Background

On March 27, 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), President Trump signed into law a long-awaited overhaul of the regulatory system for OTC drugs, which we analyzed online here. Section 744M of the FDCA, as added by the CARES Act, establishes an OTC monograph drug user fee program, under which FDA will assess and collect fees from submitters of OMORs as well as facility fees from certain manufacturers of OTC monograph drugs, to support the agency's OTC monograph drug activities.

On January 6, 2021, the U.S. Department of Health and Human Services (HHS) ordered FDA to “cease further collection efforts” related to the OTC Drug Monograph User Fee Program, issuing a Withdrawal Notice for FDA’s December 29, 2020 Federal Register Notice on user fee rates. The December 29 Notice had sparked concern from distilleries and breweries that entered the market under FDA’s March 2020 temporary guidance, which encouraged firms that were not traditional drug manufacturers to make hand sanitizer for consumer use under certain conditions specified in the guidance. On January 8, HHS issued another notice (“Exemption Notice”) stating that distilleries and other small businesses that supplied hand sanitizer for the first time during the COVID-19 public health emergency cannot not be subject to OTC user fees. We previously summarized these changes in greater depth online here.

New OTC Monograph Drug User Fee Rates for FY 2021

Replacing the December 29 Federal Register Notice, today’s Notice includes:

• Notification that, consistent with an HHS January 12, 2021 Notice, FDA will not assess OMUFA facility fees upon those firms that first registered with FDA on or after the January 27, 2020 declaration of the COVID-19 public health emergency (PHE) solely to manufacture OTC hand sanitizer products during the PHE, and;

• Updates to the facility fee amounts.

The new fee schedule for FY 2021 is as follows:

Today’s Notice clarifies that post-January 27, 2020 registrants will be exempt from the facility fees if they manufacture either antiseptic rubs or antiseptic wipes, for either consumer or health care use.  In addition, the exemption is limited to the period during which the COVID-19 public health emergency remains in effect.  The Notice references the January 12, 2021 HHS notice, which stated that fees for hand sanitizer products would be assessed for entities that continue to manufacture, as opposed to hold, distribute or sell existing inventories,  as of December 31 of the year immediately following the year during which the COVID-19 Public Health Emergency is terminated.

In a press release, FDA said it recognizes that because certain hand sanitizer product facilities will not be assessed fees, firms subject to the OMUFA facility fees will see an increase in the FY 2021 facility fees, compared to fees shown in the withdrawn fee notice, as we predicted in our January 12 client alert. This is because the number of manufacturers subject to OMUFA facility fees has decreased, and the total collected by FDA must still match the amount Congress authorized agency to collect, nearly $23.3 million.

We will continue to monitor HHS and FDA actions and keep you apprised of significant developments. Please contact your Hogan Lovells attorney for assistance if you have any questions on the opportunities and competitive challenges arising from this new and evolving regulatory framework for OTC drug products.

Authored by Heidi Gertner and David Horowitz