The Most Engaging Decision You’ll Read All Year – Five StarsJanuary 16, 2024
You know a court decision is going to be worth reading when the judges compare FDA’s regulatory governance of flavored e-cigarettes to a Shakespearean gaslighting. To quote the Fifth Circuit: “It was the regulatory equivalent of Romeo sending Mercutio on a wild goose chase—and then admitting there never was a goose while denying he even suggested the chase.” With such an opening, you can just imagine the tenor of the opinion the Fifth Circuit released a few days ago in response to a lawsuit filed by a manufacturer of bottles of flavored nicotine liquid used to refill e-cigarette products or tank systems after the Agency denied plaintiff’s marketing applications, along with 55,000 other flavored e-cigarette applications. Let’s just say, the smackdown—er, decision—eviscerates FDA’s approach to regulating flavored e-cigarettes.
In Wages and White Lion Investments (DBA Triton Distribution) v. FDA, Petitioners, a liquid nicotine manufacturer, sued FDA arguing that the Agency was arbitrary and capricious in rejecting the Petitioner’s Premarket Tobacco Application (“PMTA”) in violation of the Administrative Procedure Act (“APA”). If you made it through the first 2 pages of the opinion, this Court’s answer is clear: FDA flagrantly violated the APA in denying those flavored e-cigarette applications due to the Agency’s utter failure to provide comprehensible instructions and consistent policies.
This story goes back to the 2009 Family Smoking Prevention and Tobacco Control Act, which prohibits manufacturers from selling any “new tobacco product” without authorization from FDA. In 2016, FDA determined that e-cigarettes and their component parts fell under the term “new tobacco products,” requiring manufacturers of such products to submit PMTAs for FDA review before the Agency would issue a marketing order permitting the legal sale of the product. FDA extended PMTA compliance deadlines for years so it could figure out appropriate application instructions and so that manufacturers could figure out how to comply. FDA originally set the PMTA deadline as August 8, 2022, but a district court in Maryland ordered FDA to shorten it. FDA complied with that order, later extended the deadline because of COVID, and eventually settled on a PMTA deadline of September 9, 2020. Before that deadline, as the Fifth Circuit Court explained, FDA provided PMTA instructions on at least five relevant occasions:
- At an October 2018 Public Meeting, FDA said in a formal presentation that “No specific studies are required for a PMTA” and that PMTA could be supported without conducting new nonclinical or clinical sources given other data. Youth behavioral data was not specifically required but FDA encouraged such information.
- FDA published a June 2019 guidance, which stated that manufacturers would not need to perform long-term studies or submit long-term data in PMTAs. FDA said randomized clinical trials could be used, but so could observational studies with respect to cessation data. FDA also directed manufacturers to produce detailed marketing plans.
- At an October 2019 Meeting, FDA explained the application process and provided assurances that decisions would be made on each specific product in a submission—not the submission in its entirety.
- In September 2019, FDA issued a proposed rule reiterating that it did not expect long-term studies to be necessary, but that marketing plans were critical to success of a PMTA.
- Finally, FDA issued another guidance in January 2020 (and revised in April) that stated that after the PMTA deadline set for September 2020, the Agency would prioritize “flavored, cartridge-based” e-cigarettes over than tobacco or menthol-flavored. FDA explained that “cartridge-based” products are more attractive to youth than “open tank systems,” which are bigger, harder to conceal, more complicated, and require refilling.
Importantly, the Court emphasized, “Never in this long, winding, and byzantine regulatory process of meetings, PowerPoint decks, proposed rules, comment periods, guidance documents, and enforcement priorities did FDA ever say that it was contemplating an across-the-board ban on flavored products.” Nor did FDA give notice that favored product manufactures had to submit robust scientific studies on flavored cigarette products. Yet…
Petitioners filed PMTAs for their flavored nicotine liquids, which included marketing and sales access restriction plans, with FDA before the deadline. They also submitted long-term, controlled, and peer-reviewed studies to show that e-cigarettes generally cause smokers to switch to vaping. They also included observational studies. But they did not submit information specific to flavored products.
