GrayRobinson Health Care E-lert: Sanitizer Manufacturers Beware – FDA Facility Fee May Be A Hefty One

By: Rupasri S. Lloyd, Shareholder and Jordan A. Ross, Associate

Florida – January 11, 2021 – On December 29, 2020, the US Food and Drug Administration (FDA) published a notice in the Federal Register announcing that manufacturing facilities producing products under an OTC monograph will have to pay a fee of $14,060 in 45 days. The news came as a shock to new hand sanitizer manufacturers, specifically distilleries, who began producing hand sanitizer in March 2020 to prevent shortages during the pandemic. The FDA guidance was quickly reversed, but what exactly are the implications and basis for such a fee?

The fee that FDA attempted to collect was a facility fee for its Over-the-Counter (OTC) Monograph Drug User Fee Program (OMUFA) for Fiscal Year 2021. OMUFA was created in March 2020 through passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). According to the programs’ performance goals and procedure document, the purpose of OMUFA is ultimately to reform and modernize the FDA’s regulation of OTC monograph products.

The CARES Act granted the Secretary of HHS the authority to assess and collect two types of fees under OMUFA: facility fees and OTC monograph order request fees. The CARES Act defined an OTC monograph drug facility as "a foreign or domestic business or other entity that [is] … engaged in manufacturing or processing the finished dosage form of an OTC monograph drug." The act further specifies that firms are required to pay a facility fee for the current fiscal year for facilities identified as OTC monograph drug facilities. FDA’s notice on December 29, 2020 refers to such facilities simply as Monograph Drug Facilities (MDF), and required them pay a facility fee of $14,060.

The FDA’s notice was met with staunch resistance, specifically from firms operating under the FDA temporary guidance to produce hand sanitizer. Back in March 2020, the FDA issued a guidance document, Temporary Policy for Preparation of Certain Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19), detailing the process for which distillers can manufacturer hand sanitizer. In light of the recent notice, entities like distilleries were immediately concerned that they had to pay this hefty fine at the start of the new year.

Due to the instant backlash, the FDA’s notice was immediately condemned by HHS officials and formally withdrawn on January 6, 2021. In the withdrawal notice, the FDA wrote that the original notice announcing the fee rates was being withdrawn because it was issued without being signed by HHS Secretary Alex Azar. To provide additional clarification, the FDA posted on its website further explaining that entities that entered the OTC drug market for the first time to produce hand sanitizer during the COVID-19 public health are not subject to OMUFA facility fees.

Currently, all OTC manufacturing entities will not be required to pay a facility fee of $14,060, as the original notice setting the OMUFA fee rates has been removed in its entirely. Nevertheless, the information provided by the FDA states its intent to not levy this fee only to those manufacturing "in response to the COVID-19 Public Health Emergency," meaning that only those manufacturing under the Temporary Guidance will be exempt. The FDA wrote specifically as follows:

"The Department has concluded that persons that entered the over-the-counter drug market in order to produce hand sanitizers in reliance on the guidance cited above are not "identified as . . . OTC drug monograph facilit[ies]" and are thus not subject to the facility fees authorized under section 744M of the FD&CT Act, 21 U.S.C. 379j-72."

Ultimately, it is reasonable to apprise distillery clients manufacturing under the Temporary Guidance that they most likely will not be required to pay a facility fee levied under OMUFA. For clients who have sought more permanent registration from the FDA under approved OTC monographs (including hand sanitizer), however, it is prudent to prepare and budget for the possibility that a sizeable fee may be reinstated and assessed in the future.