Formulating OTC Products vs. Cosmetics: What Brands Need to Know
“An OTC formula can still require excellent cosmetic formulation. The difference is that the chemist has a much narrower regulatory box to design inside.”
A moisturizer and an acne treatment can sit beside each other on a bathroom counter. They may use similar emulsifiers, humectants, botanical extracts, preservatives, and packaging. They may even be developed by the same cosmetic chemist.
From a regulatory standpoint, however, they can be very different products.
In the United States, whether a topical product is a cosmetic or a drug depends primarily on its intended use, not simply what the product looks like or where it is sold.
A product intended to cleanse, beautify, promote attractiveness, or alter appearance may fall within the cosmetic definition. A product intended to diagnose, cure, mitigate, treat, or prevent disease, or affect the structure or function of the body, may be a drug.
And some products are both.
That distinction changes much more than the label. It can affect which active ingredients can be used, at what levels, what claims can be made, what testing is required, how the product is labeled, where it can be commercially manufactured, and how changes to the formula are managed.
For founders, one of the most useful distinctions is also one of the least understood:
Formulating an OTC product and manufacturing an OTC drug for commercial sale are not the same stage of product development.
What Makes a Product an OTC Drug Instead of a Cosmetic?
The distinction begins with intended use.
A standard facial moisturizer intended to moisturize dry-feeling skin may be a cosmetic.
A product intended to treat acne is a drug.
A shampoo intended to cleanse the hair is a cosmetic. A shampoo intended to treat dandruff has a drug purpose as well.
A deodorant controls odor and is generally a cosmetic. An antiperspirant is intended to reduce perspiration and is regulated as a drug.
A moisturizer marketed with sunscreen protection can be both a cosmetic and an OTC drug.
Common beauty and personal-care categories that can involve OTC drug regulation include:
Sunscreens
Acne treatments
Antiperspirants
Dandruff treatments
Certain skin protectants
Certain medicated personal-care products
This is why product classification should be considered before formulation begins, not after a formula has already been developed.
Claims Can Change the Regulatory Category
Founders sometimes assume that classification depends entirely on ingredients.
It doesn't.
Claims and intended use matter enormously.
Consider a product containing salicylic acid. The presence of salicylic acid does not, by itself, tell you everything you need to know about how the finished product will be regulated. How the product is positioned, labeled, marketed, and intended to be used matters.
Likewise, a cosmetic cannot simply make therapeutic claims because its ingredient list contains ingredients associated with those benefits.
Claims involving treatment or prevention of acne, dandruff or other diseases, for example, can move a product into drug territory.
This means regulatory strategy and formulation strategy cannot always be separated.
A brand should know what it wants to say about the product while the formula is being designed.
Some Products Are Both Cosmetics and Drugs
This is particularly relevant to the beauty industry.
An anti-dandruff shampoo cleanses hair, making it a cosmetic, while also treating dandruff, giving it a drug function.
An antiperspirant deodorant may provide cosmetic odor-control benefits while also reducing perspiration as an OTC drug.
A moisturizing sunscreen may moisturize and improve appearance while also providing regulated sun protection.
These combination products generally need to satisfy the requirements applicable to both categories.
That is an important concept for founders because "OTC" does not necessarily mean the product stops being cosmetic in every other respect.
In fact, some of the most technically demanding OTC beauty products are expected to deliver both.
Consumers want the efficacy and claims associated with the drug while still expecting the texture, aesthetics, spreadability, fragrance profile, elegance, packaging, and application experience of modern skincare.
That is where OTC cosmetic formulation becomes especially interesting.
What Is an OTC Monograph?
Many nonprescription drugs are marketed under the FDA's OTC monograph system.
An OTC monograph establishes conditions under which products in a particular therapeutic category can be marketed without an individually approved New Drug Application, provided the applicable requirements are satisfied.
Depending on the category, those conditions can address matters such as:
Permitted active ingredients
Active ingredient concentrations
Intended uses
Dosage or directions
Routes of administration
Warnings
Labeling
Required testing
A useful way to think about a monograph is as a regulatory framework for a category rather than an FDA-approved formula template.
The monograph does not tell a cosmetic chemist how to create an elegant lotion, a transparent gel, a lightweight sunscreen, a non-pilling moisturizer, or a pleasant scalp product.
That part is still formulation.
The chemist simply has less freedom around certain parts of the architecture.
