A New Fee Program Meets an Emergency Manufacturing Boom

OMUFA was authorized by the Coronavirus Aid, Relief, and Economic Security Act, commonly called the CARES Act, signed into law on March 27, 2020. The law modernized the old OTC drug monograph system and authorized the U.S. Food and Drug Administration to collect fees supporting its OTC monograph regulatory activities. OMUFA initially covered fiscal years 2021 through 2025 and was subsequently reauthorized for fiscal years 2026 through 2030.

The timing was extraordinary. During the early months of COVID-19, severe shortages of hand sanitizer led many businesses with access to alcohol, mixing equipment, bottling lines or packaging capacity to enter the market. Distilleries, beer brewers, cosmetic manufacturers, chemical processors, contract packagers, private-label businesses and even establishments better known as coffee shops or hospitality companies attempted to help meet public demand. Some registered with FDA and listed hand sanitizer products without previously operating as drug manufacturers.

When annual OMUFA facility fees began to appear, many small operators described the experience as a scandal, a shock or an unfair post-emergency bill. That language reflects the frustration of affected businesses, but it is important to separate public criticism from the legal framework. The fees were created by federal statute, not invented retroactively by an individual FDA office. At the same time, the confusion was understandable: many emergency entrants did not appreciate that hand sanitizer is an OTC drug, that drug establishment registration can carry continuing consequences, or that failing to update registration records may expose a facility to a later fee assessment.

What OMUFA Covers

OMUFA supports FDA work involving OTC monograph drugs. These are nonprescription drugs marketed under the statutory monograph framework rather than under an individual approved new drug application. Common categories may include certain sunscreens, antiperspirants, dandruff shampoos, skin protectants, topical antiseptics, cough and cold products, laxatives, antacids and other products subject to applicable monograph conditions and FDA requirements.

OMUFA includes two principal fee types. The first is the annual facility fee imposed on qualifying owners of OTC monograph drug facilities. The second is the OTC Monograph Order Request, or OMOR, fee paid by a person submitting a qualifying request for FDA to issue, revise or amend an administrative order concerning an OTC monograph drug. Most ordinary manufacturers are primarily concerned with the annual facility fee, while product developers seeking a regulatory change may also face an OMOR fee.

OMUFA is separate from other FDA user fee programs. A company that pays fees under a prescription drug, generic drug or medical device program does not automatically satisfy an OMUFA obligation. Likewise, payment of a commercial service fee to a consultant, U.S. Agent, importer or registration provider is not payment of the federal OMUFA fee. FDA user fees must be paid through the authorized FDA payment process and associated with the correct facility and FDA Establishment Identifier.

The Post-COVID Hand Sanitizer Fee Controversy

The COVID-19 emergency produced one of the most unusual manufacturing shifts in recent regulatory history. Businesses outside the traditional pharmaceutical sector rapidly converted equipment and supply chains to produce hand sanitizer. Many acted in good faith and responded to urgent local demand. Others entered the market commercially after recognizing that sanitizer had become a high-demand product. In both situations, registration and product listing brought those facilities into FDA’s drug regulatory system.

Early OMUFA fee notices generated intense concern because the annual fee could be substantial compared with the revenue earned by a small emergency producer. For a coffee company, craft brewer or small distillery that manufactured limited sanitizer batches, a five-figure federal facility fee could erase the economic benefit of the entire project. Some businesses also believed that FDA’s temporary sanitizer policies represented an invitation to manufacture without the long-term consequences associated with ordinary OTC drug production.

FDA responded by explaining a specific enforcement and assessment position for certain emergency entrants. For the relevant early fiscal years, FDA stated that it would not assess OMUFA facility fees on firms that first registered on or after the January 27, 2020 declaration of the COVID-19 public health emergency and whose sole OTC monograph drug activity during the pandemic consisted of manufacturing hand sanitizer. This was not a universal exemption for every sanitizer business. A facility that already manufactured another OTC monograph drug, entered before the relevant date, performed additional covered activity or failed to fit the stated conditions could have a different result.

The temporary hand sanitizer guidances were later withdrawn. Producers operating under those temporary policies were expected to stop manufacturing new sanitizer by December 31, 2021 and stop distribution of remaining sanitizer made under the temporary policies by March 31, 2022. A company that wished to continue after that period needed to comply with the applicable OTC drug requirements, including current good manufacturing practice, establishment registration, product listing, labeling and the relevant monograph conditions.

