How the CARES Act would affect life science regulatory policy and the FDA

The $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act contains several regulatory provisions important to FDA-regulated industries. AgencyIQ explains these provisions and their potential impact.

To contact the author of this analysis, please email Laura DiAngelo.
To contact the editor of this analysis, please email Alec Gaffney.

On Wednesday, the Senate advanced on a $2.2 trillion stimulus package, the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020, to confront the COVID-19 pandemic.

While the legislation contains substantial provisions intended to improve the health of the nation’s economy, it also includes numerous provisions intended to affect the way life sciences products are regulated. In this analysis, AgencyIQ identifies provisions that would affect the FDA and the life sciences companies it regulates. Though the bill is primarily focused on regulations that could help the FDA and industry better respond to COVID-19, it also contains substantial provisions intended to change the entire way that over-the-counter drugs are regulated in the US.


The CARES Act legislation is generally focused on material improvements to the supply chain from a payment and regulatory oversight perspective. As noted, it also contains an extensive provision to modify the FDA’s process for approving over-the-counter drugs through significant updates to the FDA’s “monograph” process. The legislation is also notable for what it does not address. These provisions are outlined in the following graphic and will be discussed in detail later in this analysis.

Life sciences industry provisions in the CARES Act


Security and the supply chain

The United States’ life sciences industry is heavily reliant on a global supply chain for the products it produces and consumes. Even if products are ultimately assembled in the US, they may have constituent parts that are made or sourced abroad. As COVID-19 continues to have a massive global impact, there are concerns that drug or device shortages may emerge in the US. Those concerns—that the US supply chain is vulnerable to global shocks or conflict—have long been noted in Congress, and the CARES Act begins to take steps to alleviate some concerns and set the foundation to later address others.

One provision of the legislation aims to alleviate the effects of shocks to the supply chain by improving the amount of critical products kept in reserve in the Strategic National Stockpile. Currently, the directive for the types of supplies that must be maintained in the stockpile include “drugs, vaccines and other biological products, medical devices, and other supplies.” The bill would amend this definition, describing the types of products that should be included as medical devices. Specifically, this would include “personal protective equipment, ancillary medical supplies, and other applicable supplies required for the administration of drugs, vaccines and other biological products, medical devices, and diagnostic tests.” The changes come as healthcare providers report having difficulty accessing sufficient quantities of personal protective equipment (PPE), accessories like ventilator tubing and swabs for diagnostics.

Additionally, the bill would also officially codify that respirator equipment is a “covered countermeasure” for the purposes of liability protections for manufacturers during the outbreak. This means that, under the COVID-19 Public Health Emergency and Declaration of Emergency Use, the FDA can authorize the use of respirators that have not been fully approved or cleared by the agency for distribution, and the manufacturer will be shielded from legal liability for any adverse outcomes or patient harms that do not demonstrate “willful misconduct.”

The CARES Act also directs HHS to contract with the National Academies of Sciences, Engineering and Medicine to examine the security of the US’ medical product supply chain. That research would be used to make recommendations to Congress about which measures should be taken to improve security, which could inform future legislation. The report would focus on drugs and devices that are sourced or manufactured outside of the US.

Drugs and biologics shortages

Under Section 506C of the Food, Drug, and Cosmetic (FD&C) Act, the FDA has the authority to manage shortages of certain medical products, including both pharmaceutical-based and biologic therapies (i.e., “drugs”). For drugs that are intended as life-supporting, life-sustaining, or intended for use in emergency medical care, the FDA can require manufacturers to notify the agency if there is an interruption in the supply or manufacture that could lead to a shortage. The FDA can then take action to mitigate a shortage by expediting the review of alternative products.

Under the new legislation, that section of the law would be amended to allow the FDA to not just expedite, but to “prioritize,” the reviews of products that could mitigate a shortage. However, the impact of this change could be limited. The FDA’s Manual of Policies and Procedures for generic drug reviews already states that the FDA “will initiate a priority review of [a generic drug application] only if the drug product relates to (1) a drug shortage; or (2) a public health emergency; or (3) if there are not more than three approved drugs.” For products that are not generic, the FDA has always had the ability to prioritize the review of certain products according to clinical need and available resources. The provision may therefore be of limited benefit.

The bill would also expand manufacturer reporting of drug products that are or could be in shortage to include not just the drugs themselves, but the active pharmaceutical ingredient (API). APIs are the raw chemical materials used to make a drug and may be made separately from the finished dose pharmaceutical. With this more granular reporting, the FDA may be able to more quickly identify and respond to potential shortages of multiple products that use the same API.

Manufacturers of life-supporting or -sustaining drugs (or their ingredients) would also be directed to have a “risk management” or contingency plan in place. That plan would need to evaluate the risks to the continued supply of the drug. The plan would be able to be audited by the FDA.

Medical Devices

Unlike drugs, the FDA does not currently have the statutory authority to compel medical device manufacturers to report on medical device shortages, nor does it have the authority to mitigate or prevent shortages by prioritizing or expediting reviews of similar products. Instead, the FDA relies on voluntary reporting from only the manufacturers of the most “essential” devices.

[AgencyIQ subscribers can read our analysis on medical device shortage reporting authority here.]

Under the CARES Act, the Federal Food, Drug, and Cosmetic (FD&C) Act would be amended to require such reporting from device manufacturers in the event of a public health emergency. The legislation states that the manufacturer of any device that is “life-supporting, life-sustaining, or intended for use in emergency medical care or during surgery,” or “for which the Secretary determines” that the device would be needed, would be required to report on a potential shortage or disruption in manufacturing during or in advance of a public health emergency.

If such a device was, or was likely to be, in shortage, the FDA would be granted the authority to expedite and prioritize the review of other similar devices that could mitigate or prevent the shortage.

