Federal Support for Hand Sanitizer Production – FDA & TTB Guidance, Impact of the CARES Act

For additional guidance, please refer to Steptoe's COVID-19 Resource Center.

Hand sanitizer has become a key tool in the response to the COVID-19 pandemic and a sought-after commodity on store shelves. In response to the shortage, the two federal agencies with regulatory oversight, the Food and Drug Administration (FDA) and the Alcohol and Tobacco Tax and Trade Bureau (TTB), have issued guidance documents outlining relaxed but specific regulatory requirements temporarily applicable to the production of hand sanitizers. The guidelines in these documents are intended to facilitate the production of alcohol-based hand sanitizers by manufacturers who may be considering conversion of their facilities for this product, but will also impact the entire consumer product supply chain, such as raw material producers, packagers, and transporters. In addition, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) signed into law on March 27, 2020, amended the tax code to provide a temporary exception from excise tax for alcohol used to produce hand sanitizer and to exempt this alcohol from any requirements related to labeling or bulk sales.

We review FDA's and TTB's guidance below and also provide some considerations for companies considering entering the expanded market. Steptoe's COVID-19 cross-disciplinary team is ready to assist with any and all questions.

Existing Regulation of Consumer and Healthcare Antiseptic Rubs 

Antiseptic products such as hand sanitizers and hand wipes are regulated by FDA as Over-the-Counter (OTC) drugs. FDA reviews the safety of ingredients for use in OTC drugs and establishes regulations describing their permitted uses. As OTC drugs, hand sanitizers and their manufacturers are typically subject to a slew of regulatory obligations imposed by FDA, including facility registration, drug listing, Good Manufacturing Practices (GMP), reporting obligations, and labeling.  

While FDA regulates all hand sanitizers, TTB's involvement comes through its regulation of alcohol. This includes not just alcohol for beverage uses, but also for scientific, medical, and industrial uses. TTB regulates the manufacture and distribution of alcohol and denatured alcohol as well as the formulas for products and articles made with alcohol and denatured alcohol, including specially denatured alcohol. Entities regulated by TTB may be responsible for paying federal excise taxes. 

Federal Guidance 

Guidance documents from FDA and from TTB reduce many of these requirements in light of the current public health emergency. FDA has issued two guidance documents, the first describing temporary requirements for the production of hand sanitizers generally, and the second addressing the production specifically of ethyl alcohol for use as an active ingredient in hand sanitizers. TTB has released guidance regarding relaxation of certain permitting and formula approval requirements.   

FDA's first guidance, Temporary Policy for Preparation of Certain Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19), announced FDA's policy of enforcement discretion for entities that are not currently regulated by FDA as drug manufacturers, but that want to convert their facilities to the manufacture of hand sanitizing rubs for public and healthcare use, provided the following conditions are met:

• The hand sanitizer can be manufactured using only a specific formulation as identified in the guidance (using a formula from the World Health Organization (WHO), with either ethyl alcohol (denatured) or isopropyl alcohol as the active ingredient);
• A simple record must document key steps and controls during manufacturing to confirm compliance with the identified formula;
• The hand sanitizer must be prepared under "sanitary conditions" using "well maintained and fit for [] purpose" equipment;
• The alcohol content is verified using the most accurate method of analysis available at the site;
• The hand sanitizer is labeled only as indicated in the guidance; and
• Firms register their facility and list these products in the FDA Drug Registration and Listing System (DRLS). 

FDA's second guidance, Temporary Policy for Manufacture of Alcohol for Incorporation Into Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19), announces a similar enforcement discretion policy as above, this time applicable specifically for entities not currently regulated by FDA as drug manufacturers, but that want to produce and distribute ethyl alcohol for use as an active ingredient in hand sanitizing rubs for public and healthcare use, under the following conditions:

• The alcohol must meet United States Pharmacopoeia (USP) or Food Chemical Codex (FCC) grade requirements for purity, that is, not less than 94.9% ethanol by volume;
• Water used during production must be sterile (e.g., boiling the water, distillation, or reverse osmosis);
• The alcohol is denatured according to TTB requirements (see 27 CFR parts 20 and 21), using specific formulas (see Appendix C of the guidance); and
• The alcohol must not contain any other ingredients beyond water and the denaturants. 

As with the first guidance, FDA is requiring simple manufacturing recordkeeping, production using "sanitary conditions" and equipment that is "well maintained and fit for this purpose," verification of the alcohol content, appropriate labeling (as identified in the guidance), facility registration, and product listing with FDA.   

TTB's guidance, Production of Hand Sanitizer to Address the COVID-19 Pandemic, indicates the following:

• Alcohol fuel plants and beverage distilled spirits plants will not be required to obtain additional permits or bonds to manufacture hand sanitizer or to supply ethanol for use in the manufacture of hand sanitizer to other TTB permittees who are authorized to receive such distilled spirits;
• Only hand sanitizer made with denatured ethanol will be exempt from federal excise tax;
• Plants producing hand sanitizer according to the WHO/FDA formula do not need formula approval from TTB; and
• Industrial alcohol user permittees do not need to request approval from TTB to increase the quantities of denatured ethanol that they may procure. 

Impact of the CARES Act 

As mentioned above, TTB-regulated entities may be responsible for paying federal excise taxes. The CARES Act, passed on March 27, 2020, impacts in two different ways distilled spirits that are removed after December 31, 2019 and before January 1, 2021, and are for use in or contained in a hand sanitizer produced and distributed in compliance with FDA's COVID-19 related guidance:

• Provides for a temporary exception from the excise tax imposed by section 5214(a) of the Internal Revenue Code of 1986; and
• Exempts the products from any requirements related to labeling or bulk sales under sections 105 or 106 of the Federal Alcohol Administration Act (27 U.S.C. 205, 206); or section 204 of the Alcoholic Beverage Labeling Act of 1988 (27 U.S.C. 215).

The first provision legislatively implements the TTB guidance regarding the federal excise tax exemption. The second provision temporarily exempts the need for compliance with existing legal requirements for the labeling of distilled products so that manufacturers can legally label product intended for hand sanitizer use in accordance with FDA's guidance, and also sets aside the existing prohibition against the bulk sales of distilled spirits. 

Who should be paying attention?

• Raw material suppliers: With only one specifically permitted formula, manufacturers looking to convert facilities that use ethyl or isopropyl alcohol will also be seeking significant quantities of the permitted inactive ingredients, glycerol and hydrogen peroxide.
• Packaging manufacturers: FDA's guidance does not address packaging requirements, but given the high-alcohol content of hand sanitizer product, manufacturers should ensure that they are using packaging materials that will be safe and suitable.
• Facilities using or producing ethyl alcohol or isopropyl alcohol under GMP or GMP-like practices may be in a particularly strong position to convert to hand sanitizer production. Facilities such as distilleries and manufacturers of cosmetics, fuel ethanol, and e-liquids are good examples. 

How can Steptoe help?

Steptoe's cross-practice team has regulatory expertise in FDA, TTB, trade, tax, retail, crisis management, and other relevant areas that can help you address any questions relating to FDA and TTB's regulation of hand sanitizers and OTC drugs more generally.