FR 2021-00237

General Summary

The document issued by the Department of Health and Human Services clarifies that businesses which started producing hand sanitizers during the COVID-19 pandemic are not required to pay specific facility fees associated with the production of over-the-counter (OTC) drugs under the Food, Drug, and Cosmetic Act. This notice primarily affects businesses that have ventured into hand sanitizer production for the first time, many of which are in the alcoholic beverage industry. The Food and Drug Administration (FDA) established a temporary policy to address sanitizer shortages during the pandemic, which these businesses took advantage of to help meet public needs.

Significant Issues or Concerns

One notable concern is the complex language used in the notice, including references to specific sections of federal laws like the FD&C Act and the CARES Act. These references might be perplexing to readers unfamiliar with regulatory terminology. Moreover, the term "OTC drug monograph facility" is used without adequate explanation, possibly contributing to confusion about who qualifies under this classification and is thus subject to fees.

Another issue is the lack of clarity about the withdrawn FDA policy mentioned in the document. An understanding of the current status of this policy is crucial for stakeholders to make informed decisions. Furthermore, there could be ambiguity regarding the entities subject to the facility fee, particularly for those that temporarily engaged in hand sanitizer production during the pandemic.

Additionally, the notice does not fully elaborate on the implications for businesses that continue producing hand sanitizers beyond a certain timeframe or that were already involved in manufacturing other OTC drugs. This oversight leaves open questions about the ongoing applicability of such fees.

The mention of changes to external language on the FDA's website might not be accessible or understandable to all readers, potentially leading to further confusion.

Impact on the Public

Broadly, this document provides relief to many small businesses and entities that joined the market to help curb the sanitizer shortage during a public health crisis. By exempting these entities from facility fees, it reduces the financial burden on businesses that contributed to this emergency response.

Impact on Specific Stakeholders

For businesses that pivoted to hand sanitizer production, especially those in the alcoholic beverage sector, this notice is likely to have a positive financial impact by removing unexpected costs tied to facility fees. However, there may be lingering uncertainties for companies that remain involved in the production of other OTC drugs or those whose business strategies rely on continued hand sanitizer production beyond the COVID-19 public health emergency period.

Additionally, the notice might negatively impact entities engaged in broader OTC drug manufacturing, as it delineates a clear distinction between temporary producers and traditional drug manufacturers, potentially affecting competitive dynamics and business planning.

In conclusion, while aimed at providing clarity and alleviating unexpected financial burdens for reactive hand sanitizer producers, this document raises several issues that stakeholders may need further clarification on to avoid any long-term misunderstandings or missteps.

The notice from the Department of Health and Human Services addresses a significant financial topic: facility fees that were expected to be levied on entities producing hand sanitizers during the COVID-19 Public Health Emergency. Two main financial references stand out in the notice.

Firstly, the document highlights that entities involved in hand sanitizer production were surprised when the FDA sought to collect an establishment fee exceeding $14,000. This unexpected demand for a substantial fee can be attributed to the language in the CARES Act, which provided the FDA with the authority to impose such fees on certain facilities. Nevertheless, imposing such fees took these entities by surprise, especially those that had only temporarily joined the market to meet urgent public health needs.

Secondly, the notice discusses the intention behind exemptions from excise taxes on distilled spirits used in hand sanitizers, as outlined in the CARES Act. It implies that Congress likely aimed to relieve these new hand sanitizer producers from such financial burdens by waiving excise taxes. Therefore, it seems counterintuitive and inconsistent with congressional intent to impose tens of thousands of dollars in facility fees on these entities, from a regulator they were not familiar with, during an unprecedented public health crisis.

The interplay between these financial references and the issues at hand is crucial. One of the significant issues identified is the confusion regarding who is liable for these fees. The reference to a $14,000 fee imposed by the FDA without prior clear communication highlights a gap that could lead to financial strain, especially for small-scale or temporary producers. These producers might have operated under the assumption that there would be no financial penalties given the emergency context and their non-traditional role in the drug market.

Furthermore, the financial implications for entities that continued their hand sanitizer production beyond the scope of the temporary guidance, especially those already involved in over-the-counter drug production, remain unclear. The document leaves room for ambiguity, which could result in unexpected financial commitments or liabilities for these businesses.

In summary, the references to financial allocations and fees in the notice point to a possible mismatch between expected regulatory relief and the on-the-ground financial realities faced by hand sanitizer producers during the pandemic. This inconsistency underscores a broader issue of regulatory clarity and financial understanding for many businesses stepping into unfamiliar territory during public emergencies.