Distilleries that stepped up bigtime to produce hand sanitizer blindsided with massive FDA fee

As the COVID-19 pandemic began to sweep across the United States, supplies of anti-viral cleaners dwindled quickly, with some becoming completely unavailable to consumers.

To fill the void, distilleries already hard-hit by mass closures of bars and restaurants that serve alcohol stepped up to fill those shortages.

Now, just as it looked as if many of them were going to turn the corner financially, they’re being docked again, only this time by the federal government: The Food and Drug Administration slapped distilleries that agreed to produce hand sanitizer and other products with a fee for more than $14,000, Reason magazine reported.

“I was in literal disbelief when I read it yesterday,” Aaron Bergh, president and distiller at Calwise Spirits in Paso Robles, Calif., told the magazine. “I had to confirm with my attorney this morning that it’s true.”

The fees were a complete surprise to the distilleries, who thought they were doing the country a service at its time of need.

Reason adds:

When the onset of the pandemic led to a massive increase in demand for hand sanitizer this spring, many distilleries stepped up to alleviate the sudden shortage. The main ingredient in sanitizer is ethanol, which they are in the business of making, albeit typically in more fun and tasty formats. More than 800 distilleries pivoted from spirits to sanitizer, offering it for sale or in many cases donating it to their communities free of charge. Their prompt action helped ensure supplies of sanitizer when it was otherwise unobtainable.

Even then, however, the FDA made it tough in distilleries through the imposition of additional requirements and guidelines on top of those published by the World Health Organization for use during emergency production.

One requirement was that distilleries had to ensure that all alcohol in their sanitizers were denatured — that is, ensuring it was undrinkable — which created a “bottleneck” for them that raised their costs and slowed down production, Reason reported.

(Photo by Al Bello/Getty Images)

Many distilleries saw their decision to switch to sanitizer as a matter of pride and a good way to help out communities in need during an unprecedented health crisis.

But now, they see the FDA’s unexpected fees as a good deed being punished.

“I compare it to surprise medical billing,” Becky Harris, head of the American Craft Spirits Association (ACSA), as well as Catoctin Creek Distilling in Purcellville, Va., told Reason.

The FDA’s fee falls under a provision of the CARES Act, which revised a regulation pertaining to non-prescription medications.

Under the change, distilleries that switched to producing sanitizer were classified as “over-the-counter drug monograph facilities.” In addition, the act imposed user fees on said facilities in order to fund the FDA’s regulatory actions which amount to a surprise $14,060 bill that comes due Feb. 11.

“People are incredibly anxious. We have all been dealing with tons of phone calls talking to individual members and state guilds to tell them what we know and what we don’t know,” Harris told the magazine.

“We recognize that this bill [the CARES ACT] was not written specifically for the issue of sanitizer,” Harris added. “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.”

Bergh, owner of CalWise Spirits, said that while the switch to sanitizer allowed him to remain open and his employees working, he did not make “an enormous profit” on the 5,000 gallons his company produced.

“Some of my hand sanitizer was donated,” he told Reason. “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.”

At present, Harris said she’s advising distilleries not to pay the fee immediately.

“We want to push back on this,” she said, adding she hopes the agency will simply waive the fee.

“If you were making sanitizer for your community at a limited capacity, this should not be something you have to deal with. It will be a slap in the face to make it through all of this and then get hit with this bill,” Harris added.

Jon Dougherty

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