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Congress Enacts Sweeping Reforms to Over-the-Counter Drug Regulation as Part of COVID-19 Response Bill

For years, regulators, industry, and lawmakers alike have sought to modernize the regulatory framework under which most over-the-counter (OTC) drugs are marketed in the US. With the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020, stakeholders finally saw these long-awaited reforms become reality.  

In addition to providing economic relief to individuals and entities affected by the COVID-19 pandemic, the CARES Act also overhauled the Food and Drug Administration’s (FDA) regulation of OTC drugs, representing the most meaningful reform to OTC drug regulation since 1972. Among other things, the CARES Act establishes a new streamlined process by which FDA will evaluate the safety and effectiveness of OTC drugs, clarifies the legal status of drugs reviewed under FDA’s historic OTC Drug Review process, and imposes user fees on entities that manufacture OTC drugs and entities that avail themselves of FDA’s new streamlined review process. We describe these changes below, but first briefly summarize the existing regulatory framework under which most OTC drugs are marketed today.

Background on FDA’s OTC Drug Review 

In 1972, FDA established the OTC Drug Review to facilitate the agency’s evaluation of the safety and effectiveness of OTC drugs. Rather than approving individual drug products, as is typically is done for prescription drugs, through the OTC Drug Review, FDA developed standards for numerous therapeutic categories of OTC drugs (e.g., internal analgesics, topical antiseptics). These standards—called “monographs”—outline the conditions under which an OTC drug is generally recognized as safe and effective (GRASE) and may be marketed lawfully without an FDA-approved application. Among other things, monographs identify the active ingredient(s), strengths, and dosage forms that are permissible for a class of OTC drugs, and set forth specific labeling requirements (e.g., directions for use, warning statements).

The process for establishing a monograph under the OTC Drug Review was cumbersome and slow—proceeding through a multi-stage, notice-and-comment rulemaking process. Historically, the first stage included a review of ingredients in then-marketed OTC drug products by advisory panels to evaluate whether the ingredients were GRASE for use without a prescription. FDA published the panels’ conclusions in the Federal Register as proposed monographs in Advance Notices of Proposed Rulemaking (ANPRs). During the second stage, FDA would review public comments submitted in response to the ANPR, along with any new data or information available, then publish its conclusions in the Federal Register as a so-called Tentative Final Monograph (TFM) in a proposed rule. In the final stage, FDA would publish the final monograph in the Federal Register as a final rule, and codify the monograph in the Code of Federal Regulations (in 21 C.F.R. Part 330, et seq.). [NOTE: As noted below, despite starting the OTC Drug Review in 1972, FDA has not yet finalized a number of the monographs.]

As part of the OTC Drug Review, prior to issuing a final monograph, FDA classified active ingredients used in OTC drugs into one of three categories: 

  • Category I: active ingredients that are GRASE for the claimed therapeutic indication;
  • Category II: active ingredients that are not GRASE or that have an unacceptable claimed therapeutic indication; or 
  • Category III: active ingredients for which there were insufficient data to permit final classification.

Once a final monograph is implemented, companies may lawfully make and market an OTC product without the need for FDA pre-approval, as long as the drug complies with the applicable monograph and other applicable FDA regulations. The final monograph includes only active ingredients that FDA has concluded are GRASE; all other active ingredients previously considered are deemed “non-monograph” and may not be included in an OTC drug absent FDA approval of a drug application. However, pending issuance of a final monograph, FDA has allowed companies to market products formulated with Category I or Category III active ingredients that meet the formulation and labeling requirements described in the relevant TFM until the particular monograph is finalized.

The lengthy rulemaking process required to finalize (or amend) OTC drug monographs has led to many monographs languishing in the proposed rule/TFM stage. It also has made it difficult to update monographs to reflect new data regarding safety or effectiveness, or to allow for the use of new, innovative ingredients or formulations.

CARES Act Reforms to the OTC Monograph System

According to FDA, the CARES Act “grants the FDA transformative, new authorities that will meaningfully advance [the agency’s] efforts to modernize the OTC drug development and review process…” Among other things, the law clarifies the regulatory status of currently marketed OTC monograph drugs, creates streamlined processes for establishing and revising OTC monographs, includes special provisions for sunscreen drugs, and imposes user fees on entities that manufacture OTC monograph drugs and entities that avail themselves of FDA’s new streamlined review process.