Monograph Compliance Is Not the Same as FDA Product Approval
This distinction causes considerable confusion.
A product that legally conforms to an applicable OTC monograph generally does not receive individual FDA premarket approval in the same way a product marketed under a New Drug Application does.
Instead, the company is responsible for ensuring that the product complies with the applicable monograph and other drug requirements.
This is also why seeing a product or company in the FDA's National Drug Code Directory should not automatically be interpreted as FDA approval of that product.
Registration and listing are regulatory requirements. They are not endorsements.
OTC Formulation Has a Different Starting Point
With a conventional cosmetic, the formulation process can begin with a relatively open question:
What is the best formulation architecture for the product we're trying to create?
With an OTC product, the first question is often narrower:
What can we build while remaining inside the applicable regulatory framework?
That changes development.
A chemist may need to consider the required active ingredient and concentration alongside:
Solubility
pH
Emulsion architecture
Ingredient compatibility
Rheology
Preservation
Sensory performance
Packaging compatibility
Stability
Required testing
Label claims
Manufacturing feasibility
The active cannot simply be dropped into an otherwise finished cosmetic formula.
It becomes part of the architecture.
The Active Ingredient Is Only Part of the Formula
This is where brands sometimes underestimate OTC development.
If an acne treatment requires a particular active system, the formulation still needs to function as a complete product.
The active may affect pH, viscosity, color, odor, emulsion stability, crystallization risk, ingredient compatibility, skin feel, packaging, or preservation.
Sunscreen is an even more obvious example.
Choosing permitted UV filters is only the beginning. The finished system has to distribute those filters appropriately, remain stable, create the desired film on the skin, meet applicable testing requirements, and still be something consumers are willing to wear.
An OTC active can satisfy the regulatory framework and still sit inside a poor formulation.
Compliance does not automatically create a good product.
OTC Does Not Mean the Formula Has to Feel Pharmaceutical
One of the biggest opportunities in modern OTC personal care is sensory quality.
Consumers increasingly expect an acne treatment to feel like skincare. They expect sunscreen to sit well under makeup. They expect dandruff products to leave the hair attractive. They expect antiperspirants to apply elegantly.
That puts significant pressure on the cosmetic portion of OTC formulation.
The challenge becomes:
How do we preserve the regulated function while improving everything surrounding it?
That can mean optimizing:
Slip
Absorption
Residue
Tack
Pilling
Spreadability
Afterfeel
Appearance
Fragrance, where appropriate
Packaging experience
The monograph may define important regulatory boundaries. It does not define what the consumer experience has to feel like.
That is one of the major areas where brands can still differentiate.
Formulating an OTC Product Is Not the Same as Commercially Manufacturing One
This distinction deserves much more attention.
Product development starts before commercial manufacturing.
A formulation laboratory may perform R&D work to develop prototypes, investigate ingredient compatibility, optimize sensory characteristics, evaluate stability, and prepare a formula for transfer into an appropriate manufacturing environment.
Commercial production is a different stage.
Drug products sold in the United States are subject to drug manufacturing requirements, including current Good Manufacturing Practice requirements. Drug establishments also have FDA registration and drug-listing obligations.
In practical terms, a brand should not assume that a contract manufacturer capable of producing excellent cosmetics is automatically equipped to commercially manufacture OTC drug products.
Before selecting a manufacturing partner for an OTC project, determine whether that facility has the appropriate capabilities and regulatory infrastructure for the product being developed.
That conversation should happen early.
Why Manufacturer Selection Can Affect Development
A common product-development mistake is designing the product first and considering the manufacturer much later.
For OTC development, manufacturing compatibility can become important sooner.
The eventual manufacturing partner may need appropriate systems for:
Drug CGMP compliance
Documentation
Raw-material controls
Batch records
Laboratory controls
Finished-product specifications
Testing
Stability programs
Drug establishment registration
Drug listing
Quality systems
The exact responsibilities depend on the product and commercial arrangement, but the larger point is straightforward:
The regulatory path follows the product beyond the formulation bench.
A beautiful lab prototype is not yet a commercial OTC drug.
OTC Products Need Drug Facts Labeling
OTC drug products use standardized Drug Facts labeling.
Depending on the applicable requirements, the panel includes information such as:
Active ingredient
Purpose
Uses
Warnings
Directions
Other information
Inactive ingredients
That changes packaging development.
