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Drug Facility Fees Will Not Apply to Distilleries Producing Hand Sanitizer
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By Lynn L. Bergeson and Carla N. Hutton

Last week, press reported that the U.S. Food and Drug Administration (FDA) would assess distilleries making hand sanitizer $14,060 in fees as Monograph Drug Facilities (MDF) under the Over-the-Counter (OTC) Monograph Drug user fee program for fiscal year (FY) 2021.  Several days later, on December 31, 2020, the Department of Health and Human Services (HHS) Office of Public Affairs tweeted a statement from Brian Harrison, HHS Chief of Staff.  According to the statement, HHS has “directed FDA to cease enforcement of these arbitrary, surprise user fees.”  FDA announced the fee rates on December 29, 2020.  85 Fed. Reg. 85646.  According to the notice, MDFs are exempt from FY 2021 facility fees if they had ceased OTC monograph drug activities and updated their registration with FDA to that effect, prior to December 31, 2019 -- an impossibility for distilleries that began making hand sanitizer in 2020 in response to the COVID-19 pandemic.

According to the complete HHS statement, posted by the Distilled Spirits Council, FDA’s March 2020 guidance document, Temporary Policy for Preparation of Certain Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19), “contains no discussion regarding user fees or any indication such fees would be due by these entities, many of which would be entering the drug manufacturing business for the first time.”  HHS states that FDA’s action “was not cleared by HHS leadership, who only learned of it through media reports.”  The HHS Office of the General Counsel (OGC) reviewed the matter and “determined that the manner in which the fees were announced and issued has the force and effect of a legislative rule.  Only the HHS Secretary has the authority to issue legislative rules, and he would never have authorized such an action during a time in which the Department is maximizing its regulatory flexibility to empower Americans to confront and defeat COVID-19.”  Because HHS OGC has determined the FDA’s notice is a legislative rule and that no one at FDA has been delegated authority to issue such a rule, HHS states that the notice is void.  HHS leadership, based on the legal opinion, has ordered FDA’s Federal Register notice to be withdrawn, “meaning these surprise user fees will not need to be paid.”

Commentary

The decision comes as a huge relief to businesses far beyond the distillery industry.  FDA is to be commended for ensuring well-intended businesses that redeployed their infrastructure for all the right reasons were not inadvertently penalized for stepping up.