HHS to FDA: Rescind fees on craft distillers -- right now

I love a happy ending. And so will the hundreds of craft distillers that tried to help out in a national emergency  by shifting production from spirits to hand sanitizer — and got socked with a $14,000 “fee” by the FDA for their assistance. The bill stunned the small distillers, many of whom donated their production to first responders and health providers until commercial producers ramped up their output and eclipsed them.

Late yesterday, Alex Azar intervened — apparently driven by the explosion of bad publicity over the FDA’s surprise fees at the end of the year:

Reason’s Jacob Grier, who reported on this surprise fee earlier as well, deconstructs the longer and more substantial press release from HHS. Azar and his cohort may have been blindsided by the fees themselves, and didn’t love having that distraction at this particular moment. HHS scolded the FDA for overstepping its authority in attempting to enforce the fee without approval from its parent agency, effectively tossing the FDA under the bus:

“This action was not cleared by HHS leadership, who only learned of it through media reports late yesterday. HHS leadership convened an emergency meeting late last night to discuss the matter and requested an immediate legal review. The HHS Office of the General Counsel (OGC) has 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 notice is really a legislative rule and that no one at FDA has been delegated authority to issue such a rule, the notice is void. HHS leadership, based on this legal opinion, has ordered the Federal Register Notice to be withdrawn from the Federal Register, meaning these surprise user fees will not need to be paid.”

Translation: You’re in big trouble, Stephen Hahn. Bear in mind, however, that the fee wasn’t the FDA’s idea in the first place. That idea originated in Congress and got slid into the CARES Act as a funding mechanism for the expanded work the FDA would have to do in this pandemic. Someone on Capitol Hill — and likely many someones — thought punishing the very people who volunteered to help in the crisis was a smart idea. It would be incredibly helpful to know the identities of those someones right about now — and make sure we keep the list handy in 2022, too.

Distillers began toasting the reversal last night, but no one’s quite sure whether this is a permanent fix. The fee’s still on the books, and distillers wonder whether the next administration will choose to enforce it:

Aaron Bergh of Calwise Spirits Co. in Paso Robles, California, struck a similar note. “The FDA’s announcement at the beginning of this week was set to wipe out our holiday-season profit,” he says, relieved. But “there are still some concerns that remain,” such as whether distilleries will be charged if they continue making sanitizer in 2021.

Nonetheless, he’s grateful for the outcome. “Thanks to speaking out and fighting the power, we’ve found ourselves the recipients of a New Year’s miracle.…Thank you to all who stood up for us—our voices were clearly heard.”

No – thank you, Mr. Bergh, and all of your industry’s members who decided to pitch in to help overcome the spread of COVID-19. You deserved better than this shadow codicil in the CARES Act, and better than the surprise fee months after the fact. We will have to keep a closer eye on Congress and HHS to make sure this rule remains as toxic as your product is to bacteria and viruses.