A founder designing an OTC product should therefore avoid finalizing a tiny bottle, tube, carton, or label before understanding how much regulatory copy the product needs.
Packaging is not simply the last graphic-design step.
It is part of regulatory planning.
Active Ingredients and Inactive Ingredients Are Treated Differently
Cosmetic founders are accustomed to thinking primarily in terms of an INCI ingredient list.
OTC labeling introduces another layer.
The regulated drug active or actives are identified in the Drug Facts panel, while the product's inactive ingredients are handled according to applicable labeling requirements.
For products that are both drugs and cosmetics, ingredient labeling can become more complicated because the product must satisfy requirements applicable to both categories.
This is another reason regulatory review should occur before artwork is locked.
Testing Expectations Can Change Substantially
Cosmetic development already requires serious attention to safety, stability, microbiological quality, packaging compatibility, and substantiation.
OTC development can add category-specific testing and drug-quality requirements.
The exact program depends on what is being developed.
Sunscreen is an obvious example because SPF and broad-spectrum claims are connected to standardized testing requirements.
Other OTC categories have their own applicable conditions and quality considerations.
This means "OTC testing" should not be treated as one universal checklist.
The better question is:
What does this specific product category, formula, claim set, manufacturing environment, and regulatory pathway require?
Stability Has a Different Regulatory Context
A cosmetic formula should be stable and adequately supported for its intended shelf life.
For an OTC drug, stability also intersects with the expectation that the drug product continues to meet its established specifications throughout its labeled shelf life.
That makes active-ingredient stability particularly important.
A formula that still looks, smells, and feels acceptable may not necessarily be acceptable if the active no longer meets its required specification.
This is a critical difference between evaluating cosmetic aesthetics and evaluating drug-product quality.
Appearance matters.
So does chemistry.
Why "We'll Just Add the OTC Active Later" Can Fail
This is one of the more expensive development shortcuts.
A brand may develop a cosmetic base it loves and then decide to turn it into an acne treatment, sunscreen, or another OTC product by adding the appropriate active.
Sometimes an existing base can be adapted.
Sometimes it cannot.
The new active may alter:
pH
Viscosity
Emulsion stability
Solubility
Electrolyte balance
Preservation
Color
Odor
Skin feel
Packaging compatibility
Long-term stability
It may also require a different regulatory and testing strategy.
OTC intent should ideally be identified at the beginning of development.
OTC Sunscreen Shows How Quickly the Complexity Increases
Sunscreen is a particularly useful example because it sits directly at the intersection of cosmetic aesthetics and drug regulation in the United States.
Consumers want elegant skincare.
The regulatory system treats sunscreen as an OTC drug.
That means a sunscreen developer is simultaneously thinking about filter selection, regulatory status, dispersion, film formation, emulsion stability, water resistance where claimed, SPF performance, broad-spectrum performance, sensory profile, packaging, scale-up, and manufacturing.
The regulatory environment can also change.
In June 2026, FDA issued a final order adding bemotrizinol as a permitted sunscreen active ingredient in the United States, the first new sunscreen active added to the U.S. OTC framework in decades.
For formulators and brands, that is more than an ingredient story. It demonstrates why OTC product development needs to account for evolving regulatory technology as well as formulation science.
A product platform designed today may have different innovation possibilities tomorrow.
Acne Products Illustrate a Different Challenge
Acne products present another useful example.
A founder may want a highly contemporary treatment with exfoliating acids, niacinamide, soothing ingredients, hydrators, botanical materials, barrier-support ingredients, and a regulated acne active.
The temptation is to add everything.
That is not necessarily good formulation.
The OTC active has to remain compatible with the surrounding system, and every additional ingredient adds another variable involving pH, stability, sensory performance, preservation, claims, cost, or manufacturing.
Sometimes the more sophisticated acne formula is the one with the more disciplined ingredient architecture.
The goal is not to fit the longest possible skincare ingredient list around the drug active.
The goal is to build the best finished product.
OTC Innovation Happens Inside Constraints
The existence of a monograph does not eliminate innovation.
It changes where innovation happens.
Depending on the category, meaningful differentiation can come from:
Vehicle architecture
Sensory performance
Delivery
Supporting cosmetic ingredients
Product format
Packaging
Application experience
Target consumer
Wear characteristics
Ingredient sourcing
Manufacturing technology
Combination of cosmetic benefits with regulated functionality
This can actually make OTC development an interesting formulation challenge.
