Distilleries helped out by making hand sanitizer. Now they’ve been threatened with unexpected FDA fees. – The Washington Post

Now, hundreds of distilleries around the country are surprised to find out that their forays into the sanitizer business could cost them, as the Food and Drug Administration warned some that they owe more than $14,000 in fees levied on the makers of over-the-counter drugs. A notice that the agency posted this week — and emails to at least some distilleries — have the industry in a late-year state of confusion, although the U.S. Department of Health and Human Services indicated on Thursday that a reprieve was in order.

Earlier, the FDA had indicated that its hands might be tied when it comes to the waivers the distilleries are hoping for.

“The FDA appreciates industry’s willingness to help supply alcohol-based hand sanitizer to the market to meet the increasing demand for these products during COVID-19, and we are grateful for their efforts,” a spokesman said in an emailed statement to The Washington Post. “We understand the concern that manufacturers have about the fees they are being asked to pay, especially from small businesses during this difficult time.”

But the agency can’t just make the fees go away without some help from lawmakers, he said. “The statute does not provide any waiver provisions for any specific category of manufacturer or for the deadline for assessing those fees, however we stand ready to work with Congress on ways this can be addressed,” the statement continued.

Becky Harris would usually be doing inventory this week, she says. Instead, Harris, president of the American Craft Spirits Association and also president and chief distiller at Catoctin Creek Distilling, has been fielding emails from panicky business owners and trying to navigate unfamiliar regulatory waters. It started with an email from the FDA to one of her group’s members earlier this week, alerting the distiller about the fees and saying they are due within 45 days of being published in the Federal Register on Tuesday, she said. The surprising missive touched off days of frantic phone calls and parsing of legalese.

“You’re used to your own industry — but in the FDA-sphere, it’s a whole other language,” says Harris, who worked with the FDA months ago to help fellow distillers get into the sanitizer production game. After many phone calls, including one with the top staffer for Health and Human Services Secretary Alex Azar, she was hopeful that the industry would be able to work something out with regulators and lawmakers to stave off the fees. “I think we will find our way through this,” she says. “In the meantime, it makes for a nerve-racking New Year’s.”

Shortly after 6 p.m. Thursday, HHS’s public-relations account tweeted a statement from chief of staff Brian Harrison that the department had “directed FDA to cease enforcement of these arbitrary, surprise user fees.”

“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so,” the statement read. “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!”

In an interview before the HHS statement was released, Harris said not all distillers that produced sanitizer got similar emails. It might be, she says, that they went out only to the businesses that are still listed with the FDA as producers. (Catoctin Creek, for example, delisted when sanitizer began appearing again on grocery shelves.)

She estimates that there are a couple thousand distillers in the country and that most of them made sanitizer at some point during the pandemic. Many donated bottles to first responders or other groups in their communities. Some sold the precious commodities as a way of employing workers they otherwise would have had to lay off as tasting rooms and tours shut down.

But the shift away from booze inadvertently put them in a different regulatory category. The Coronavirus Aid, Relief, and Economic Security Act, or Cares Act, that Congress passed in March established new fees for companies producing many over-the-counter drugs.

Which wasn’t a business most booze-makers even wanted to be in. “It was something we felt we had to do,” Harris says. “When you get calls from your first responders who need something that you can make, you’re going to help out. These were your neighbors.”

Distilled Spirits Council President and CEO Chris Swonger called the FDA’s move a “complete shock” and said it would devastate some small businesses. “While this fee may be a rounding error to a large pharmaceutical company, this will be disastrous to small distilleries who stepped up to help produce this critical product,” he said in a statement. “It will quite literally bankrupt some struggling businesses.”

Beyond the $14,600 fees for producing this year, another concern is that unless distilleries delist with the FDA by the end of the year — that is, by today — they could wind up owing another year’s fees for operating in 2021. Complicating things, some distilleries are closed for the holidays and might not have gotten the FDA email, if it even came, Harris notes.

“None of us regret doing our bit,” she says. “But I guarantee most of us just don’t have that kind of money lying around.”