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U.S. Distillers Hit with Surprise FDA Fee for Producing Hand Sanitizer

By December 31, 2020Top News

The United States Food and Drug Administration (FDA) announced Dec. 29, without any advance notice, that it is imposing fees on distilleries and other facilities that produced hand sanitizer during the pandemic. The Distilled Spirits Council (DISCUS) is urging the FDA to waive these surprise fees, during a time when distilleries aided their communities in need.

“This incredibly frustrating news comes as a complete shock to the more than 800 distilleries across the country that came to the aid of their local communities and first responders. This unexpected fee serves to punish already struggling distilleries who jumped in at a time of need to do the right thing,” said Distilled Spirits Council President and CEO Chris Swonger.

“While this fee may be a rounding error to a large pharmaceutical company, this will be disastrous to small distilleries who stepped up to help produce this critical product – it will quite literally bankrupt some struggling businesses. We are urging FDA to immediately waive the fees for distillers who are producing hand sanitizer on a temporary basis to help combat the pandemic, pursuant to the FDA’s temporary policy.”

The FDA made the surprise announcement in a Federal Register Notice (FRN) titled “Fee Rates under the Over-The-Counter Monograph Drug User Fee Program for Fiscal Year 2021.”  These fees are being levied under a newly established “OTC monograph drug user fee program,” which has established fees on OTC monograph drug facilities, as well as OTC Monograph Order Requests (OMORs) for FY 2021.  The FDA has stated that these fees also apply to facilities, including distilleries, that produced hand sanitizer under the temporary policy during Covid-19.

The fees impacting distillers are a $14,060 Monograph Drug Facility Fee and $9,373 Contract Manufacturing Organization Facility Fee. The fees for FY 2021 are due on February 11, 2021.

In order for distillers to avoid the 2022 OTC Monograph Drug Facility Fee, they need to act today, December 31, 2020 to (1) cease producing and selling the product; and (2) de-register in the FDA eDRLS system.

Phil McDaniel, CEO of St. Augustine Distillery and Chair of the DISCUS Craft Advisory Council, added, “Everyone was totally blindsided by FDA’s announcement and as a result, craft distillers across the country are scrambling to understand and respond. Given all that’s happened in 2020, the timing of this news could not be worse. The $14,000 fee being assessed could certainly put many of these small family owned businesses out of business.”

UPDATE

On December 31, 2020 Brian Harrison,  U.S. Department of Health and Human Service Chief of Staff, issued a statement that they have withdrawn the Notice published in the Federal Register re OTC Monograph Drug Facility Fees and directed FDA to cease enforcement of these fees.  Of note,  “Because the [HHS Office of the General Counsel] has determined the notice is really a legislative rule and that no one at FDA has been delegated authority to issue such a rule, the notice is void. HHS leadership, based on this legal opinion, has ordered the Federal Register Notice to be withdrawn from the Federal Register, meaning these surprise user fees will not need to be paid.”  Harrison closes his statement with the following: “Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so. I’m pleased to announce we have directed FDA to cease enforcement of these arbitrary, surprise user fees. Happy New Year, distilleries, and cheers to you for helping keep us safe.”

 

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