During a public health crisis, distilleries across the country pumped out hand sanitizer to cover a nationwide shortage.
Now those same distilleries are being told to pay more than $14,000 to the Food and Drug Administration (FDA) for making over-the-counter drugs without proper licensing.
“I feel like the FDA welcomed me when they needed me, now they are letting the door shut on me on my way out," Calwise Spirits & Co. distillery owner Aaron Bergh said.
For distilleries like Calwise Spirits & Co. in Paso Robles, making sanitizer was an opportunity to bring back furloughed employees and avoid bankruptcy during the pandemic.
He says in March, the FDA reached out to distillers for help in making more products and waived the registration and drug approval process to get sanitizer out fast.
In a six-week period, Bergh and his team made more than 5,000 gallons of the germ-killing formula and shipped it out across the state to government agencies and front-line workers.
Now he and nearly 800 other distillers in the U.S. owe $14,080 to the FDA in facility fees.
“I feel like no good deed goes unpunished,” Bergh said. “What I could have done what others did and not register with the FDA and start making it without registering, but because I followed the rules and I registered, now I'm getting audited and taxed."
Shock and frustration are rippling through the industry.
“There must be some mistake. We're the good guys. We are the guys who [the FDA] wanted us to help and we jumped in and helped,” Central Coast Distillery owner Eric Olson said. “That was our whole purpose and there was no talk that we'd have to pay later for helping."
The CARES Act passed in March changed the regulation of non-prescription drugs, which allowed distilleries to make the product under FDA guidelines.
However, under the revision, distilleries are classified as "over the counter monograph drug facilities," which means business owners have to pay the associated fees for the fiscal year by Feb. 12.
On Thursday evening, the U.S. Department of Health and Human Services tweeted a recommendation that the FDA "cease enforcement of these arbitrary, surprise user fees." However, there has been no response from the FDA yet.
BREAKING: @HHSGov Acts Swiftly to Protect Small Businesses from Arbitrary Fees
Statement from Brian Harrison, HHS Chief of Staff
“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so. (1/2)
— HHS Office of Public Affairs (@SpoxHHS) December 31, 2020
Olson says many distillers lost money or broke even selling sanitizer.
Many local business owners like himself even donated bottles to homeless shelters and first responders.
“It was such a rush to get going on it. Nobody even tried to make money. These guys were just trying to get it out to people's hands. I mean, honestly, it was goodwill,” Olson said.
In an email to KSBY, an FDA spokeswoman says the info about the fee was posted on the agency's website back in May. On Tuesday, Dec. 27, it announced how much the fee would be.
In a statement, the FDA said it "appreciates the 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. We understand the concern that manufacturers have about the fees they are being asked to pay, especially from small businesses during this difficult time."
Distillery owners have until the end of 2020 to decide if they want to continue sanitizer production into the new year, which would cost them another $14,000 in registration and facility fees.
For Bergh, it’s not worth it.
“This morning I had to cancel my FDA registration. I would have liked to hold on to it, so I have it all ready in case there’s another massive shortage and we can start manufacturing, but the FDA created too much risk,” Bergh said.
The Distilled Spirits Council of the United States said in a press release the FDA's announcement came with no warning and they are urging the agency to waive those fees.
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