Fifth Circuit Rebukes FDA for Regulatory “Switcheroo” in Denying Vaping Product Applications

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In 2016 the Food & Drug Administration “deemed” electronic cigarettes, vaping pens, and other electronic Nicotine delivery systems (“ENDS”) to be “tobacco products” under the Family Smoking Prevention and Tobacco Control Act. As a consequence, all ENDS manufacturers were required to submit premarket tobacco applications (PMTAs) in order to continue selling their wares. Under the Tobacco Act, the FDA is only to approve a PMTA if it concludes approval is “appropriate for the protection of public health,” taking into account “the risks and benefits to the population as a whole.” Without a PMTA, a deemed tobacco product cannot be sold.

PMTAs are supposed to be submitted before a new tobacco product is sold, but this was impossible since the FDA’s rule applied to products already on the market. Accordingly, the FDA announced that ENDS manufacturers would have two years to prepare and submit the lengthy and detailed materials necessary for their applications before they would face the prospect of FDA enforcement. The FDA soon realized that the material and information necessary for PMTAs would be substantial, particularly because a separate PMTA is required for each product, defined quite capaciously (i.e. each package size, each flavor, each nicotine level, each delivery system, etc.). So the FDA tried to extend the enforcement deadline until 2022, but anti-smoking groups sued, and they settled on a 2020 deadline.

The FDA ultimately received applications for over 4.8 million ENDS products from 230 companies. Needless to say, this is a bit more than the agency anticipated, and it has been working to process the applications, denying most of them. Because a PMTA denial is a death sentence, some disappointed ENDS producers have filed suit, challenging the denials and seeking judicial orders blocking FDA enforcement in the meantime.

Yesterday, the U.S. Court of Appeals for the Fifth Circuit ruled on one company’s application for a stay pending resolution of its petition challenging the FDA’s denial of its PMTAs. The court’s opinion in Wages and White Lion Investments LLC v. USFDA (WWLI) is a blistering indictment of the agency’s decision-making and evaluation of ENDS PMTAs.

In WWLI a unanimous panel granted Triton Distribution’s application for a stay, concluding that  it had demonstrated not only a strong likelihood of success on the merits, but also that it would suffer irreparable injury without a stay, and the government would not.

A key problem with the way that the FDA handled the PMTAs filed by Triton (and other ENDS manufacturers) is that the FDA based its denial of their applications on a different standard than it had told companies they have to meet. This sort of action is at the heart of arbitrary agency action, and is antithetical to principles of due process.

For years, the FDA had informed ENDS manufacturers that they would not need to conduct long-term health studies on their individual products for their applications. This only makes sense, as ENDS manufacturers only had a limited period of time to prepare their materials. Yet, on August 26 when the FDA announced it was denying PMTAs for 55,000 flavored e-cigarette products, it claimed that such studies were “likely” necessary for approval. A few weeks later, the FDA denied Triton’s applications, explaining that the key basis” for the denial, was the lack of “robust and reliable evidence” from long-term studies of the sort FDA had previously told manufacturers were unnecessary. (Triton had nonetheless committed to conduct such studies, but the FDA refused to consider that assurance.)

As Judge Oldham’s opinion makes clear, the FDA’s decision-making in denying Triton’s application is an almost textbook example of what agencies are not supposed to do. It both changed course without adequate explanation or consideration of serious reliance interests while simultaneously refusing to consider multiple relevant factors and information submitted by Triton.

Here are a few examples from Oldham’s opinion:

The FDA failed to reasonably consider Triton’s proposed marketing plan. The FDA repeatedly stated that a marketing plan is “a critical factor in[] FDA’s statutorily required determination.” Premarket Tobacco Product Applications and Recordkeeping Requirements, 86 Fed. Reg. 55,300, 55,324 (Oct. 5, 2021) (“Final Rule”); see also 84 Fed. Reg. 50,566, 50,581 (Sept. 25, 2019) (“Proposed Rule”) (“The applicant’s marketing plans . . . will provide input that is critical to FDA’s determination of the likelihood of changes in tobacco product use behavior, especially when considered in conjunction with other information contained in the application.” (emphasis added)); A.45 n.xix (“Limiting youth access and exposure to marketing is a critical aspect of product regulation.” (emphasis added)); A.45 (Premarket “assessment includes evaluating the appropriateness of the proposed marketing plan.”). Here, however, the FDA simply ignored Triton’s plan. It stated: “[F]or the sake of efficiency, the evaluation of the marketing plan in applications will not occur at this stage of review, and we have not evaluated any marketing plans submitted with these applications.”

