At long last, landmark OTC Drug reform legislation is enacted

Hogan Lovells

Hogan Lovells

On March 27, 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), U.S. President Trump signed into law a long-awaited overhaul of the regulatory system for Over-the-Counter (OTC) drugs. This “OTC drug monograph reform” has been a priority of the Food and Drug Administration (FDA) for several years, as the agency has struggled to effectively implement an antiquated system for regulating over 800 active ingredients in more than 300,000 OTC drug products marketed in the U.S. The prior monograph system for OTC drugs was designed primarily to assess the safety and efficacy of the OTC drugs that had been marketed in the U.S. prior to 1972. Despite the delay in its passage, the new legislation obtained broad support from industry and public interest groups and bipartisan support in both houses of Congress. In fact, the Senate passed the same bill in December, and the House had passed very similar bills three times, previously.

OTC drug companies will want to review this OTC monograph reform legislation closely, and begin preparing immediately for the innovation opportunities, as well as the regulatory and competitive risks, created by the new law.

OTC Monograph Order Requests (OMORs) will accelerate the regulatory process

The OTC drug legislation includes a new user fee program that, along with other new authorities, will allow FDA to expand and accelerate its regulatory oversight of OTC drugs marketed under the monograph system. The reformed monograph system will continue to provide a pathway to market OTC drug product without obtaining FDA approval of a new drug application (NDA). However, the new law will no longer require FDA to use the notoriously slow and resource-intensive notice and comment rulemaking process to authorize new OTC products. Similarly, FDA will not need to use notice and comment rulemaking to obtain updated safety labeling or to clear the market of products for which FDA determines that evidence of general recognition of safety or effectiveness (GRASE) is lacking. Instead, FDA will issue administrative orders, in response to OTC Monograph Order Requests (OMORs), similar to the administrative process underlying FDA’s NDA approval process. Nevertheless, FDA will still issue a proposed order for public comment before issuing the final order that will either permit or prohibit the marketing of OTC drugs covered by the order. Moreover, the legal standard for evidence of GRASE will not change.

Innovation and marketing opportunities

For drug companies, the new legislation will make it easier to market products with new ingredients, and in combinations, that were not marketed in the U.S. prior to 1972, if evidence of GRASE can be demonstrated. Of significant importance, the new law offers the potential to obtain 18 months of exclusivity for certain new OTC drugs that contain new ingredients or new conditions of use for which new clinical data is essential. The law also provides a route — without requiring any premarket approval process — for certain minor changes in dosage form that may not have been permitted under prior law (e.g., because such dosage forms were not marketed in the U.S. prior to 1972), such as new OTC products using existing OTC ingredients in dissolvable tablets and films, chewable gel, or other dosage forms.

New user fees

The legislation includes an annual fee for any OTC monograph drug facility, with FDA’s authority to assess and collect OTC monograph fees for the fiscal year beginning October 1, 2020, depending on enactment of appropriations legislation to authorize such fee collection. In addition to these new facility fees, most OMORs will incur a fee of $500,000, although certain minor modifications of a monograph will only be associated with a $100,000 fee, and both fees will be adjusted for inflation over time. The Administration’s budget request for fiscal year 2021 included $28.4 million for OTC user fees, and the legislation provides for increasing the size of the program by $23 million over the next four years.

Streamlined review for OTC drugs

As a result of the additional resources that FDA will receive from user fees, OTC drug companies can expect that FDA will act more quickly and predictably on requests to market new OTC products, and that FDA will provide greater clarity on the regulatory status of certain products. Over time, performance goals will be phased in that will establish expectations for timeframes for FDA review periods and established procedures. For example, four years after enactment, performance goals for OMORs will include a 10-month review period before issuance of a proposed order and a 60-day period for FDA review comments on the proposed order. After the phase-in period, from the day the OMOR is received, an OMOR is expected to take between 17.5 and 23.5 months until FDA issues the final order. These timeframes would represent an extraordinary change from the prior monograph system, under which rulemaking proceedings sometimes continued for decades without resolution.

Market impact

The streamlined administrative processes and additional FDA resources for OTC drugs will have both positive, and potentially some adverse, impacts for different segments of the OTC drug industry. On the positive side, companies that seek to bring innovative OTC products to market with evidence of GRASE will, generally, find it easier and faster to do so. For example, it should be faster to obtain authorization to market products with new OTC ingredients and indications, including some that would not have been eligible for inclusion under the old monograph system. In certain cases, these products may even qualify for 18 months of marketing exclusivity. Similarly, companies that want to make minor labeling changes will benefit from the more nimble and predictable system.

On the adverse side, the innovative products expected to be approved under the new system will shake up the OTC marketplace, creating new competition in an environment that had been relatively stable for many years. Some OTC drugs that FDA had allowed to continue marketing for many years because FDA had not issued final monographs may face the prospect of FDA enforcement action in the future. For example, drugs with ingredients that FDA determined were not GRASE (Category II) in a tentative final monograph (TFM) will have 180 days after enactment to come off the market unless FDA provides an extension. In addition, drugs that FDA had determined not to be monograph eligible will be subject to enforcement action. Similarly, drugs for which FDA determined in a TFM that there was insufficient information to determine GRASE status (Category III) may be subject to FDA-initiated data calls (OMORs) that could result in expedited FDA determinations that these products must be withdrawn from the market.

How to prepare

OTC manufacturers should ask a series of questions to assess next steps under the statute:

  • Are my current products considered GRASE under an existing monograph?
    • If not, can my product still be lawfully marketed, or will I be forced to take it off the market?
  • Will FDA initiate an OMOR for these products, to resolve whether they are GRASE, motivated by safety reasons or otherwise?
    • If so, is gathering data to prove GRASE feasible?
  • Will FDA use new user fee resources to increase the regulatory scrutiny of the dosage form or GMP status of my product?
  • Will a competitor seek exclusivity that might affect a product that I currently market or intend to market?
  • Will a competitor seek an OMOR for a new use or labeling that might affect my product?
  • Should I seek to change my current products through minor dosage form changes, new uses, or labeling?
    • How much will that cost and how long will it take FDA to act?

We look forward to helping clients answer these questions so that they are prepared to seize the opportunities and proactively address the competitive challenges that will arise from this new regulatory framework for OTC drug products. Please contact your Hogan Lovells attorney for assistance.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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