The Food and Drug Administration announced late last week that it reversed its position and will not seek to charge distillers, who shifted to making hand sanitizer amid coronavirus-driven shortages, a $14,000 fine for operating as “drug facilities.”
Distillers, many of whom are suffering because of coronavirus-related lockdowns, received letters from the FDA in late December demanding $14,060 in fees for operating as “monograph drug facilities” — a new class of over-the-counter drug producers outlined in the CARES coronavirus relief act passed in May. Distilleries that produced any amount of sanitizer, for any price (or even those who gave the sanitizer away for free to needy medical facilities) were on the hook for the fine.
The San Joaquin Valley Sun was the first to report on the fines, kicking off a national outcry. On New Year’s Eve, the Department of Health and Human Services announced a swift reversal, likely in response.
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
“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!” Harrison said in a statement.
In a longer statement, the HHS admitted that it did not have the authority to demand the fees. “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,” the department said.
“Because HHS [Office of 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,” the statement continued, absolving the distilleries of having to pay the fee.
Distillers, who largely led the battle to bring the fees to light, were cautious but happy with the result.
“The FDA’s announcement at the beginning of this week was set to wipe out our holiday-season profit,” Aaron Bergh, Paso Robles-based distiller, and owner of Calwise Spirits told the SJV Sun. “Thanks to speaking out and fighting the power, we’ve found ourselves the recipients of a New Year’s miracle.”
Bergh did, however, suggest that HHS may not have rescinded the rule if not for the public outcry.
“Perhaps Director Harrison did not authorize this, but it’s clear that someone in a high-ranking leadership role at the HHS or FDA did,” Bergh said in a statement emailed to The Daily Wire.
According to the California-based distiller, a month ago, his distillery — as well as others across the country — were “randomly audited.”
“One of the FDA inspectors that contacted Bergh said she was part of an operation officially dubbed ‘Mission Critical,'” the distillery said in a statement. “Mission Critical,” the inspector reportedly noted, was charged with “examining production records as well as surveying the sales value of hand sanitizer produced, sold, and on-hand.”
Bergh says he was told by the inspector that the FDA was considering imposing a tax on sanitizer.
“Now it’s obvious to me that Mission Critical wasn’t just about public safety. Part of its purpose was to assess how big the money pie was so they could take a slice.” Bergh added. “I respect and appreciate the FDA’s efforts to keep the public safe by preventing defective products from entering the market. I would have understood if they were operating on a complaint-basis but conducting random audits on law-abiding distilleries during the resurgence of the pandemic and business closures was unreasonably burdensome.”
By acknowledging that it had no authority to issue the fines, it appears the FDA will not attempt to collect on fees for either 2020 or 2021 — fees distilleries might have incurred if they still had stock on January 1st. Neither the HHS nor the FDA was clear on whether such a tax or legislative rule would be up for consideration in the future, however.
Related: Government Fines Distilleries $14K For Making Hand Sanitizer During Pandemic Shortage