On March 27, 2020, Congress and the House of Representatives with the support of the President signed into law a $2 trillion stimulus bill to address the dramatic economic impact caused by the coronavirus pandemic. Better known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the bill includes a provision for over-the-counter (OTC) Monograph Reform, significantly changing FDA’s regulation of non-prescription drugs via the Monograph Drug Review.  The OTC Monograph Reform includes a user fee system similar to the ones for prescription drugs and medical devices.

Overview of the Monograph Drug Review Process

The Monograph Drug Review was initiated in the 1970s by FDA to address the effectiveness and safety of OTC drug products already on the market and determine ingredients that could be legally marketed without pre-approval. Advisory review panels were convened to evaluate the hundreds of active ingredients in OTC drugs to determine those that could be deemed generally recognized as safe and effective (GRAS/E) for consumer use under conditions set forth by the Monographs.

The Agency classified ingredients into three categories, as follows:

• Category I: generally recognized as safe and effective for the claimed therapeutic indication;
• Category II: not generally recognized as safe and effective or unacceptable indications;
• Category III: insufficient data available to permit final classification

The Monograph Drug Review outcomes are published in the Federal Register in the form of a Tentative Final Monograph (TFM) or Final Monograph. Any active ingredients or indications that are not listed in the OTC monographs are subject to pre-market approval through the New Drug Application (NDA) process.

Implications of the CARES Act

Congress and FDA have been exploring approaches for Monograph reform for many years. The recent passage of the CARES Act will have major implications for manufactures and distributors now, and for years to come. A short summary of these implications is provided below:

Final Monographs or TFMs for Category I drugs are deemed final administrative orders.

OTC drugs will be deemed GRAS/E if they:

• Conform with a Final Monograph,
• Were proposed as GRAS/E and conform with a Tentative Final Monograph (TFM),
• Comply with a future final administrative order from FDA,
• or otherwise meet one of the preceding requirements and follow a minor change procedure

Drugs may be lawfully marketed without an NDA if they:

• Classify as Category III and conform with a TFM
• Classify as Category I under an advance notice of proposed rulemaking and conform with the conditions of the proposal

The most drastic change involves those who market or distribute Category II drugs – the FDA no longer recognizes this classification. Manufacturers and distributors of Category II drugs must pull their products from the market within 180 days of the enactment of this bill. OTC drug products that were previously considered Category II have two options moving forward – undergo reformulation to fit the approved specifications discussed above, or submit an NDA, starting September 23, 2020. Similarly, unclassified OTC drugs, unless exempt, will be deemed “new drugs” and are subject to NDA requirements.

In an FDA-initiated monograph order process, FDA will deem a drug not to be GRAS/E if evidence is inadequate to show safety and effectiveness under section 201(p)(1). After at least a 45-day comment period, FDA will provide a statement of reasons supporting the order and issue a final statement.

User Fees

The Monograph Drug Review process now includes user fees that affect OTC drug manufacturers and distributors, similar to the existing prescription drug (PDUFA) and generic drug (GDUFA) systems.

The CARES Act (Section 3862) establishes a user fee system to fund activities related to Monograph Drug Review and includes two types of user fees:

1. Facility fees
   • Paid by facilities engaged in manufacturing or processing an OTC monograph drug in finished dosage form
   • FDA will be releasing the facility fee amounts in May 2020
   • Research suppliers, testing facilities, or an entity solely placing outer packaging on packages containing multiple products when the products within are already in final packaged form are exempt
2. OTC monograph order request fees
   • Paid by entities submitting industry-initiated administrative orders (except for certain changes in safety labeling)
   • Tier 1 – Any request that is not Tier 2. Will be $500,000, adjusted for inflation.
   • Tier 2 – Request for certain, minor modifications of a monograph. Will be $100,000 adjusted for inflation

Given the amendments to the Monograph Drug Review process, the main question of interest is: exactly who is required to pay these user fees?

Similar to that of PDUFA and GDUFA, only one fee payment is required per facility, even if a facility manufactures multiple OTC monograph drugs. Specific types of facilities that are required to pay fees will be released in May 2020.

Monograph drugs marketed by a non-fee-paying facility are deemed misbranded.

Each person that owns a monograph drug facility on December 31, or at any time in the preceding year shall be subject to a facility fee, unless the facility has ceased all activities related to monograph drugs by December 30 of the year immediately preceding the applicable fiscal year (I.e., December 30, 2019 for FY2021).

For 2020, facility fees for FY2021 are due on July 1 or 45 days after FDA publishes a notice on the fee amount. For future years, facility fees are due on the first business day in June or the first business day after enactment of appropriations authority. Fees are due ahead of the upcoming fiscal year.

Sponsor-initiated OTC monograph order requests are subject to an inflation-adjusted $500,000 fee for tier 1 requests, and $100,000 for tier 2 requests. Safety-related label change OTC Monograph order requests are exempt from the fee.

For FY2021, by May 11, 2020, FDA is directed to publish the facility fee amount and provide greater clarity on who must pay these fees. For future years, FDA will set and publish the facility fee for the upcoming fiscal year by the second Monday in March.

Timeline for Implementation of OTC Monograph Reform Fees

The OTC drug review process continues to evolve rapidly, which presents both risks and opportunities for manufacturers/marketers. To effectively navigate this complex environment, OTC marketers and their counsel must maintain an awareness of the science and regulatory landscapes.

ISS has almost two decades of experience in providing regulatory support, including long-standing support for OTC Monograph products. ISS specializes in preparing persuasive regulatory support based on sound scientific data to maximizing potential for business success while limiting risk. To learn more about how ISS can help you navigate the new regulations, contact info@innovativescience.net.