Distilleries who stepped up to make hand sanitizer during a coronavirus pandemic-driven shortage in the spring now owe $14,000 to the Food and Drug Administration because of a bizarre provision in the CARES Act that reclassified spirits manufacturers who chipped in as “monograph drug facilities.”
The San Joaquin Valley Sun first reported on the fine notices, which appeared in distillers’ mailboxes right before Christmas.
“Tuesday, the U.S. Food and Drug Administration unveiled a new set of fees for organizations operating as ‘monograph drug facilities’ producing over-the-counter drugs,” the outlet reported on Wednesday. “Hand sanitizer is one of those over-the-counter drugs qualifying for fee assessments by its producers – including makeshift sanitizer producers like distillers.”
“Now, the annual fees assessed by the Federal government are serving as the final, crushing financial woe to close out an already dismal business year for distillers,” SJV Sun added.
In some cases, as in California, distilleries were legally prohibited from operating tasting rooms and, like many businesses, distilleries across the country suffered a major downturn in business during the pandemic-related lockdowns. Reason Magazine reports that some 800 distilleries tried to soften the blow by manufacturing hand sanitizer — the primary ingredient in most hand sanitizer is ethanol, “which they are in the business of making.”
The FDA already complicated that process, demanding that the alcohol be denatured before distillery-made hand sanitizer could be sold on the open market — something even the World Health Organization does not require, at least in emergencies.
“Producing sanitizer is viewed as a point of pride in the distilling business, a way that they were able to help their communities in a fearful time of crisis,” Reason notes, adding that “no good deed goes unpunished.”
“At issue is a provision of the CARES Act that reformed regulation of non-prescription drugs. Under the revised law, distilleries that produced sanitizer have been classified as ‘over-the-counter drug monograph facilities.’ The CARES Act also enacted user fees on these facilities to fund the FDA’s regulatory activities. For small distillers, that means ending the year with a surprise bill for $14,060 due on February 11,” Reason reports.
Worse still, if the same distilleries maintain their license into 2021 and fail to update their status with the FDA — something very difficult in the span of time between Christmas and New Years’ — they could owe another $14,000. And it doesn’t matter whether distillers produced cases of hand sanitizer or only a few bottles, or even whether the sanitizer was sold or donated to desperate medical care facilities; the designation applies to the action, not to the quantity or the profit margin.
The CARES Act, of course, was an emergency coronavirus relief bill.
Distillers are shocked at the bill.
“I was in literal disbelief when I read it yesterday,” one California distiller, Aaron Bergh told the San Joaquin Valley Sun. “I had to confirm with my attorney this morning that it’s true.”
“At the beginning of the pandemic the FDA and our communities called out for help and distillers enthusiastically stepped up to the plate and provided an essential product to medical workers and first responders,” Bergh added. “It’s apparent the FDA has decided they don’t need us anymore and it’s in their best interest to suck us dry when we’re already struggling during the pandemic’s business closures.”
“Some of my hand sanitizer was donated,” Bergh added in a statement. “The rest was sold at a fraction of the market price. My goal was to get as much out as I could, at as low of a price as I could, while being able to bring my furloughed employees back to work. The hand sanitizer business saved me from bankruptcy—but I didn’t make an enormous profit.”
The American Craft Spirits Association told Reason that they are trying to assist craft distillers with the issue, but even they were taken by surprise.
“We recognize that this bill was not written specifically for the issue of sanitizer,” a representative from ACSA told the magazine. “The problem that we have right now is that [the fee assessment] is going out to a whole lot of small businesses who are struggling in the pandemic.”
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