At the onset of the coronavirus pandemic, when hand sanitizer was scarce, distilleries stepped up to produce sanitizer for health care workers and first responders. Since March, many have sold and donated thousands of gallons to first-responders, nonprofits and even farmers markets.
Now, a surprise FDA fee of $14,060 has left them feeling penalized for their good deeds.
The American Craft Spirits Association said distilleries began receiving notices this week that they owed the fee for operating as an over-the-counter monograph drug facility. The businesses were required to register as such when they produced the sanitizer, but distillers say they were not given a heads up about the cost. The fees are due on Feb. 12, according to the FDA website.
“When we were asked to answer the call to duty, that was never discussed,” said Tony Guilfoy, who owns Noble Cut Distillery in Gahanna. “We shut down our total production of all of our spirits just so that we can make sanitizer. … I feel like we’re being punished.”
Greg Lehman, co-founder and CEO of Watershed Distillery on the Northwest Side and president of the Ohio Distiller’s Guild, wondered if he should have taken more time to educate himself on the requirements.
“I’m not completely clear on what the fee is for, and maybe it shows a little bit of our ignorance on our part,” he said. “It was a very steep learning curve this year.”
Guilfoy and Lehman have yet to receive notices from the FDA. Others are still trying to figure out if the charge even applies to them. Chad Kessler, co-owner of 451 Spirits in Clintonville, and Gene Sigel, owner of Red Eagle Distillery in Geneva, Ohio, said they think they’re exempt because they only donated pure alcohol to other facilities, which produced the finished product.
Mark Shilling, chair of the government affairs committee for the ACSA, said some distillers didn’t receive notices because they didn’t realize they needed to register with the FDA, and others may have only been making a single component of sanitizer, and therefore did not need to register.
The OTC monograph drug user fee program was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. FDA press agent Jeremy Kahn told the Dispatch that information about the program was made available on the agency’s website beginning in May 2020.
“The FDA 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,” Kahn said. “We understand the concern that manufacturers have about the fees they are being asked to pay, especially from small businesses during this difficult time.”
But he also said there are no waiver provisions for the fees or the deadline.
“However, we stand ready to work with Congress on ways this can be addressed,” he added.
Shilling said the FDA provided guidance for making sanitizer, but provided no indication the fee existed until this week.
“My initial reaction was there was some sort of a mistake, and we were getting notices that should have been going to traditional legacy pharmacy companies,” he said.
According to Shilling, the ACSA is working with the FDA to try to get the fees waived, but hasn’t made much headway. The organization also sent out a notice this week to distillers, urging them to de-register with the FDA on Dec. 31 to avoid being charged in 2022.
The surprise fees come at a particularly difficult time for the craft liquor industry. The economic downturn brought on by the coronavirus pandemic hit Ohio’s smallest craft distilleries especially hard, because most depend on sales to restaurants and bars, and Ohioans are increasingly eating and drinking at home at avoid the virus.
“It’s a major hit that we weren’t expecting,” said Ryan Lang, head distiller and co-founder of Middle West Spirits. Lang said he’s still investigating to see if the fine applies to his business. “I don’t understand how they can ask us to step up and help people and then turn around and give us this.”
James Bagford, a distiller for Flat Rock Spirits in Fairborn (a suburb of Dayton), is also unsure if the requirement applies to his business, but said he wouldn’t be able to afford the fee.
“It would basically wipe out anything we made from the sanitizer, which helped us stay afloat when nobody was buying spirits,” he said.
Joe Bidinger, co-owner of Echo Spirits in Franklinton, considers himself lucky because his business was able to sell most of its sanitizer. But others were not able to do as demand decreased over time.
“I know there are a lot of distilleries out there sitting on hundreds or thousands of gallons of it,” he said. “To then be hit with a surprise $14,000 registration fee, that’s a tough pill to swallow. I would venture that 90% of us couldn’t even write that check right now even if we wanted to. It’s been a rough year.”
Joe Duer, co-owner of Indian Creek Distillery in New Carlisle, has yet to receive a notice from the FDA, but considers the fee a “stab in the back.”
“I probably wouldn’t pay it,” he continued. “We donated literally hundreds of gallons to civic organizations, law enforcement and so on. … We did it to help people, and being penalized for doing so, it’s not right.”
Several distillers said they had faith in the industry organizations working with the FDA on their behalf.
“It’s just ‘wait and pray,’” Guilfoy said “I feel like that’s what a lot of people are doing with everything right now.”