If competitors have access to the same regulated active ingredients, differentiation has to come from what the brand builds around them.
Claims Strategy Should Start Before Copywriting
Claims are often treated as a marketing exercise that happens near launch.
For OTC products, that is too late.
The intended claims influence regulatory classification, development strategy, testing, labeling, and sometimes the formula itself.
Product development should therefore connect:
CONCEPT → INTENDED USE → REGULATORY PATH → FORMULATION → TESTING → CLAIMS → LABELING → MANUFACTURING
rather than developing each piece independently.
This is especially important when a brand wants both cosmetic and drug benefits.
Cosmetics Have Become More Regulated Too
The difference between cosmetics and OTC drugs should not be described as "regulated versus unregulated."
That is outdated.
The Modernization of Cosmetics Regulation Act of 2022 significantly expanded FDA's authority over cosmetics and created new requirements involving areas such as facility registration, product listing, adverse-event reporting, records, and safety substantiation.
Generally, cosmetic manufacturers and processors subject to the requirements must register applicable facilities, and responsible persons must list marketed cosmetic products, subject to applicable exemptions.
OTC drugs still operate under a substantially different drug framework, including drug CGMP requirements, drug establishment registration and listing, Drug Facts labeling, and applicable monograph or drug-application requirements.
So the useful distinction today is not:
OTC = regulated / cosmetic = unregulated
It is:
OTC drugs and cosmetics operate under different regulatory frameworks.
Does an OTC Product Need FDA Approval?
Sometimes, but not necessarily in the way founders mean when they ask this question.
Many OTC drugs can be legally marketed without an individually approved New Drug Application when they conform to the applicable OTC monograph and other regulatory requirements.
Other OTC drugs are marketed under approved drug applications.
Therefore, "OTC" does not automatically mean "FDA approved," and "monograph compliant" should not be casually replaced with "FDA approved."
That distinction matters in marketing language as well as regulatory understanding.
Can a Brand Develop a More Innovative OTC Active?
Potentially, but moving beyond established monograph conditions can change the regulatory pathway substantially.
The modern OTC monograph system includes an administrative order process through which conditions can be added, removed, or changed.
That is very different from simply deciding during product development to use an unrecognized active and market the product as an OTC drug.
For most beauty brands, the commercially practical approach is to understand the existing regulatory pathway before committing significant resources to a concept.
Innovation is valuable.
Regulatory feasibility is part of innovation.
Choosing a Development Partner for an OTC Product
OTC beauty development sits between two disciplines.
A partner who understands only cosmetic aesthetics may underestimate the regulatory constraints.
A partner focused only on regulatory compliance may produce something technically compliant that consumers don't enjoy using.
The strongest development strategy accounts for both.
Before development begins, brands should have clarity around:
Intended product claims
Applicable OTC category
Active ingredient strategy
Desired cosmetic benefits
Target consumer
Sensory expectations
Packaging direction
Testing requirements
Manufacturing pathway
Commercial market
This is also where early regulatory consultation can be valuable, particularly for unusual claims, novel actives, ambiguous product classification, or concepts that may not fit cleanly within an existing monograph.
Formula Ownership Can Matter Even More With OTC Products
A quantitative OTC formula can become a significant business asset.
Knowing the exact formula gives a brand visibility into the active level and the complete inactive ingredient architecture surrounding it.
That can matter when the brand needs to:
Evaluate manufacturing alternatives
Investigate stability issues
Manage raw-material changes
Optimize cost
Improve sensory performance
Update supporting ingredients
Respond to supplier discontinuations
Evolve the product over time
Ownership of the finished quantitative formula does not give a brand ownership of a supplier's patents, proprietary raw materials, trademarks, or third-party technologies incorporated into the formula.
It does, however, give the brand considerably more visibility and control over the product it is commercializing.
That distinction becomes especially valuable when a formula must move through regulated manufacturing environments.
Private Label vs. Custom OTC Development
Private label can be a very practical route for OTC products.
For a brand prioritizing speed, lower development investment, and an established manufacturing pathway, an existing compliant platform may make sense.
Custom development becomes more compelling when differentiation matters.
A brand may want control over texture, supporting ingredients, packaging experience, target consumer, ingredient philosophy, sensory performance, or the overall product architecture.
The trade-off is greater development complexity.
There is no universally superior route.
The right decision depends on what the product is supposed to accomplish commercially.
