For first time, FDA releases OTC drug user fees prior to start of government fiscal year

The FDA today unexpectedly unveiled certain user fees under its OTC Monograph User Fee Program (OMUFA), its nonprescription drug funding and performance mechanism. While fees payable for OTC Monograph Order Request (OMOR) submissions have previously been published in March, six months after the start of the fiscal year, the fees are now being published prior to the start of the 2024 fiscal year. However, similar fees payable by manufacturing facilities have not yet been published and likely won’t be for another 6 months.

Regulatory background: User fees and over-the-counter (OTC) drug reform

• Quick background: The FDA collects user fees as part of an essential bargain between regulators and industry. Industry wants its products reviewed quickly, efficiently and predictably. Without sufficient resources, the FDA is unable to do so. Therefore, industry pays the FDA “user fees” for nearly all applications for approval, as well as annual fees related to registration and listing. These fees help the FDA hire staff, who help to review applications more quickly. In addition, the FDA agrees to follow certain performance metrics to ensure the timely review of applications. Fees are also used for a host of other activities meant to improve the FDA’s regulatory capacity and capabilities, such as I.T. modernization efforts.
• The user fee program for OTC drugs is relatively young. Until recently, the FDA relied on a monograph process through which firms could bring OTC drugs to market without FDA approval so long as it adhered to pre-set terms under the monograph. The monographs functioned as rule books for specific classes of OTC drugs, describing active ingredients, doses, indications, labeling and tests required for covered OTC products to be generally recognized as safe and effective (GRASE). Congress passed into law a new user fee program for OTC drugs on March 27, 2020, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act [ Read our explainer on the CARES Act here.]. The provisions of the bill related to OTC user fees, commonly referred to as the OTC Monograph Drug User Fee Program (OMUFA), had long been stalled in Congress and were an unexpected addition to the legislation.
• Under the new system, the approval process for OTC products is more akin to that used to approve regular drugs. This includes an administrative process, allowing the FDA to simply approve a drug without first having to issue a proposed and final regulation for public comment. The law also allows FDA to provide periods of market exclusivity for marketed products, the right to collect fees from registered facilities, and funding for reviews through a new user fee system. Additionally, if a change to a monograph is requested by the sponsor, the sponsor will be required to submit a new submission type called an OTC Monograph Order Request (OMOR).
• Most FDA user fee amounts are published at a regular cadence. While user fee amounts are typically set about 60 days in advance of each government fiscal year (which runs from October 1 – September 30), the publication of the fees has been quite delayed in the past. In 2017, the first year of the PDUFA VI agreement under the FDA Reauthorization Act, the fees were published on September 14, 2017. More recently, FDA published Fiscal Year (FY) 2023 user fee amounts on October 5, 2022 – several days after the start of the 2023 fiscal year. [ Read AgencyIQ analysis here.]
• However, the timeline for OMUFA rates aligns with the passage of the CARES Act, so these are typically seen in March. In FY 2022, FDA published OMUFA rates on March 14, 2022 [ Read AgencyIQ analysis here], and in FY 2023 FDA published OMUFA rates on March 24, 2023. [ Read AgencyIQ analysis here]
• User fee amounts are extremely important for companies. The FDA requires that user fees be paid at the time of the filing of a new product application for approval, licensure or clearance (among other activities), and failure to pay the fee means that the FDA will not review the product. In addition, failure to pay an annual registration fee can place a company on an arrears list that will also preclude approvals, among other sanctions.

Background on OMUFA’s fee structure

• FDA collects two types of fees under OMUFA: OMOR fees and facility fees [ See AgencyIQ’s analysis of a November 2022 20-page draft guidance document clarifying OMUFA fees.].
• OMOR fees consist of two tiers based on the complexity of the changes being requested to the monograph. A Tier 1 OMOR fee is assessed on an application which proposes a major change – things like a new ingredient, indication, combination, test method for an existing monograph, route of administration, dose or concentration, or therapeutic category for a product. A Tier 2 OMOR fee, in comparison, is for relatively smaller changes such as the reordering of information on the Drug Facts labels, modifying the Directions for Use, or the addition of new information to the “Other Information” section of the Drug Facts label. No fee is assessed for safety changes to a drug that are intended to “add to or strengthen” warnings, contraindications, precautions, instructions, or statements about misuse or abuse.
• Facility fees differ for monograph drug facilities (MDFs) and contract manufacturing organizations (CMOs). User fees are set by taking the program’s target revenue (which is a combination of the base fee revenue amount in addition to other adjustments for inflation, additional costs and operating reserves) and dividing that number by the total facilities (also factoring in types of facilities) that will be assessed a payment.

New fee information for Tier 1 and Tier 2 OMOR submissions

• Today the FDA published new details on the user fees that sponsors of OMORs will be required to pay as of FY 2024. Based on an analysis by AgencyIQ, the Tier 1 and Tier 2 user fee rates for FY 2024 increased 3.88% over FY 2023.
• OMUFA FY2024 Fee Schedule

• OMUFA vs. other UFAs: The 3.88% increase is significantly less than the year-over-year changes for other similar user fee programs in the same timeframe. For example, fees for New Drug Applications under PDUFA are set to increase 24.88% in FY 2024; Premarket Applications under MDUFA are set to increase 9.51% in FY 2024; and Abbreviated New Drug Applications under GDUFA are set to increase 4.93% in FY 2024. (Biosimilar applications under BsUFA, however, are set to decrease by 41.68% owing to an expected increase in the number of submitted applications). [ Read AgencyIQ analysis here.]
• How the fee was calculated: The stability of the fees is likely because OMOR fees “are not included in the OMUFA target revenue calculation, which is based on the facility fees.” Rather, the OMOR fees are calculated based on FTE staff costs (compensation and benefits) for the FDA and the consumer price index for the Washington, D.C. region.
• This appears to be the first time the FDA has ever published fee information prior to the start of the fiscal year. As noted above, it has previously published this information for FY 2021, FY 2022 and FY 2023 in March of each of those years – about six months after the start of the fiscal year.
• Notably, this does not include information about the Facility Fees that will be assessed on monograph drug facilities or contract manufacturing organizations. It’s not yet clear when the FDA might publish these fees, although the agency explained that it anticipates the publication of facility fees will “generally align with the timing of OMUFA facility fee rate publication for prior fiscal years.” This likely means that industry will have to wait until March 2024 for facility fee information.
• The fees are in effect and payable as of October 1, 2023, which is the start of the government’s fiscal year. They will remain in effect through September 30, 2024.

Contains prior research from Kedest Tadesse, Amanda Conti, and Kari Oakes
To contact the author of this analysis, please email Alec Gaffney ( agaffney@agencyiq.com)
To contact the editor of this analysis, please email Chelsey McIntyre (cmcintyre@agencyiq.com)

Key Documents and Dates

• • Over-the-Counter Monograph Drug User Fee Program: Over-the-Counter Monograph Order Requests Fee Rates for Fiscal Year 2024