CARES Act Modernizes Over-The-Counter Drug Monograph Process

A complete overhaul to the over-the-counter (OTC) drug system quietly rode its way into law with the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act (H.R. 748), along with several other significant reform measures impacting pharmaceutical and medical device manufacturers. Although a majority of the regulatory reform measures in the CARES Act aim to address issues that have surfaced as part of the coronavirus (COVID-19) pandemic, the OTC reform provisions modernize and substantially revise the existing arcane and tedious OTC drug approval system. The CARES Act changes are the first meaningful update to the OTC drug product approval system since the early 1970s.

Read on for a brief history of the OTC drug approval process and five key takeaways from the OTC drug system reform wrought by the CARES Act.

History of OTC Product Approvals

Unlike prescription drugs, which are approved by the U.S. Food and Drug Administration (FDA) after rigorous review of clinical trial information to ensure the product is both safe and effective for human use, the OTC drug review process involves a lengthy three-phase public rulemaking process to establish drug “monographs.” FDA often refers to these monographs as the “rulebook” for OTC drug products. The monograph includes all necessary product information such as indications, dosing information, strength and warnings. Once a monograph becomes “final” through the rulemaking process, it is published in federal regulations and companies can manufacture and market an OTC drug product based on the monograph and without additional FDA review or approval.

In a simplified sense, OTC drugs are made readily available to consumers and are taken by patients who essentially diagnose and treat themselves based solely on information obtained from the product labeling of the product. Examples of everyday OTC drug products in monograph status are cough and cold medicines, antacids, acne medication and antiperspirant, to name a few. According to FDA, there are more than 300,000 marketed OTC drug products; however, the OTC drug monograph process does not come close to the FDA-scrutinized prescription drug approval regime.

At a high level under the current regime, OTC monographs are categorized based on their ingredients:

1. Category I — Generally recognized as safe and effective (GRASE) for the claimed therapeutic indication
2. Category II — Not GRASE and ineffective or unacceptable indications
3. Category III — Insufficient data available to permit final classification

The greatest shortcoming of the OTC drug monograph process is the lengthy delays that result from the public rulemaking process. These delays leave many OTC drug products in perpetual approval purgatory and “proposed” rule status (a tentative final monograph or TFM), and the process to update any OTC drug monograph to address safety or other concerns is ineffective and often allows safety concerns to simply fall between the cracks.

CARES Act Reform of OTC Monograph Process

1. Provisions Addressing Current OTC Monograph Status. The CARES Act significantly revises the status for each category of OTC drugs. The revisions and necessary go-forward requirements depend on the current product monograph status (proposed, TFM or final) and on the GRASE category:
   • A Category I drug under a TFM or one that meets the requirements of a final monograph would be considered GRASE and not a “new drug,” so long as all applicable requirements are met.
   • Category II drugs are now automatically deemed new drugs. Manufacturers of these OTC products must submit new drug applications within 180 calendar days of exclusivity unless FDA determines that it is in the interest of public health to extend the period. Failure to comply may subject these products to FDA enforcement.
   • Category III drugs meeting certain requirements will be allowed to transition to OTC drug status.
   Any OTC drug currently on the market that fails to meet the requirements above or are not subject to an administrative order (as described below) will be deemed a “new drug” subject to FDA’s new drug approval process and will be considered misbranded and subject to enforcement if otherwise marketed.
2. Monographs Issued by Administrative Order. FDA now has the authority to utilize an administrative order process for OTC drug products that can be initiated by FDA or through a request by any person marketing, manufacturing, processing or developing a drug. The administrative order process continues to provide for certain public comment periods and appeal measures. The provisions for the administrative order process also set forth other processes to allow FDA to better determine whether certain product changes will affect safety or effectiveness of an OTC drug.
3. Market Exclusivity for Certain OTC Drugs. To encourage innovation, certain qualifying OTC drugs that, among other things, contain an active ingredient not previously used or provide for a change in the conditions of use of a drug for which new human data studies were conducted may receive 18 months of market exclusivity.
4. User Fees. The OTC industry finally must join the rest of the drug industry in terms of being required to pay facility fees and user fees for new OTC drug monographs, which are set to begin in fiscal year 20201. The fees are intended to fund FDA and the new OTC review process.
5. OTC Cough and Cold Products. Through the CARES Act, Congress has revisited potential issues related to OTC cough and cold drugs for pediatric uses. Some have suspected that cough and cold drugs presently sold on the market may cause adverse reactions or possess inadequate labeling for pediatric patients. Congress has directed the Secretary of Health and Human Service to, within one year, begin submitting a report on cough and cold OTC drug monographs for children under the age of 6, encouraging the Secretary, as appropriate, to revise such monographs. The inquiry is limited to OTC drugs containing “antitussive, expectorant, nasal decongestant, or antihistamine ingredients (or combinations).

Importantly, many of the CARES Act OTC reform measures take immediate effect. Here are some key takeaways for OTC drug manufacturers, distributers and marketers:

1. The company should know the OTC drug’s history and monograph status and review whether the drug’s current status will be impacted by these changes, particularly if the OTC’s current category may require the submission of a new drug application.
2. Confirm that any OTC product currently sold is made in accordance with OTC monographs that are GRASE or finalized.
3. Keep an eye out for user fees and be prepared to pay FDA annually for the right to manufacture OTC drugs.
4. Private Label Distributors (PLD), manufacturers and contract manufacturers should closely analyze products to confirm whether user fees will apply.
5. Companies should know their cough and cold OTCs and what evidence is out there for pediatric safety, as this category may be facing changes in the future.

Please contact the authors for additional information. McGuireWoods has published additional thought leadership on how companies across various industries can address crucial coronavirus-related business and legal issues. The firm’s COVID-19 response team stands ready to help clients navigate urgent and evolving legal and business issues arising from the COVID-19 pandemic.