Facing an outcry, the Department of Health and Human Services overruled the Food and Drug Administration late Thursday and canceled plans to charge $14,000 fees on distilleries that rushed to make hand sanitizer to combat the coronavirus.
HHS administered the stark spanking to one of its own agencies, saying the FDA didn’t clear the move with department leadership and that oversight made the decision unlawful.
“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so,” said Brian Harrison, chief of staff at HHS. “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!”
The FDA had announced the fee in a notice published in the Federal Register this week.
That had sparked dismay among distilleries that, as the pandemic began to bite in March and April, rushed to fill a sanitizer shortage by switching their production lines from drinks to sanitizer.
More than 800 distilleries stepped up, according to industry figures, delivering cases to local emergency responders, often free of charge, and also selling supplies to a desperate public.
The FDA and distilleries negotiated back and forth over requirements such as what sort of bitterant had to be added to make sanitizer not consumable.
But distilleries said the new fee caught them by surprise when it was published on Tuesday.
“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. “It will quite literally bankrupt some struggling businesses.”
He asked the FDA to issue waivers to the distilleries.
After Thursday’s reversal, he said the move was “such a relief to hundreds of distillers.”
The FDA had said it was following through on a new Over-the-Counter Monograph Drug User Fee Program, which Congress wrote into the Coronavirus Aid, Relied and Economic Security Act, one of the major pandemic bills Washington cleared in the spring.
The agency said Congress left no room for waivers, but officials said they would work with Capitol Hill to have the situation “addressed.”
Late Thursday, after HHS delivered its spanking, the FDA said it “intends to appropriately and transparently implement the drug user fee program enacted by Congress and signed into law.”
Under the OTC monograph program, distilleries were deemed to be drug manufacturers if they produced sanitizer.
The fee for 2021 is $14,060 and is due in February.
HHS said it wasn’t told of the FDA’s move beforehand and learned of it from press reports after the fees were published in the Federal Register.
The department said its lawyers have now looked over the fee and concluded it is the equivalent of a legislative rule, and so it should have been issued by the secretary — who never would have authorized it.
That voids the notice, the department said.