The public health emergency expired on May 11, 2023. FDA later addressed how the end of that emergency would affect continuing sanitizer manufacturers. The central lesson is that temporary relief must not be confused with a permanent waiver. Businesses that continued OTC monograph drug activity, or that left their FDA registration records indicating continued drug manufacturing, needed to evaluate later-year fee liability carefully.

Which Facilities Are Subject to the Annual Fee?

Under the FD&C Act, an OTC monograph drug facility is generally a foreign or domestic business or entity under one management at one geographic location or address that manufactures or processes the finished dosage form of an OTC monograph drug. The definition can include a finished dosage form manufacturer working under contract for the sponsor or owner of an OTC monograph drug.

The law excludes certain limited activities. A business whose only relevant activity is testing, producing clinical research supplies or placing outer packaging around already-final packaged products to create multipacks may fall outside the facility definition. Facilities that only manufacture an active pharmaceutical ingredient, without manufacturing or processing the finished dosage form, are also generally outside the OMUFA facility definition identified by FDA. Each activity must be analyzed precisely; relabeling, repackaging, mixing, filling or other processing can change the conclusion.

Importers, wholesalers and distributors are not automatically charged an OMUFA facility fee merely because they handle OTC drugs. However, an importer or brand owner may own an affiliated manufacturing facility, control a site engaged in processing, or have FDA records that create uncertainty. Foreign manufacturers are subject to the same core OMUFA framework as domestic manufacturers when their facilities meet the statutory definition and manufacture OTC monograph drugs for the U.S. market.

MDF Facility Fee Versus CMO Facility Fee

A Monograph Drug Facility, commonly abbreviated MDF, is a qualifying OTC monograph drug facility that does not meet the narrower statutory definition of a contract manufacturing organization facility. A CMO facility is an OTC monograph drug facility where neither the facility owner nor an affiliate of the owner or facility sells the OTC monograph drug produced at that facility directly to wholesalers, retailers or consumers in the United States.

The distinction is not simply whether a written manufacturing contract exists. A facility may manufacture for other companies and still fail the CMO definition if the owner or an affiliate sells OTC drugs directly into the U.S. market. Ownership structures, affiliated companies, sales channels and actual U.S. transactions must be reviewed. Incorrectly claiming CMO status can result in an underpayment, while incorrectly accepting MDF status can cause a company to pay more than required.

Rates change by fiscal year. Businesses should not use an old invoice, blog post or prior-year payment as the basis for a current payment. FDA publishes the applicable rates and deadlines in the Federal Register and on its OMUFA program webpage.

Lawful Strategies for Fee Exemption or Avoidance

A lawful fee strategy begins with accurate classification, timely registration maintenance and documented business decisions. It does not involve concealing manufacturing, using a false address, deleting records after receiving an invoice or transferring a product listing to create the appearance that activity occurred elsewhere. Those tactics can create additional compliance exposure.

For FY 2027, FDA states that the fee does not apply to OTC monograph drug facilities that ceased all OTC monograph drug activities before January 1, 2026 and updated their FDA registration to reflect that change. Future fiscal years will have their own statutory reference dates and published instructions. A company considering withdrawal from the OTC drug business should plan well before year-end.

Corporate restructuring may also affect future classification, but it must have economic substance and be accurately reflected in registrations, contracts, sales records and operations. A company should not create a paper CMO while an affiliate continues to sell the facility’s OTC drugs directly in the United States. FDA can examine ownership, affiliation and actual distribution practices.

When and How to Make an OMUFA Payment

OMUFA facility fees are annual. For FY 2026, the facility fee was due June 1, 2026. OMUFA II changes the schedule beginning with FY 2027. FDA states that the FY 2027 fee is payable in two equal installments: 50 percent due October 1, 2026 and the remaining 50 percent due February 1, 2027, subject to statutory rules addressing the timing of an appropriations act. Beginning with FY 2028, the full fee is generally due on the first business day on or after October 1, or the first business day after enactment of the applicable appropriations act, whichever is later.

