CARES Act Will Accelerate OTC Drug Development

By: Daniel Dwyer, Suzan Onel, and T. Daniel Logan

(This article was published in Law360 on April 15, 2020)

On March 27, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act (Pub. Law 116-136), was signed into law. This act, among its many economic relief provisions, includes a comprehensive revision of the rules governing traditional over-the-counter drugs, which are currently marketed under proposed and final regulations referred to as monographs, published by the U.S. Food and Drug Administration.

We anticipate that this revision will transform the OTC drug marketplace. Traditional OTC drugs such as acne products, analgesics, skin protectants and dandruff products will still be permitted, but competition will encourage manufacturers to develop new products that may ultimately replace the old ones.

The law encourages competition by providing a financial incentive for manufacturers to develop new OTC drug products (in the form of an exclusive right to market new products for 18 months) and by providing the FDA with resources to implement a new streamlined mechanism for authorizing such products. As a result, we anticipate a much more rapid evolution of OTC drugs in the marketplace than has taken place over the last 50 years.


Currently, most traditional OTC drugs are marketed under the FDA’s OTC Drug Review. The OTC Drug Review permits the marketing of drugs on the basis that they are “generally recognized … as safe and effective” and have been “used to a material extent [and] for a material time,” and therefore are not new drugs under Section 201(p) of the Federal Food, Drug, and Cosmetic Act. Accordingly, they do not need to be covered by an approved new drug application in order to be marketed.

The OTC Drug Review regulates products using monographs that act as a sort of cookbook for OTC drug categories, specifying which active ingredients can be used, in what amounts and dosage forms and with what claims. These monographs are published in the Federal Register in the initial proposed monograph and intermediate tentative final monograph stages, and appear in the Code of Federal Regulations when a final monograph is issued.

There are two fundamental problems with the OTC Drug Review: first, with a few exceptions, the only drugs covered by the monograph process are ones similar to products on the market prior to 1975. Thus, the process does not encourage the development of new products. Second, the monograph process has been going on since 1972 and is still not complete for many OTC drugs. Because the procedures are resource-intensive and the FDA’s resources have been limited, the process has been slow.

Summary of the New Provisions

The CARES Act addresses these two problems by effectively dismantling the OTC Drug Review. It freezes the status of currently authorized drugs and allows future changes to be implemented by administrative orders instead of by the cumbersome notice-and-comment rulemaking process. The FDA is required to issue guidance documents and administrative orders to implement the new law, and it must withdraw or alter its OTC drug regulations to conform to the statute. 

The engine of the new law is the FDA’s new authority to issue OTC drug administrative orders. The FDA may do so on its own initiative or at the request of one or more requestors. A requestor may request that the FDA determine that any drug or combination, or any change to a condition of use of a currently authorized drug, is a lawful OTC drug. In addition to data supporting the requested change, for most OTC drugs a requestor must submit information demonstrating a verifiable history of safe nonprescription marketing and use.

If the FDA issues an administrative order in response to a request, the requestor is granted a period of 18 months of exclusive marketing rights where the administrative order covers an active ingredient (including any ester or salt) not previously incorporated in a lawful unapproved OTC drug, or a change in conditions of use of a previously authorized drug, and new human data studies conducted or sponsored by the requestor (or to which the requestor has an exclusive right of reference) are essential to the issuance of the order.

However, exclusivity is not available for certain minor changes to the drug (e.g., modifying directions for use due to changes that do not affect safety or effectiveness, or reordering information in the drug facts box), certain safety changes, and changes to testing methods.

The fuel for the FDA’s new administrative order engine is user fees: the CARES Act authorizes the FDA to assess user fees for OTC drug facilities and OTC monograph requests beginning in fiscal year 2021 and thereafter. The law authorizes the FDA to use these fees in carrying out OTC drug activities.


The changes to OTC drug regulation wrought by the CARES Act — particularly the provisions governing exclusivity and user fees — are analogous to changes in the regulation of prescription drugs under the new drug application procedures that have occurred over the past generation. Those changes have vastly improved the ability of manufacturers and the FDA to bring innovative new prescription drugs to patients.

It is reasonable to expect a similar transformation in the OTC drug marketplace as a result of the CARES Act — though of course, much will depend on how the law is implemented by both the FDA and the regulated industry.