If the brand's competitive advantage is primarily branding and distribution, private label may be sufficient.
If the product itself is supposed to be differentiated, controlling the formulation becomes more strategically important.
The Real Difference Is the Development System
OTC development is sometimes described as cosmetic formulation with extra paperwork.
That understates the difference.
The regulatory classification can influence decisions from the beginning of concept development through manufacturing and commercialization.
For an OTC product, the path may look more like:
PRODUCT CONCEPT → REGULATORY CLASSIFICATION → MONOGRAPH OR OTHER DRUG PATHWAY → ACTIVE STRATEGY → FORMULATION → PROTOTYPING → STABILITY + REQUIRED TESTING → PACKAGING + DRUG FACTS → OTC-CAPABLE MANUFACTURING → DRUG LISTING → COMMERCIALIZATION
A cosmetic product follows a different framework, even though many of the underlying formulation disciplines overlap.
Understanding that distinction early can prevent expensive redevelopment later.
Key Takeaways
Whether a personal-care product is a cosmetic or drug depends heavily on intended use and claims.
Some products, including certain sunscreens, acne products, antiperspirants, and dandruff products, fall under OTC drug regulation.
Some products are simultaneously cosmetics and drugs and must satisfy requirements applicable to both.
OTC monographs establish regulatory conditions for certain nonprescription drug categories. They are not formulation templates.
Monograph compliance is not the same thing as individual FDA product approval.
OTC actives have to be engineered into the complete formulation, not simply added at the end.
Sensory performance remains an important area of innovation even when the active system is regulated.
Commercial OTC drug manufacturing operates under drug CGMP and registration/listing requirements.
Drug Facts labeling should be considered before packaging is finalized.
Stability must consider active-ingredient specifications as well as cosmetic appearance.
Claims strategy should begin during product development, not after the formula is finished.
Cosmetics are also subject to expanded federal requirements under MoCRA, but the cosmetic and OTC drug regulatory frameworks remain distinct.
Formula ownership can give brands greater control over future manufacturing, reformulation, cost optimization, and product evolution.
Cosmeta's Perspective
OTC products are a good example of why product development cannot be reduced to an ingredient list.
A regulated active may determine what the product is allowed to do, but it doesn't determine whether consumers will like using it.
That leaves considerable room for formulation intelligence.
The next generation of OTC beauty products will increasingly be judged by two standards simultaneously: Does it satisfy the regulatory and performance requirements of the drug category, and does it deliver the experience consumers now expect from modern cosmetics?
Sunscreen already demonstrates this shift. Acne care increasingly does too.
For brands, the opportunity is not simply to put a familiar OTC active into prettier packaging. It is to rethink the entire vehicle surrounding that active.
Regulatory constraints define part of the product.
They do not have to define the imagination behind it.
Ready for the Next Step
If an OTC product is part of a brand's roadmap, determine the regulatory pathway before the formula, claims, packaging, and manufacturer become fixed.
The earlier those decisions are connected, the more freedom the development team usually has to create something that is both commercially practical and meaningfully differentiated.
FAQs
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In the United States, the distinction is largely based on intended use. Cosmetics are generally intended to cleanse, beautify, promote attractiveness or alter appearance. Drugs are intended to diagnose, cure, mitigate, treat or prevent disease or affect the structure or function of the body. Some products have both cosmetic and drug purposes and must comply with requirements applicable to both.
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Not necessarily. Many OTC drugs can be marketed without an individually approved New Drug Application when they comply with an applicable OTC monograph and all other relevant requirements. Other OTC drugs are marketed under FDA-approved drug applications. Monograph compliance, FDA registration, drug listing and an NDC number should not be confused with individual FDA product approval.
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Not automatically. Commercial OTC drug manufacturing is subject to drug requirements, including current Good Manufacturing Practice requirements and applicable establishment registration and drug-listing obligations. A manufacturer that produces cosmetics should therefore be specifically evaluated for its ability to manufacture the type of OTC drug being developed.
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Sometimes an existing formula can be adapted, but it should not be assumed. An OTC active may change pH, viscosity, solubility, stability, preservation, sensory characteristics, packaging compatibility and testing requirements. The finished product must also comply with the applicable regulatory framework.
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Sunscreens are regulated as OTC drugs in the United States. A product such as a moisturizing lotion or makeup product that also provides sunscreen protection may be both a cosmetic and a drug and must satisfy the applicable requirements for both categories.
