As the COVID-19 pandemic intensified this past spring, Madison-area distilleries and craft alcohol producers nationally responded by producing hand sanitizer in lieu of vodka or gin to fill a shortage in the crucial supply.
Now, those distilleries are learning their effort could cost them $14,000 each.
The Food and Drug Administration published this week a fee for businesses that registered as an “over-the-counter monograph drug facility” — a necessary step for distilleries to be able to legally produce hand sanitizer — coming as an unexpected cost to some.
“I don’t think they really took into account all of the little distilleries around the country that registered as they were instructed in order to produce hand sanitizer for their communities,” said Nels Forde, general manager for Yahara Bay Distillers. “These little distilleries are very small businesses, and some of them can’t afford the $14,000 facility fee, especially this year.”
The federal CARES Act included a change to how nonprescription, over-the-counter drugs are regulated by the FDA and allowed for the agency to collect fees from businesses registered to make those products, such as hand sanitizer.
On Tuesday, the FDA published a $14,060 “facility fee” for the 2021 fiscal year, which began in October, that’s due by February.
Forde said Madison-based Yahara Bay hasn’t been notified by the FDA about the fee, but he learned about it through interest groups. While the cost “won’t put us out of business,” he said “it’s not something I care to absorb.”
The distillery didn’t need to pay when it registered with the FDA in the spring, Forde said, and was unaware it could eventually face a fee.
“At that time, the message we were receiving was, ‘Do whatever you got to do to produce it, don’t worry about it,’” Forde said.
He said the American Craft Spirits Association is working with the FDA to see if a compromise can be reached to help out small distilleries that “pivoted in a time of need and did not want to become pharmaceutical facilities long-term.”
Other area distillers — such as State Line in Madison, Doundrins in Cottage Grove and Dancing Goat in Cambridge — also turned to making hand sanitizer. Requests for comment from to those distilleries were not returned Thursday.
Forde said he unregistered with the FDA on Thursday, hoping it sends a message the distillery doesn’t intend to make any more hand sanitizer.
In the spring and early summer, he said Yahara Bay produced thousands of liters of hand sanitizer to help fill the demand, selling cases of sanitizer for the state prison system and health care facilities.
“As fast as we could produce it, it was being sold,” Forde said.
He said the demand started to dry up in early summer when large, commercial producers of hand sanitizer were able to catch up, leaving Yahara Bay with about a pallet’s worth of product left.
“The $14,000 expense was not a part of the model, and I have to absorb it in some other way,” he said.
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