The U.S. Department of Health and Human Services (HHS) is overriding the Food and Drug Administration (FDA), which made a surprise announcement Tuesday that any distillery that switched to producing hand sanitizer this year during the pandemic will owe thousands of dollars in fees and could be charged twice if they do not cease production immediately.
HHS Chief of Staff Brian Harrison announced Thursday: “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!”
BREAKING: @HHSGov Acts Swiftly to Protect Small Businesses from Arbitrary Fees
Statement from Brian Harrison, HHS Chief of Staff
“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so. (1/2)
— ARCHIVED: HHS Office of Public Affairs (@SpoxHHS) December 31, 2020
The early and uncertain days of the pandemic created a high demand for hand sanitizer. Many craft-brewing distilleries, which found their regular operations at a standstill due to COVID shutdowns, pivoted to making sanitizer to stay financially afloat and help with the sudden shortage. More than 800 distilleries shifted from spirits to sanitizer, offering it for sale and even donating it to their communities.
How were the distilleries rewarded for their swift, resourceful, and admirable actions? The FDA slapped them with a notice that they owed an unexpected fee to the government of more than $14,000. Any facility described as an “over-the-counter drug monograph” facility would be subject to a $14,060 Monograph Drug Facility Fee.
The CARES Act, passed into law earlier this year as an initial round of COVID-19 spending defined all distilleries producing hand sanitizer as such facilities. Under the now-voided rule, distilleries would have been forced to shut down production of hand sanitizer and notify the federal government of their change in status in order to avoid having to pay the same fee in 2022.
For the blindsided distilleries, the unexpected fee would have been devastating in an already financially difficult year.
HHS officials said they first became aware of the fee this week via the press and held an emergency meeting late Wednesday night. In a statement, the HHS said the FDA’s March guidance document – the Temporary Policy for Preparation of Certain Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19) – gave flexibility for establishments capable of producing hand sanitizer to rapidly enter the market.
“In the guidance,” wrote the HHS, “the FDA stated it ‘does not intend to take action against firms that’ produce hand sanitizer products – which are classified as over-the-counter drugs – during the COVID-19 Public Health Emergency, provided the firm’s activities are consistent with the guidance.”
“Importantly, the guidance contains no discussion regarding user fees or any indication such fees would be due by these entities, many of which would be entering the drug manufacturing business for the first time,” wrote the HHS, highlighting how unfair the bureaucratic money grab was. “Nevertheless, on December 29, the FDA posted an over-the-counter drugs user fee notice that imposes a significant financial burden on these small businesses.”
The HHS declared the FDA notice void, citing that “Only the HHS Secretary has the authority to issue legislative rules, and he would never have authorized such an action during a time in which the Department is maximizing its regulatory flexibility to empower Americans to confront and defeat COVID-19.”