DISCUS - Distillers Get Sucker Punched by FDA with $14,060 Fee

In a year that has already cost American distilleries over $700 million in lost sales and countless employee furloughs the FDA is closing out 2020 with a sucker punch to the gut. With zero warning the FDA has notified distilleries that registered to make hand sanitizer during the 2020 Covid-19 pandemic that they must pay a $14,060 Monograph Drug Facility Fee and  $9,373 Contract Manufacturing Organization Facility Fee. Oh and while you are trying to catch your breath from that surprise Decmber 29th first punch get ready for a follow up as the fee is due on February 11, 2021.

It was just a few days ago that distillers were popping the cork on some of their best craft spirits when the House, Senate and President all signed off on a new law that permanently reduced distilled spirits Federal Excise Taxes. That bill saved distillers from a looming 400% tax January 1, 2021 increase. Now, before the cork is even placed back in the bottle the FDA has ruined the celebration.

UPDATE: HHS Comes to the Rescue – Says FDA has No Authority to Issue Distilleries $14,060 Hand Sanitizer Making Fee.

When you hear the words “I’m from the Government and I’m here to help.” be prepared to run!

“Everyone was totally blindsided by FDA’s announcement and as a result, craft distillers across the country are scrambling to understand and respond. Given all that’s happened in 2020, the timing of this news could not be worse,” exclaimed Chair of the Distilled Spirits Council of the United States – DISCUS Craft Advisory Council and CEO of St. Augustine Distillery Phil McDaniel. “The $14,000 fee being assessed could certainly put many of these small family owned businesses out of business.”

“This incredibly frustrating news comes as a complete shock to the more than 800 distilleries across the country that came to the aid of their local communities and first responders. This unexpected fee serves to punish already struggling distilleries who jumped in at a time of need to do the right thing,” said Distilled Spirits Council President and CEO Chris Swonger.

Old Forge Distillery - Hand Sanitizer

“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 – it will quite literally bankrupt some struggling businesses. We are urging FDA to immediately waive the fees for distillers who are producing hand sanitizer on a temporary basis to help combat the pandemic, pursuant to the FDA’s temporary policy.”

The FDA made the surprise announcement in a Federal Register Notice (FRN) titled “Fee Rates under the Over-The-Counter Monograph Drug User Fee Program for Fiscal Year 2021.” 

American Craft Spirits Association Guidance

Catoctin Creek Distilling Co. - Co-Founder and Chief Distiller Becky Harris, Hand Sanitizer
Catoctin Creek Distilling Co-Founder & Chief Distiller Becky Harris.

In a statement from the American Craft Spirits Association – ACSA they advise, “If your 2021 business plan does NOT include manufacture, marketing, and/or sale of hand sanitizer, we recommend that you IMMEDIATELY de-register with the FDA. To be clear, to avoid a fee in 2022, de-register your facility on eDRLS by December 31, 2020. If you need help, we’ve tried to simplify it. Click here for additional guidance.”

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. We will continue to advocate on your behalf as we also know most distillers were startled by the hefty user fee due in such a short time. If you do not plan on continuing to produce hand sanitizer into 2021, we recommend that you do NOT pay the fee until further clarification and guidance.

These fees are being levied under a newly established “OTC monograph drug user fee program,” which has established fees on OTC monograph drug facilities, as well as OTC Monograph Order Requests (OMORs) for FY 2021.  The FDA has stated that these fees also apply to facilities, including distilleries, that produced hand sanitizer under the temporary policy during Covid-19.

In order for distillers to avoid the 2022 OTC Monograph Drug Facility Fee, they need to act today, December 31, 2020 to (1) cease producing and selling the product; and (2) de-register in the FDA eDRLS system.

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