U.S. CARES Act Enables Long-Awaited OTC Drug Regulatory Modernization: Key Highlights

Subtitle F of the recently enacted U.S. CARES Act substantially reforms the regulatory framework for non-prescription drugs, representing the most significant update of the review process for over-the-counter (OTC) drugs since that process was first established in 1972. The Act draws from recent legislative proposals to reform OTC regulation, incorporating a modified version of the “Over-the-Counter Monograph Safety, Innovation, and Reform Act of 2019” (S. 2740, H.R. 3443) that was passed 91-2 by the U.S. Senate in December 2019. At that time, Senate Health Committee Chairman Lamar Alexander (R-Tenn.) described the legislation as “the most important new law affecting the safety, innovation, and affordability of over-the-counter drugs since the 1970s.”¹

Subtitle F includes the following significant reforms to OTC drug authorities:

• Stipulates that certain OTC drug products will be deemed “new drugs” subject to new drug applications under Section 505. The law provides that drugs classified in the following categories may be marketed lawfully without obtaining approved new drug applications: (1) drugs in category I for safety and effectiveness under a tentative final monograph; or (2) drugs in category III for safety and effectiveness in the preamble of a proposed rule establishing a tentative final monograph that most recently addresses such drugs, so long as the OTC drugs marketed in these categories meet certain other requirements for conformance with the applicable tentative final monograph or proposed rule. The law settles that, effective 180 days following enactment, category II drugs for safety and effectiveness under a tentative final monograph or a proposed rule that most recently addresses such drugs are misbranded and deemed new drugs requiring applications under Section 505 unless allowed to remain on the market by the U.S. Food and Drug Administration (FDA), such as for reasons involving the public health. All other OTC drugs FDA has not determined to be generally recognized as safe and effective are similarly considered misbranded and deemed new drugs requiring applications under Section 505, effective immediately.
• A new streamlined process (under newly-created Section 505G(b) of the federal Food, Drug, and Cosmetic Act (FDCA)) for approving new OTC monograph drugs that replaces notice-and-comment rulemaking. The new administrative order process may be initiated either by the FDA or by industry sponsors who are seeking approval of new active ingredients, new dosage forms of existing acting ingredients, or other changes in currently marketed products. In either case, the process allows for public notice and an opportunity for comment, as well as for dispute resolution through an administrative-hearing process and judicial review (brought in federal district court). In limited cases involving significant health risks, the FDA may invoke an expedited process, which allows the agency to issue an interim final order before there is notice, comment, or a hearing.
• An 18-month exclusivity period (outlined in Section 505G(b)(5)(C)) available following administrative orders initiated by a sponsor for (1) OTC drugs that contain an active ingredient not previously incorporated in a drug, or (2) administrative orders that provide for a change in the conditions of use of a drug, for which new human data studies conducted or sponsored by the requestor (or for which the requestor has an exclusive right of reference) were essential to issuance of the administrative order. This subsection recognizes certain exceptions to exclusivity, including for safety-related changes to an administrative order.
• A procedure (outlined in Section 505G(c)) for implementing minor changes to dosage forms without requiring new administrative orders provided the manufacturers carry out (and make available to the FDA upon request) supporting records. These records may include certain studies reflecting absorption and exposure to the active ingredient compared with a suitable reference product demonstrating that the change will not affect the safety and effectiveness of the drug or materially affect absorption or exposure.
• Amends the Sunscreen Innovation Act of 2014 (Section 586, et seq. of the FDCA), which governs approval of nonprescription sunscreen ingredients. The CARES Act (in Section 3854) sunsets the current sunscreen monograph at the end of fiscal year 2022 and directs the Secretary of HHS to issue a revised sunscreen order within 18 months of the CARES Act’s effective date. The CARES Act also integrates review of sunscreen ingredients with general OTC review, and it provides sponsors of proposed orders for nonprescription sunscreen active ingredients with an option to transfer to the new Section 505G OTC administrative order process by providing written notice within 180 days of the CARE Act’s effective date after which such sponsor will be deemed ineligible for the new 505G administrative order process. In addition, the Act provides 18 months of marketing exclusivity for a company that requests and receives a final order that allows a sunscreen to contain a new active sunscreen ingredient.
• Establishes user fees to support FDA’s OTC drug review. Those fees are paid by (1) companies that manufacture or process finished OTC products (i.e., annual facility fees), and (2) companies submitting requests for new OTC monograph orders. Additionally, the CARES Act amends Section 502 of the FDCA to state that OTC drugs manufactured at a facility for which fees have not been paid will be deemed misbranded.

The Act’s 18-month exclusivity provisions are especially notable, as they incorporate new incentives for OTC drug developers that have long been a feature of the new drug application path that, while not exclusive of OTC developers, is more typically followed by prescription drug developers. The new OTC exclusivity provisions enacted under the CARES Act establish a pathway to exclusivity for products marketed under the OTC monograph process rather than seeking new drug approval under Section 505(b):

• 18-month exclusivity for issuance of an administrative order covering an OTC drug with a new active ingredient is reminiscent of the 5-year exclusivity for new chemical entities (NCE) in Section 505(c)(3)(E)(ii), but with a critical difference: NCE exclusivity applies if a drug has “no active” that has been approved in a previous drug application, whereas the OTC administrative order exclusivity can apply if any of the drug’s active ingredients is new.
• 18-month exclusivity for issuance of an administrative order that provides “for a change in the conditions of use” is, in turn, modeled after the 3-year exclusivity available for submitting new clinical investigations under Section 505(c)(3)(E)(iii). That provision confers exclusivity—limited to a drug’s “conditions of approval”—for a company that obtains approval to market a previously approved active moiety in a new formulation or for new purposes, and doing so requires the company to furnish new clinical investigations to the FDA. In the prescription-drug context, disputes about the scope of this exclusivity have frequently given rise to regulatory challenges and litigation. See, e.g., Braeburn, Inc. v. FDA, 389 F. Supp. 3d 1 (D.D.C. 2019) (vacating the FDA’s exclusivity decision and concluding that its construction of “conditions of approval” was not reasonable). These regulatory and judicial decisions could inform interpretation of the similarly worded new OTC exclusivity.

Recognizing that the CARES Act authorities will make exclusivity more accessible to OTC developers than past reliance on having to proceed on a Section 505 pathway to market is new to OTC drug development. As such, the CARES Act provides that the Comptroller General of the United States must submit a study to Congress within four years that analyzes the impact of exclusivity on consumer access to non-prescription drugs.

In a statement announcing the passage of the CARES Act, FDA Commissioner Stephen Hahn highlighted the changes to OTC regulation as “a landmark step that will have an impact lasting long after the current public health emergency.”²  Given the significance of these changes, and the fact that the Act requires the issuance of guidance in a number of areas, we expect to see much more OTC regulatory activity from FDA on the implementation of these provisions. Finally, it will be interesting to see whether the current COVID-19 pandemic provides public health justification for FDA to allow any category II products to remain on the market that otherwise will be subject to a market exit on misbranding and unapproved “new drug” grounds 6 months from enactment.

[1] See Press Release, U.S. Senate Committee on Health, Education, Labor, and Pensions, “Alexander: Senate Passes “Most Important” New Law For Over-the-Counter Drugs in 40 Years (Dec. 10, 2019).

[2] See FDA Statement, “FDA on Signing of the COVID-19 Emergency Relief Bill, Including Landmark Over-the-Counter Drug Reform and User Fee Legislation. (March 30, 2020)

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