In August 2021, FDA issued a press release announcing the denial of 55,000 flavored e-cigarette applications en masse. FDA proceeded to deny 946,000 flavored product applications in just over two weeks. In the August 2021 press release, the Agency announced for the first time that a randomized controlled study or other comparably robust and reliable study is required in a PMTA for a flavored e-cigarette product. Petitioners asked for more time to amend their PMTAs to include the newly-required studies, but, as the Court explained, FDA went ahead and issued Marketing Denial Orders due to the absence of the “once-optional-but-now-required scientific studies.” The Court also took umbrage with FDA’s plain statement that it “refused to even read petitioners’ marketing plans” that the Agency emphasized so heavily in guidance. Petitioners moved to stay their Marketing Denial Orders pending review in Court. Though a Fifth Circuit merits panel refused, the Court granted rehearing.
In a 10-5 en banc decision, the Fifth Circuit Court found that “FDA acted arbitrarily and capriciously in rejecting petitioners’ PMTAs.” Going through “[f]our well-established and longstanding principles of administrative law,” the Court explained how any one of such principles “independently require that result.” Specifically, the Court explained that:
- Any agency cannot invent post hoc justifications for its decision in court and outside the administrative record;
- An agency must provide fair notice before it deprives a citizen of property;
- When an agency chances its position, it must display awareness of the change and explain it; and
- Even if an agency acknowledges and explains a change in its position, it cannot fault a regulated entity for relying in good faith the on the previous one.
FDA failed on each count. FDA said no new clinical data would be necessary then denied Petitioners’ and many other PMTAs for flavored e-cigarette products because those applications contained no randomized controlled trial and/or longitudinal cohort study. And FDA deemed irrelevant robust scientific studies showing e-cigarettes induce adults to switch from smoking because it did not show that flavored e-cigarettes promote switching more than unflavored ones. And, the Court stated, FDA failed to even read the marketing plans it stressed as necessary.
FDA did justify its position—using arguments that apparently have worked in other circuits—by citing to several ambiguous sentences in its June 2019 guidance insinuating that randomized data might be required. FDA claimed that these sentences provided fair notice, but the Court disagreed, noting that FDA had repeatedly stated in no uncertain terms that such studies would not be mandatory in PMTAs. Indeed, FDA received over one million PMTAs for flavored e-cigarette products “and not a single one of them contained the scientific studies that FDA now requires . . . .” Says the Court: “It is perhaps possible that FDA did its part to give the regulated community clear guidance and that one million out of one million not only got it wrong but got it unreasonably wrong. But administrative law does not turn on such infinitesimal possibilities.”
While FDA did try to suggest that these studies were not a requirement, the Court cited a PMTA checklist in FDA’s Decisions Document that included a requirement for a randomized controlled trial or a longitudinal cohort study. According to the Court, “[t]hat sure looks like a requirement that petitioners perform long-term scientific studies on their e-cigarette products.” Further, FDA “created a new, after-the-fact, categorical ban on using scientific data from unflavored products to support flavored PMTAs.” The Court stated that FDA essentially “imposed an across-the-board ban on all flavored products, regardless of device type.” All of this, the Fifth Circuit stated, is a clear demonstration that FDA added requirements without fair notice and without acknowledging any change in its position. “All that matters here,” said the Court, “is that the agency unquestionably changed its position and then pretended otherwise.”
FDA’s argument in the alternative—that any “error was harmless”—was shut down by the Court as the Agency’s “misunderstand[ing] of how harmless error review works under the APA.” The harmless error doctrine arises from the administrative law principle than agency errors result in a remand back to the Agency—not in a court substituting a more adequate or proper remedy. The Fifth Circuit Court reasoned that the harmless error doctrine would have applied only if FDA were required to deny the Petitioner’s applications; but it did not apply just because FDA “will deny [the Petitioner’s applications] on remand even if we send the case back . . . .” The harmless-error rule, in other words, does not apply to discretionary administrative decisions.
We note that the Fifth Circuit is not the first circuit to have addressed the issue. The Eleventh Circuit came to the same conclusion as the Fifth—that FDA acted arbitrarily and capriciously—but five other circuits have sided with FDA. FDA clearly made that point in this case, arguing to the Fifth Circuit that it must look to its “sister circuits,” but the Court flatly rejected that line of reasoning noting that “law is not a nose-counting exercise” and then explaining why it disagreed with each of its “sister circuits.” With this circuit split and the literal millions of rejected PMTA e-cigarette applicants, and several other circuits left to opine, this is not the last we’ll hear of this issue. We just hope that all future decisions are as engagingly written as the Fifth Circuit’s. Give it a read—you’ll enjoy it.