SAN DIEGO (KGTV) -- A small, organic sunscreen company run by a husband and wife in San Diego managed to survive the pandemic. Still, a little-known fee in the first federal coronavirus relief act threatens to shut it down.
Pacific Beach Organics is one of nearly 1,000 over-the-counter drug manufacturers nationwide struggling with a new $20,000 annual fee from the Food and Drug Administration, according to federal records.
The new fee was part of an effort to modernize regulations on the over-the-counter drug industry. The changes were incorporated into the bipartisan Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which passed in March 2020.
“It’s just a matter of time before they force our arm in having to close up,” said Pacific Beach Organics founder and CEO Jessica Walmsley. “We were looking at the CARES Act as something that was intended to help people. We can’t believe this is the very thing that has caused us to consider closing up shop.”
The Over-The-Counter Monograph User Fee Act, or OMUFA, applies to manufacturers of a wide range of products, including cough medicines, pain relievers, mouthwash, and sunscreen.
The funding is designed to help the FDA speed up approvals of new and innovative over-the-counter drugs and modernize regulations that hadn’t been updated in 50 years, an FDA spokesperson told ABC 10News.
But when the FDA began rolling out the fee this year, some businesses were surprised to learn the agency would levy them uniformly. Over-the-counter manufacturing businesses were charged $20,000 per year, regardless of their size or revenue.
Pacific Beach Organics has no employees. Jessica and her husband Jonathon make all the products themselves in a 300-square foot commercial space.
“We’re paying the same as companies with thousands of employees,” Jonathon Walmsley said.
The $20,000 annual facility fee is more than three times what PB Organics pays to rent its small facility in Normal Heights.
“What this does is it allows big chemical companies, big mega-corporations to have a stronghold over the industry,” said Jessica.
The FDA says it’s simply a function of how Congress wrote the legislation. “There is no statutory authority under OMUFA for any waiver or reduction of facility fees based on business size or business revenue,” said FDA spokeswoman Courtney Rhodes.
One of the groups that lobbied for the reforms, the Consumer Healthcare Products Association, said the reforms were the result of years of dialogue between bipartisan lawmakers, regulators, and the industry.
The regulatory changes offer “a pathway for innovation in the marketplace, meaning the possibility of new ingredients, combinations, dosage forms, among other things, offering greater variety and choice for consumers to better manage their health,” a CHPA spokesperson said in a statement.
“CHPA represents both large and small companies and, because the entire industry benefits from OTC Monograph reform, we support fees shared by all manufacturing facilities,” the statement said.
The Walmsleys estimate they paid an outside company about $1,000 last year to get fully registered with the FDA. Pacific Beach Organics’ primary product is an organic, zinc-based sunscreen safe for coral reefs; some sunscreens can bleach hard corals, even at low concentrations.
“Everything we’re doing is to make a positive impact, and it’s such a shame this legislation has come in and stopped us in our tracks,” said Jessica.
To avoid the annual facility fee, the Walmsleys could turn over manufacturing to a third party -- a contract manufacturer. The couple has already invested more than $10,000 on equipment and passed several stages of testing to do the manufacturing themselves.
Turning over the manufacturing would radically change the business model in a way they still might not be able to afford, Jonathan said. It would also surrender the quality control they have over their products.
The new $20,000 fee was due May 10. FDA records show 976 companies missed the deadline to pay, including Pacific Beach Organics.
“We need Congress to do something about it because they are the only group of people that can,” she said.
Because of lobbying by the Walmsleys and another green sunscreen company in Florida, Rep. Greg Steube (R-Sarasota, Fl.) introduced a bill last month that would reduce the fees on small businesses by 75 percent. Rep. Steube is still looking for co-sponsors.
Without discounts for small businesses, the Walmsleys say customers will see fewer organic over-the-counter drug options in stores; just products from the big companies that can afford the $20,000 fee.
