New OTC Drug Manufacturing Fees

A little publicized provision buried in the 2020 Corona virus CARES Act amended the Food Drug and Cosmetic Act to implement an assessment of user fees onto manufacturers of over-the-counter (OTC) drug products. The program, known as OMUFA, includes user fees to be paid by manufacturers, which are intended to support FDA activities related to OTC drug regulation and OTC drug manufacturing site inspections. These fees apply to all non-prescription drugs manufactured without a new drug application, and which are governed by the provisions in section 505G of the Act. Essentially the drugs covered under this user fee amendment are all OTC drugs currently manufactured in accordance with an existing OTC drug monograph. Fees apply to all foreign or domestic businesses engaged in manufacturing or processing of OTC monograph drugs in the finished dosage form of the drug for products sold here in the U.S. Firms that manufacture bulk active ingredients used to manufacture OTC drugs are currently exempted. A different set of user fees also apply to what are known as contract manufacturing organizations, which are OTC manufacturing operations where the entity or any affiliate (wholesaler or retailer) of the entity sells the OTC drug products they produce to wholesalers, retailers, or consumers not located in the United States.

FDA OTC monographs have historically been managed by FDA through a system called the notice and comment process. Under this process the agency must provide a public notice of proposed changes, accept comments from basically anyone, and respond accordingly to all the comments. Often there are multiple rounds of notice and comment taking years, or in some cases decades to resolve. This process is widely regarded as cumbersome and slow, and has hamstrung both FDA and the OTC industry in expeditiously addressing significant safety concerns related to OTC drug products. It has also contributed to major delays in creating new OTC monographs, or adapting existing monographs to new technologies, but until the 2020 CARES Act amendment has been the only tool available to FDA to manage OTC monographs.

Updating OTC Monographs

The CARES Act amendment introduces a wholly new system for managing OTC monographs called the administrate order process. Now FDA is authorized to issue administrative orders to add or update OTC monographs. While the agency can still be expected to seek outside input and comments it significantly streamlines the process. It also now allows drug manufacturers to initiate requests to FDA for monograph changes or additions through something called an OTC Monograph Order Request. Now firms can request FDA update, change, or add new OTC monographs. There will be due process applied to these order requests and firms will have to submit appropriate and credible science supporting their requests. These requests also come with a price tag attached. When submitting an OTC monograph order request the submitting firm must pay a fee of either $500,000 or $100,00 per request, depending on the class of drug. Firms submitting an OTC order request for a new monograph will receive a period of exclusivity for the product if and when approved.

In addition to opening an avenue for quickly adding new OTC monographs, this new administrative order process can be expected to also usher in a stream of updates and changes to many of FDA’s older OTC monographs, as it significantly streamlines the OTC drug monograph review and update process for FDA.

User Fees for Manufacturers

A second type of fee included in the OMUFA amendment is a manufacturing facility user fee. Payable in 2021 this fee is applicable to any firm registered with FDA as an OTC drug manufacturer after December 31, 2019. Essentially, the fee now being assessed and payable in 2021 is a retroactive fee covering the calendar year of 2020. Firms that ceased all OTC drug production, and updated their FDA registration accordingly prior to December 31, 2019, will not be required to pay the 2020 fee. Firms registered in 2020 as an OTC drug manufacturing facility, even if they immediately cease all manufacturing activities in 2021, will still be required to pay the fee. That fee is $14,060. The fee is the same for all manufacturers, as FDA does not index their user fees to account for company size or revenues. U.S. based firms that only sold their OTC products outside the U.S. are called contract manufacturers under this new act, and the contract manufacturing fee is $9,373. The same eligibility provisions and fee due date as the full manufacturing fee apply to contract manufacturing.

Payment of Fees

Fees will be due 45 days after the fee schedule is published in the Federal Register.  For 2021 the official publication date of the fee notice is 12/29/2020, making the due date for fee payment February 12, 2021.  Use this link to view the full announcement, which also includes payment instructions – 2020-28714.pdf (federalregister.gov).

We have seen FDA implement user fees for prescription drugs (PDUFA) in 1992 and generic drug user fees (GDUFA) in 2012. One thing we can advise our clients on is that FDA are very aggressive at fee collections. Some generic drug firms we have worked with have had to take FDA to court numerous times to resolve fee disputes, even after ceasing all manufacturing operations FDA has continued to press for fee payments. The other observation we can pass along related to user fees is that these fees seem to inevitably rachet up every year in the range of 2-4%. Our advice is plan accordingly.

If you have further questions please feel free to give us a call.

Important Announcement: Medical Gases and COVID-19

This alert provides some information on medical gas products and the risks they pose to COVID-19 spread.  Medical gases, due to their unique physical and chemical properties, present an extremely low hazard for the spread of COVID-19 and other similar viral agents.

To get more information on the risk of some of the medical gas products Click Here

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