The FDA’s excuses for ignoring the “critical factor” of Triton’s marketing plan are unpersuasive. First, the FDA says it didn’t evaluate Triton’s plan for “the sake of efficiency.” Ibid. But “efficiency” is no substitute for “reasoned decisionmaking.” Michigan, 576 U.S. at 750; see also Judulang v. Holder, 565 U.S. 42, 64 (2011) (emphasizing that “cheapness alone cannot save an arbitrary agency policy”). . . .

In a footnote Judge Oldham notes that the FDA’s failure to consider Triton’s marketing plan, and how it would control youth access, was particularly striking given that then-FDA Commissioner Scott Gottleib had identified Triton’s approach as “best practices.”

And then there are Trtiton’s reliance interests, which the FDA disregarded in the course of its regulatory “switcheroo.”

Between the Deeming Rule’s effective date and the deadline for PMTAs, the FDA held public meetings and issued guidance on how e-cigarette manufacturers could get premarket authorization. In its “final guidance,” the FDA stated that it did not “expect” that tobacco manufacturers would need to conduct long-term studies to support their PMTA. See, e.g., A.73–74; A.92; see also Nicopure Labs, LLC v. FDA, 944 F.3d 267, 282 (D.C. Cir. 2019) (“The FDA has expressed willingness to accept scientific literature reviews instead of commissioned studies in support of e-cigarette applications in appropriate circumstances.”). The FDA’s expectation did not deviate in its Proposed Rule issued before the Order or the Final Rule issued a couple weeks after the Order. See Final Rule, 86 Fed. Reg. at 55,387 (“FDA does not expect that long-term clinical studies will need to be conducted for each PMTA; instead, it expects that it should be able to rely on other valid scientific evidence to evaluate some PMTAs.”); Proposed Rule, 84 Fed. Reg. at 50,619 (similar). Many e-cigarette companies relied on the FDA’s repeated insistence that it did “not expect that applicants will have to conduct long-term studies to support an application” and did not perform or submit such evidence.

Then the FDA “pull[ed] a surprise switcheroo on regulated entities.” Env’t Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005) (Sentelle, J.); accord Azar v. Allina Health Servs., 139 S. Ct. 1804, 1810 (2019) (citing the “surprise switcheroo” doctrine). Almost a year after the PMTA deadline, the FDA issued its first marketing denial orders for various flavored e-cigarettes and announced that it required the very studies it originally expected it didn’t need. . . . Despite the radical difference, the FDA never mentioned, let alone reasonably considered, whether e-cigarette manufacturers, like Triton, could’ve reasonably relied on the FDA’s prior meetings and guidance.

The law requires more. “When an agency changes course, . . . it must be cognizant that longstanding policies may have engendered serious reliance interests that must be taken into account.” Regents, 140 S. Ct. at 1913 (quotation omitted). This does not mean that the FDA could not have “determine[d], in the particular context before it, that other interests and policy concerns outweigh any reliance interests. Making that difficult decision was the agency’s job, but the agency failed to do it.” Id. at 1914. This reinforces that the Order was likely arbitrary, capricious, or otherwise unlawful.

The FDA further failed to consider Triton’s reliance interests, whether there were alternatives to denial on this basis, and other evidence submitted by Triton. As Judge Oldham noted, the FDA responded more to some of Triton’s claims before the Fifth Circuit than it had when rejecting Triton’s PMTA. The court also found that that, on balance, a majority of the other relevant factors favored granting Triton’s request for a stay

The opinion also rejected the government’s (in my view, borderline frivolous) argument that Triton sought relief — a stay of FDA enforcement action — that the court could not give. Yet just as a court could issue a stay barring the deportation of an unlawfully present alien pending review of the alien’s claim for asylum or lawful presence, a court may order an administrative agency defendant to preserve the status quo pending the outcome of the litigation (in this case, by not initiating an enforcement action). How a government attorney argued the alternative is beyond me, particularly given the innovative and aggressive arguments in favor of expansive judicial authority to enter stays the federal government is currently making in the S.B. 8 litigation (something which I doubt was lost on this panel).

The Fifth Circuit’s WWLI decision indicates the FDA faces a tough road ahead defending many of its PMTA denials–and it appears the FDA knows it. Other manufacturers have also sought relief in court, and even before the Fifth Circuit’s decision issued the FDA was already beginning to back down. For instance, on October 11, in the face of a pending stay request before the U.S. Court of Appeals for the Sixth Circuit, the FDA agreed to rescind its denial of PMTAs submitted by Turning Point Brands.

What is particularly galling about the FDA’s treatment of ENDS manufacturers is that the FDA is well-aware that ENDS products pose far less risk to users than traditional, combustible cigarettes, and has acknowledged that ENDS can help some smokers quit. Further, there is substantial evidence that limitations on ENDS products will increase smoking, particularly among youth (as has been well-documented). Thus the FDA’s cavalier rejection of PMTAs is not only arbitrary and capricious, it is contrary to the FDA’s underlying public health mission (and may also be unconstitutional).

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