Alerts and Updates

CARES Act Package Ushers in Changes to OTC Drug Review Process

April 13, 2020

The OTC drug review-related provisions in the CARES Act modified the mechanics and features of the prior system in a number of ways.

Most of the hundreds of pages comprising the CARES Act, signed into law on March 27, 2020, concern measures for directly counteracting COVID-19 and assisting those dealing with economic consequences of the pandemic. Yet tucked away in Subtitle F of the legislation are a number of provisions—now law—which streamline FDA’s over-the-counter (OTC) drug review process. These changes are likely to lower the regulatory burden of getting a product through the OTC drug review process and provide incentives of market exclusivity for companies who do.

Historically Cumbersome OTC Drug Review Process

The OTC drug review process was designed to evaluate the safety and effectiveness of OTC drugs marketed in the U.S. The framework consisted of a three-phase rulemaking process (with a publication in the Federal Register required for each phase), ultimately leading to the establishment of standards (the drug monographs) for a given class of OTC therapeutic drugs.

In Phase I, advisory panels would review the ingredients in OTC drug products to determine whether they could be generally recognized as safe and effective (GRASE) for use in self-treatment. The panels also reviewed claims and would recommend labeling (including therapeutic indications, dosage instructions, side effect warnings, etc.). FDA would then publish the panels’ conclusions in the Federal Register in the form of an Advance Notice of Proposed Rulemaking (ANPR), after which interested parties could submit comments or data in response to the ANPR, hence the “notice-and-comment” moniker. Per the panels’ review, the ingredients in the OTC drug would be classified in three categories: Category I (GRASE for the claimed therapeutic indication); Category II (not GRASE or unacceptable indications); or Category III (insufficient data).

In Phase II, panels would review the active ingredients in each class of drugs, based upon (i) panels’ review of ingredients, (ii) public comments received and (iii) any new available data. The conclusions as to the active ingredients would be published in the Federal Register in the form of a Tentative Final Monograph (TFM), followed by another period during which interested parties could submit comments or data.

In Phase III, FDA would publish final regulations in the form of drug monographs, which establish the conditions under which certain OTC drug products are GRASE. While OTC drugs conforming to the monographs do not need an approved new drug application (NDA) to be marketed, those with active ingredients or indications that are nonmonograph do require such approval.

Changes Streamline OTC Drug Review Process

The OTC drug review-related provisions in the CARES Act modified the mechanics and features of the prior system in a number of ways, some of which are described below:

Administrative Orders. Section 3851 of the CARES Act fundamentally alters the OTC drug monograph procedure by adding a new section (505G) of the Food, Drug & Cosmetic Act (FDCA). Now the Secretary of Health and Human Services may issue an administrative order determining whether there are conditions under which a specific drug (or class or combination of drugs) would be GRASE and not subject to section 503(b)(1) of the FDCA (concerning toxic and potentially harmful drugs that are not safe for self-treatment). As a result, as the drug is (or class or combination of drugs are) marketed in conformity with an administrative order; meet the general requirements for OTC drugs; and meet certain other requirements of the new section of the FDCA, then no Section 505 approval would be required.

Where an administrative order is initiated by FDA, the proposed order should not be issued unless FDA has made reasonable efforts—“not later than 2 business days before issuance”—to notify sponsors who have a drug listing in effect for drugs that may be affected by the administrative orders.

Interestingly, any person may also request that FDA issue an administrative order that a particular drug is GRASE or that a change to a condition of use for a drug is GRASE. There are two “tiers” of requests that a person may submit. A “Tier 2” request includes requests for:

  1. Reordering existing information in the drug facts label of an OTC monograph drug;
  2. Adding information to the “other information” section of the Drug Facts;
  3. Modifying the “directions for use” section of the label to reflect otherwise approved changes;
  4. Standardizing the concentration or dose of a drug;
  5. Changing the nomenclature of an ingredient in a drug;
  6. Adding an interchangeable term; and
  7. Anything else that FDA determines to be a Tier 2 request.

A “Tier 1” request is simply a request for an administrative order not captured by the list of Tier 2 requests.

Expedited Process for Addressing Safety Issues

The CARES Act delineated two specific types of safety issues for which FDA may expedite the issuance of administrative orders.

Where a certain drug is determined to pose an imminent hazard to the public health, FDA may issue interim final orders for such drugs and provide for a comment period of at least 45 days. Before issuing the interim final order, FDA must make reasonable efforts to notify, by at least 48 hours, sponsors who have a listing in effect for the drugs under Section 510(j) of the FDCA.

Similarly, FDA is authorized to issue an interim final order to require a change in the labeling of a drug (or class or combination of drugs) “reasonably expected to mitigate a significant or unreasonable risk of a serious adverse event associated with use of the drug.” (When issuing an order for safety labeling, FDA must adhere to the same notice-and-comment provisions associated with IFRs issued in response to imminent hazards to the public health.)

Exclusivity

Importantly, the CARES Act created an exclusivity period for certain OTC drug monograph requestors. Under the new law, a final administrative order issued by FDA in response to a request has the effect of authorizing only the requestor of the order (or its licensee, assignee, successor-in-interest, etc.), for a period of 18 months (beginning the date the requestor may lawfully market the drugs under the final administrative order) to market certain drugs, including those that, pursuant to the administrative order, contain a new active ingredient not previously incorporated into the drug.

With exclusivity being an important factor in the economics of drug discovery, this change will very likely incentivize OTC drug developers and manufacturers to request the issuance of final OTC monographs, similar to five-year New Chemical Entity Exclusivity (NCE) for New Drug Applications on a new API and 180-day first-to-file exclusivity for Abbreviated New Drug Applications on a new generic drug. The availability for exclusivity combined with the streamlined administrative order process provides drug manufacturers with a new opportunity to develop OTC products where previously the regulatory burden and the prospect of immediate market competition may have precluded companies from pursuing the OTC drug review process for certain products.

User Fees

The OTC monograph reform also includes a user fee program called the OTC Monograph User Fee Act (OMUFA). Fees collected under OMUFA will support OTC monograph activities. Under OMUFA, user fees will be allocated based on ownership of a monograph drug facility on December 31 or any other time during the prior year unless the facility has ceased all activity as of December 30 of the previous year. For example, for FY 2021, the relevant date to determine whether a fee will be assessed is December 30, 2019.

Initially, FDA must set the facility fee no later than the second Monday in May (for the first year, that is May 11, 2020). In subsequent years, the facility fee must be set by the second Monday in March. Facility fees for FY2021 are due the later of July 1, 2020, or 45 days after FDA publishes the fee amount.

In addition, industry initiated monograph order requests are subject to “order fees”: $500,000 for Tier 1 requests and $100,000 for Tier 2 requests in FY 2021.

The full changes to the OTC drug review process are contained at Sections 3851 through 3862 of Subtitle F of the CARES Act.

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