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COVID-19 Stimulus Legislation Will Cost OTC Manufacturers

Tucked away in the nearly 900 pages of the Coronavirus Aid, Relief, and Economic Security (CARES) Act just passed is the addition of Section 505G to the Food, Drug, and Cosmetic Act. This section makes substantial changes to the statutory structure and requirements for over-the counter (OTC) drug products. Various versions of these changes have been introduced in previous legislation, without success. This time, the changes were lumped in with a wide variety of relief measures designed to mitigate the economic impact of the COVID-19 pandemic.

The new section covers almost 100 pages of the Act and involves several areas of the OTC industry, including marketing exclusivity periods, the monograph review process, and sunscreen product regulations. This blog post will focus on one of the more significant additions for producers of OTC products: user fees.

With the passage and signing into law of the CARES Act, OTC product manufacturers join other parts of the regulated pharmaceutical and medical device industries in paying user fees.

Per the Act, the fees will be dedicated to OTC monograph activities, as specified in Part 10, subchapter C, Chapter VII of the Food, Drug, and Cosmetic Act.

There will be two types of fees. The first will apply only to those OTC manufacturers requesting an administrative order under that provision of the CARES Act—more about this in a subsequent blog post.

The second will impact most OTC manufacturers: an annual facility fee for manufacturing sites producing OTC products. Contract manufacturing sites will be assessed and charged a fee equaling two-thirds of what a site owned by the product holder would owe.

Naturally, the first question from anyone affected is “How much will the fee be?” Unfortunately, in these matters, it’s never that simple. The Act only lays out a blueprint for the (somewhat complicated) initial calculation and the subsequent annual adjustment of the facility fee. The FDA will make the calculations and publish the actual fee amount. The first fee payment is due on the first business day of July 2020 or 45 days after the FDA publishes notice in the Federal Register. Subsequent annual fees will be due on the first business day of June. If the fee is not paid within 20 calendar days of the due date, the site may be placed on an arrears list with all products made at the site considered misbranded. Sites which manufacture OTC products are required to self-identify via the electronic Drug Registration and Listing System (eDRLS).

So, the newest portion of the FD&C Act is in place, and it’s up to the FDA to flesh out the implementation. If you are an OTC product developer or manufacturer, Premier Consulting can help determine what impact these changes may have on your organization or your program. Contact us to learn more.

Discover other ways that the CARES Act affects OTC product sponsors: CARES Act Introduces OTC Administrative Order Process.

Senior Director of Regulatory Compliance and Submissions