Regulatory Status of Existing OTC Drugs

  • Drugs formulated with active ingredients that are included in a final monograph or that have been classified as Category I in a TFM are deemed GRASE and therefore are not “new drugs,” provided that they comply with the applicable monograph and FDA’s general rules governing OTC drugs. In other words, they can continue to be marketed without an FDA-approved drug application
    • The law includes special provisions for sunscreen drugs, which will be considered GRASE if they comply with the applicable requirements in the final sunscreen monograph that was published in 1999 and codified in 21 C.F.R. Part 352 (discussed further below) and the requirements governing labeling and effectiveness set forth in 21 C.F.R. § 201.327.
  • Drugs formulated with active ingredients that have been classified as Category III in a TFM or with active ingredients classified as Category I in an ANPR that comply with the relevant monograph and general rules governing OTC drugs are permitted to remain on the market unless and until FDA issues a final administrative order (described below) that establishes that they are not GRASE. 
  • Drugs formulated with active ingredients that have been classified as Category II in a TFM or the preamble to a proposed regulation are deemed “new drugs” and must be removed from the market within 180 days following the enactment of the CARES Act (i.e., by September 23, 2020) unless FDA takes action to permit their continued marketing.
  • Drugs with active ingredients that do not fall within one of the above categories and drugs that have otherwise been determined by FDA to be not GRASE are deemed “new drugs” and therefore must obtain an FDA-approved drug application in order to be marketed legally. 

Monographs Issued by Administrative Order

The CARES Act replaces the lengthy notice-and-comment rulemaking process for establishing and amending OTC drug monographs with a shorter administrative order process that may be initiated by FDA or upon a request from industry.

For certain industry-initiated orders—e.g., for drugs that contain an active ingredient that has not been permitted previously under a monograph and changes to an existing monograph drug that are supported by new human data studies—sponsors may receive 18 months of market exclusivity.

The law also permits certain “minor changes” to an OTC drug’s dosage form without an administrative order. Specifically, a new administrative order will not be required for a minor change in the dosage form provided that a company maintains information necessary to demonstrate that the change will not affect the safety or effectiveness of the drug and will not materially affect the extent of absorption or other exposure to the active ingredient in comparison to a suitable reference product. (If requested, this information must be provided to FDA within 15 days of such a request. If a company fails to provide the information to FDA or FDA concludes that the information does not support the change adequately, the drug will be deemed a “new drug” and misbranded.) The law directs FDA to issue administrative orders specifying the requirements for determining whether a minor change affects the safety or effectiveness of a drug or materially affects the extent of absorption or other exposure to an active ingredient, and guidance for applying the orders to specific dosage forms.

Special Provisions Regarding Sunscreen Drugs

As noted above, the CARES Act provides that sunscreen drugs marketed in compliance with 1999 sunscreen monograph are considered GRASE. However, the law also requires FDA to amend and revise that monograph via an administrative order within 18 months following the enactment of the CARES Act.

User Fees 

The CARES Act also establishes a user fee system to support FDA’s new OTC drug review process. Two types of OTC drug user fees will be imposed: 

  • Entities that manufacture or process finished OTC drugs (including contract manufacturers) will be required to pay an annual facility fee beginning in fiscal year (FY) 2021, and failure to pay the required fee will render OTC drugs produced therein “misbranded.” The law directs FDA to publish the specific amounts of the facility fees for FY 2021 in the Federal Register on or before May 11, 2020. The fees will be due 45 days thereafter.
    • Although contract manufacturers are subject to facility fees, the fee charged will be two-thirds of the amount charged to facilities that are not contract manufacturers.
  • Entities that submit an industry-initiated monograph order request will be required to pay $100,000 (adjusted for inflation) for certain, minor modifications to a monograph and $500,000 for any other monograph order request. 

Key Take-Aways 

The OTC drug provisions in the CARES Act are complex, and it will take time for FDA to begin implementing the law’s requirements. In the meantime, we offer a few suggestions to companies that manufacture, distribute, or market OTC monograph drugs in the US:

  • Companies should confirm or determine the regulatory status of each active ingredient used in their OTC monograph drugs and consider whether the new law affects the legal status of their products. 
  • Companies should also confirm that their OTC monograph drugs comply with the applicable monograph, and if not, what changes might be necessary.
  • Companies—particularly private label distributors, manufacturers, and contract manufacturers—should review facility registrations to consider potential user fee obligations. As noted above, FDA soon will publish the first annual facility user fees, which will be due this summer.

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