Foreign facilities should begin early. International wire transfers, banking holidays, intermediary-bank deductions and mismatched payer names can delay crediting. The amount received by FDA must be complete. A wire transfer fee deducted from the principal can leave a balance in arrears even when the company believed it paid in full.

The company should retain the cover sheet, wire or electronic payment confirmation, bank reference number, invoice, FEI documentation and communications with FDA. These records are especially important when a brand owner, U.S. Agent, consultant or affiliated entity makes payment on behalf of a foreign manufacturer.

Arrears, the Public List and Misbranded Products

Failure to pay is not merely an accounting problem. If a facility does not pay the annual facility fee within 20 calendar days after the due date, FDA places the facility on a publicly available arrears list. The list can be reviewed by importers, customers, competitors, marketplaces, investors and regulatory authorities.

The consequences extend to the products. OTC monograph drug products manufactured at a facility that has not paid the required fee, and products containing an ingredient manufactured at such a facility when the statutory conditions apply, are deemed misbranded under section 502(ff) of the FD&C Act. Misbranding can support detention, refusal of admission, enforcement correspondence, distribution interruptions and commercial contract disputes.

FDA also states that OMORs will not be accepted from persons owing fees in arrears, and persons owing OMUFA fees are ineligible for certain OTC monograph drug meeting requests until the outstanding fees are paid. A delinquency can therefore affect both existing product distribution and future regulatory strategy.

Foreign manufacturers face additional supply-chain risk. An importer may discover the arrears listing only after cargo is in transit. A retailer may suspend purchasing because its quality agreement requires the manufacturer to remain in good standing. Amazon or another marketplace may request updated compliance evidence. Distributors may seek indemnification for storage, return, relabeling or destruction costs. Prompt resolution is therefore essential.

Compliance for Domestic and Foreign OTC Companies

OMUFA affects domestic facilities and foreign facilities in Europe, Asia, Latin America and Africa that manufacture OTC monograph drugs for the United States. The same legal definitions apply, but foreign companies often have more complicated operational chains involving a local factory, U.S. Agent, label owner, importer, distributor, customs broker, fulfillment warehouse and online marketplace.

Contracts should clearly assign responsibility for determining facility classification, generating cover sheets, paying the fee, maintaining proof of payment, notifying customers of an arrears issue and reimbursing costs caused by nonpayment. Nevertheless, a private contract does not change FDA’s statutory assessment. FDA will look to the qualifying facility owner and the legal requirements, not simply the parties’ preferred allocation.

How U.S. FDA Consultants Can Assist

Qualified FDA consultants can help companies identify and manage OMUFA exposure before a payment deadline, product launch, acquisition or import shipment. Consultants do not grant exemptions and cannot override FDA, but they can organize the facts, correct records, prepare a defensible classification analysis and communicate efficiently with the agency.

Consultants can also help companies establish an annual compliance calendar. The calendar should include registration renewal, product listing certification, OMUFA Federal Register monitoring, fee due dates, contract-manufacturer confirmation, arrears-list review and internal management approval. For FY 2027 and later, the shift toward earlier fiscal-year payments makes advance budgeting even more important.

OMUFA Requires Early Decisions, Accurate Records and Timely Payment

OMUFA emerged at the same time that thousands of nontraditional manufacturers entered the hand sanitizer market during COVID-19. The resulting fee disputes exposed a serious knowledge gap between emergency production and ordinary drug regulation. For small breweries, distilleries, coffee businesses, cosmetic factories and contract packagers, the lesson was expensive: manufacturing an OTC drug can create obligations that continue beyond the emergency unless operations and FDA records are properly closed.

Today, OMUFA is a permanent planning issue for the U.S. OTC monograph drug sector. Every facility should know whether it is fee-liable, whether it qualifies as an MDF or CMO, which fiscal-year rate applies, when payment is due and whether any statutory exclusion or documented cessation rule applies. Companies should also understand that there is no general small-business discount and that failure to pay within 20 calendar days can result in public arrears status and misbranding consequences.

The most effective strategy is preventive. Review manufacturing activity before year-end, maintain accurate FDA registration and listing records, verify affiliate sales, budget for the correct fee and resolve disputed assessments immediately. Domestic and foreign businesses that treat OMUFA as part of routine regulatory governance are far less likely to face a last-minute payment crisis or interruption of U.S. distribution.