Unlike the drug shortage reporting requirements, this reporting requirement would only be triggered upon the declaration of an emergency under section 319 of the Public Health Services (PHS) Act. As AgencyIQ has previously noted, the requirement that all device manufacturers report on all shortages presents may not be necessary. Devices generally have more substitutable equivalents than drugs have since they are often brought to market through the premarket notification pathway. Under that pathway, devices are granted market access by demonstrating that they are “substantially equivalent” to an already-marketed product.

Medical devices shortages are more likely to be the result of operational issues, like mergers and acquisitions, increased demand, recalls or lifecycle issues. Drug shortages are often the result of quality issues.

However, Congress and the FDA have recently raised concerns about the integrity of the medical device supply chain as the COVID-19 pandemic spreads. Being able to understand and track in advance shortages of critical medical equipment like ventilators and personal protective equipment (PPE) could help mitigate those shortages.

OTC Products

Perhaps the most surprising addition to the COVID-19 rescue legislation is the addition of the long-awaited over-the-counter (OTC) drug product regulatory reform. The new legislation includes the text of the OTC Monograph Safety, Innovation, and Reform Act, which was introduced by Senator Isakson (R-GA) and advanced by the Senate in December 2019.

Currently, nonprescription (“OTC”) drug products are regulated under the FDA’s monograph system. A monograph is a regulatory standard that defines how an OTC drug should be made, labeled and marketed. Any company may market a drug under an existing monograph, but it must conform to it exactly for it to be considered to be “generally recognized as safe and effective” (GRASE).

The monograph system was established in 1972 and is notoriously difficult to navigate. Each monograph is established via a three-phase public rulemaking process, and each OTC therapeutic drug class is supposed to have a monograph. However, the FDA has had difficulty finalizing and maintaining its monographs. As a result, it can take years for monographs to be finalized and products approved. Once a monograph has been approved, individual products do not have to be reviewed before being marketed, although many companies do have the FDA review their applications on a voluntary basis to ensure compliance.

Under the CARES Act, the FDA’s monograph system would be fundamentally overhauled. Rather than requiring a rulemaking process, the FDA would be authorized to set monographs using administrative order. The use of administrative orders to approve drugs aligns with the FDA’s process for approving prescription drugs and biologics.

Manufacturers of OTC products could request new administrative order monographs for novel products, and would have increased access to the FDA during OTC product development.

The bill would also establish an 18-month exclusivity period for novel OTC products, in order to incentivize innovation. As the current monograph system is hugely burdensome to update, several stakeholders have raised significant concerns that the regulatory system didn’t sufficiently reward the difficulty of bringing new OTC products to market. The exclusivity is less than the five years granted to new chemical drugs, and the three years granted to new indications of previously approved drugs, but could still incent innovation for OTC products.

To support the FDA’s increased oversight of the OTC market, the FDA would be authorized to collect user fees to support reviews, personnel, and administrative activities. Similar user fee-based systems have been used extensively to support the FDA’s drug, biologics, device, generic drug, tobacco, animal drug and other regulatory programs. Funding would be used to hire new staff, improve review times, and increase regulatory efficiencies.

Both Congress and the FDA have called for updates to the OTC process for several years. The previous iteration of Senator Isakson’s OTC reform bill stalled before its final passage in late 2018 due to unrelated circumstances. However, the bill has maintained broad bipartisan support.

What’s Not Included

As COVID-19 continues to spread, this may not be the last legislative fix that will be considered by lawmakers.

While the bill does address several of the concerns of the FDA and industry, it does omit at least one major provision that would offer life sciences companies a major incentive to get products fully approved—rather than authorized under Emergency Use or under enforcement discretion—as a therapy or preventive measure for COVID-19.

Congress granted the FDA authority under the FDA Amendments Act of 2007 to award companies a special incentive to accelerate regulatory reviews that can be either used or sold. That incentive is known as a Priority Review Voucher and allows the recipient of the voucher to have any drug reviewed under a “priority review” timeline (6 months) instead of a “standard review” timeline (10 months). Many of the vouchers sell for around $100 million each, providing a strong incentive for companies to pursue development.

However, as AgencyIQ has previously explained, companies that successfully develop a treatment for SARS-CoV-2 or COVID-19 are not currently eligible to receive a priority review voucher. That’s because the virus and disease hasn’t been added to the list of eligible diseases, and because the FDA doesn’t believe it meets the statutory authority to receive a voucher.

That’s not necessarily unusual. Congress passed legislation during the Ebola Virus Disease and Zika virus outbreaks to explicitly add both diseases to the FDA’s list of conditions eligible to receive a voucher. Despite some legislative interest in doing so by Rep. Hakeem Jeffries (D-NY), they have not yet done so for COVID-19.

While the FDA ordinarily has the power to add certain diseases to the list of diseases for which a product would be eligible to receive a Neglected Tropical Disease voucher, because the SARS-CoV-2 virus has spread so much, it is no longer eligible to be added by the FDA.

COVID-19 could meet the statutory criteria for a Material Threat Medical Countermeasure Priority Review Voucher, a system created under the 21stCentury Cures Act of 2016, but has not yet been added to the list of diseases for which a drug would be eligible for a voucher if it was approved.

According to a statement from the FDA to AgencyIQ in January, the agency stated that it was “unclear” if COVID-19 would become eligible for a medical countermeasure priority review voucher, based on “the trajectory this outbreak will take.” To be eligible for such a voucher, the novel coronavirus would need to be designated as a “high priority threat” by the HHS Assistant Secretary for Emergency Preparedness and Response (ASPR) or declared as such by Congress in legislation.

The CARES Act is now headed to the House of Representatives. If passed, it will be sent to the President for his signature.

Key Documents and Dates

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