Distilled Spirits Council Statement in Response to HHS Federal Register Notice Concluding Distillers Making Hand Sanitizer in Response to the COVID-19 Public Health Emergency Will Not be Subject to Fee
“This is a terrific outcome that will ease the minds of hundreds of distillers who answered the call to make hand sanitizer during this national public health emergency. We want to thank HHS leadership for listening to our concerns and for their commitment to ensure that distillers who supported their communities are not unfairly charged this fee.”
The U.S. Department of Health and Human Services (HHS) submitted a Notice to the Federal Register last night announcing that those who entered the market to supply hand sanitizer during the COVID-19 public health emergency are not subject to the OTC Drug Monograph Facility Fee. As explained in the Notice, HHS has “concluded that persons that entered the over-the-counter drug market in order to produce hand sanitizers in reliance on the guidance cited above are not “identified as . . . OTC drug monograph facilit[ies]” and are thus not subject to the facility fees authorized under section 744M of the FD&CT Act, 21 U.S.C. 379j-72.”
HHS provides two reasons for reaching this conclusion:
First, as the guidance itself acknowledges, the parties at issue are not in the drug manufacturing business. Many of them produce alcoholic beverages. These entities do not hold themselves out to the public as drug makers nor does the public generally encounter them as such. Under the extraordinary circumstances presented by the COVID-19 pandemic, the Department declines to identify these entities as OTC drug manufacturing facilities.
Second, imposing facility fees on these entities is inconsistent with Congress’ stated intent elsewhere in the CARES Act. Section 2308 of the Act provides a temporary exemption from excise taxes for distilled spirits “use[d] in or contained in hand sanitizer produced and distributed in a manner consistent with any guidance issued by the Food and Drug Administration that is related to the outbreak of virus SARS–CoV–2 or coronavirus disease 2019 (COVID–19).” It is unlikely Congress intended to save these entities from excise taxes only to impose tens of thousands of dollars in facility fees from an unfamiliar regulator. The Department declines to discern such a design under these circumstances.
In conclusion, the Department clarifies that persons that were not registered with FDA as drug manufacturers prior to the COVID-19 Public Health Emergency, which then later registered with FDA for the purpose of producing hand sanitizers, are not “identified” as “OTC drug manufacturing facilit[ies]” under section 744M of the FD&C Act, 21 U.S.C. 379j-72, and are thus not subject to the facility fee contained therein. The Department’s conclusion does not apply to such persons which (1) manufacture, distribute, and sell over-the-counter drugs in addition to hand sanitizer or (2) continue to manufacture (as opposed to hold, distribute, or sell existing inventories) hand sanitizer products as of December 31 of the year immediately following the year during which the COVID-19 Public Health Emergency is terminated. In those cases, the Department may identify such persons as OTC drug manufacturing facilities.
Late yesterday evening, HHS tweeted a note linking the Notice submitted to the Federal Register and reaffirming their desire to protect distilleries from unfair regulation and fees.