Distilleries Surprised by $14K Fee for Helping Make Hand Sanitizer
A "mistake" at the FDA caused some well-meaning spirits makers confusion at the end of the 2020.
In the early days of the pandemic, when hand sanitizer was harder to find than a six-pack of Angel Soft or a bag of store-brand rice, dozens of distilleries around the country shifted their focus and adapted their facilities so they could produce this now in-demand product. Some gave it away to anyone who stopped by in person, some distributed it throughout their communities, and others donated it to hospitals just as quickly as they could put it in bottles.
Calwise Spirits, a distillery in California's Central Coast, didn't hesitate to step up. "We need your help," they tweeted in March. "Our distillery is manufacturing sanitizer and fulfilling requests from first responders, government agencies, and charities who are in need. We are having a hard time finding more bottles [and] jugs [...] We have a large amount of sanitizer already produced and the ingredients needed to produce hundreds of gallons more, but can't get it to people without containers."
Aaron Bergh, the owner of Calwise Spirits, registered as a monograph drug facility with the FDA and ensured that the distillery was in compliance with the agency's requirements. Fast forward to the end of the year, and instead of sending Bergh a thank you note for his efforts in one of the states that has been the hardest hit by the coronavirus, they sent him a bill for more than $14,000.
According to the FDA, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, included some fine print about those voluntary monograph (over-the-counter, non-prescription) drug facilities. Although the CARES Act allowed distilleries to produce emergency quantities of hand sanitizer without "an approved drug application," it also stated that the FDA will "assess and collect user fees dedicated to OTC monograph drug activities," including hand sanitizer.
Basically, that means that even if a distillery donated every drop of hand sanitizer that it produced, it would have had to pay the FDA for its "monograph drug" production this year –– and if the facility is still registered as a monograph drug facility as of January 1, then it will have to pay up in 2022 as well. Crain's Detroit Business reports that the fees range between $9,373 and $14,060 annually, and this year's bill has to be paid by February 12.
CalWise Spirits was charged the full $14,060. "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," Bergh told The (San Joaquin Valley) Sun. “No good deed goes unpunished.”
The American Craft Spirits Association did its part to push back against the FDA, and recommended that distilleries shouldn't write a check until they (hopefully) get this sorted. "[W]e are taking all steps to advocate for a waiver for those distilleries who produced hand sanitizer on a temporary basis and have no plans to continue to manufacture and sell into 2021," the group wrote in a statement, according to Crain's. "ACSA is of the opinion this program was unintended for small businesses who temporarily stepped up to produce hand sanitizer to help communities in a time of need."
Luckily, it turns out the FDA was actually in agreement with the distillers. On Thursday, Heath and Human Services chief of staff Brian Harrison released a statement calling the whole thing a "mistake."
"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," Harrison said in a statement.
“This is such a relief to hundreds of distillers," Distilled Spirits Council president Chris Swonger said in a response to the FDA's rescinding of the fees. "We want to thank HHS leadership for quickly intervening and protecting distillers from these unwarranted fees. Distillers were proud to help make hand sanitizer for their communities and first responders during their time of need.”
"Many of these are rather small business, craft distilleries, and their business and livelihoods were damaged when restaurants closed down," Harrison's statement continued. "But they jumped into the fray and joined the fight against Covid. It was nothing short of heroic. They are American heroes."
And heroes who can breathe a little easier in the New Year as they toss out those invoices.
Update January 4, 2020: This story has been amended to include the FDA's response.