Pharmaceutical Manufacturers Ass'n v. Kennedy, Civ. No. Y-78-2449.

• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)
• Writing for the Court: JOSEPH H. YOUNG
• Citation: 471 F. Supp. 1224
• Docket Number: Civ. No. Y-78-2449.
• Decision Date: 21 May 1979
• Parties: PHARMACEUTICAL MANUFACTURERS ASSOCIATION v. Donald KENNEDY, Commissioner of Food and Drugs, Leonard D. Schaeffer, Administrator Health Care Financing Administration, Joseph A. Califano, Jr., Secretary of Health, Education and Welfare, United States of America.

471 F. Supp. 1224

PHARMACEUTICAL MANUFACTURERS ASSOCIATION
v.
Donald KENNEDY, Commissioner of Food and Drugs, Leonard D. Schaeffer, Administrator Health Care Financing Administration, Joseph A. Califano, Jr., Secretary of Health, Education and Welfare, United States of America.

Civ. No. Y-78-2449.

United States District Court, D. Maryland.

May 21, 1979.

471 F. Supp. 1225

George W. Liebman, Baltimore, Md., Joel E. Hoffman, Daniel F. O'Keefe, Jr., D. Michal Freedman, Martha C. Salvant, Washington, D. C., for plaintiff; Bruce J. Brennan, and Edwin C. Mulcahy, Jr., Washington, D. C., of counsel.

Russell T. Baker, Jr., Robert B. Schulman, Baltimore, Md., and Arthur E. Korkosz, Washington, D. C., for defendants; Richard M. Cooper, Donald O. Beers, Rockville, Md., and Robert C. Farrell, Washington, D. C., of counsel.

JOSEPH H. YOUNG, District Judge.

I. BACKGROUND

The Pharmaceutical Manufacturers Association ("PMA"), a nonprofit membership association of prescription drug manufacturers, filed a complaint seeking injunctive and declaratory relief against the Secretary of Health, Education, and Welfare and his delegates, the Commissioner of Food and Drugs and the Administrator of the Health Care Financing Administration ("HCFA") on December 6, 1978. Plaintiff's complaint begins by alleging a government-sponsored effort "to remake the existing competitive structure of the prescription drug industry," Complaint, ¶ 1, and seeks to prevent what it views as the government's promotion of pharmaceuticals which are less expensive than those brand name products manufactured by PMA's member firms. According to plaintiff, the government is attempting to accomplish its end through two routes. First, the Food and Drug Administration ("FDA") has given notice that it intends to publish a list of Therapeutically Equivalent Drugs providing comparisons among various pharmaceuticals containing identical generic active ingredients. Plaintiff claims that such a list would be misleading since it would be based upon undocumented and inaccurate quality comparisons among particular products. Second, HCFA plans to publish a Guide to Prescription Drug Prices, which, according to plaintiff, is "based upon irrelevant, incomplete and inaccurate wholesale price data, and depicts the use of specifically identified drug products of named manufacturers as significantly more expensive to the consumer than the use of imitative products containing the same generic active ingredients or in the same supposed therapeutic class (Complaint, ¶¶ 30-40)." Plaintiff's Memorandum in Response to Motion to Dismiss, at 3. Arguing that defendants lack the necessary statutory authority to issue these publications, plaintiff seeks injunctive and declaratory relief against their issuance. Since the factual statements in the proposed Drug List and Price Guide are alleged to be "inaccurate, misleading and falsely disparaging," id. at 4, plaintiff argues that such publications, if authorized, must be preceded by the proper rulemaking and adjudicatory proceedings to assure the obtaining of accurate factual determinations.

Initially both the Drug List and Price Guide were scheduled for final publication without any prior administrative proceedings by the FDA or HCFA. On June 30,

471 F. Supp. 1226

1978, the Commissioner of Food and Drugs announced that a list "identifying therapeutically equivalent products" was "scheduled to be completed in late summer." 43 Fed.Reg. 28557 (1978). HEW Secretary Califano issued a press release on August 10, 1978 stating that the Price Guide's "final version" would be distributed to some 350,000 physicians and pharmacists in January, 1979. After this suit was filed, however, Secretary Califano held a press conference announcing that the Drug List would be the subject of a notice-and-comment rulemaking proceeding under the Administrative Procedure Act, 5 U.S.C. § 553

The FDA published its proposed rulemaking notice in the January 12, 1979 Federal Register. 44 Fed.Reg. 2932 (1979). Comments have been solicited on the "proposed policy of making such a list available as well as the current content and form of the list itself." Although defendants stated in their Memorandum accompanying their Motion to Dismiss that notice of similar rulemaking would be published by HCFA in relation to its proposed Price Guide, no such notice has been given. Plaintiff, citing an article appearing in the pharmaceuticals trade press, notes that HCFA currently still intends to distribute up to 500,000 copies of the Price Guide—an action which would have an effect even greater than the distribution initially contemplated by Secretary Califano. See Washington Drug and Device Letter, Vol. II, No. 8, pp. 1-2 (February 19, 1979).

Defendants have moved to dismiss on two grounds: (1) that plaintiff has failed to exhaust proper administrative remedies, and (2) that because of the absence of any "final agency action," the issues raised by the complaint are not currently ripe for judicial review.

In response to defendants' motion, plaintiff has suggested a "pragmatic solution" by which PMA would be willing to dismiss its complaint without prejudice at this time provided that the Court impose suitable protective conditions ensuring PMA's ability to renew its challenge to the proposed publications without having forfeited its opportunity to secure injunctive relief. These sanctions, drafted by plaintiff for the Court's approval and included in plaintiff's proposed voluntary dismissal order, read as follows:

1. That ten working days in advance of public distribution, release or availability of the documents themselves, defendants publish in the Federal Register notices of intent to promulgate final versions of the List of Therapeutically Equivalent Drugs and Guide to Prescription Drug Prices.

2. That each notice of intent include a summary of each type of comment submitted on the proposal, the agency's conclusions with respect to each type of comment, and a thorough and comprehensible articulation of the reasons for the agency's decision on each issue.

3. That the Guide to Prescription Drug Prices to be proposed by defendants be publicized by notice in the Federal Register of its availability, with actual copies distributed solely upon request.

Defendants have rejected PMA's proposed pragmatic solution and have renewed their original motion to dismiss.

II. THE PRESENCE OF "AGENCY ACTION"

The scope of judicial review of administrative actions is set forth in the Administrative Procedure Act ("APA") which allows such review of "agency action made reviewable by statute and final agency action." 5 U.S.C. § 704 (emphasis added). Additionally, section 702 requires that in order to achieve standing to obtain judicial review, a party must be "adversely affected or aggrieved by agency action." (emphasis added). It is quite clear that not every "action" or activity undertaken by an agency constitutes "agency action" within the statutory context. Generally, for an action to qualify as being subject to judicial review it must satisfy the APA's statutory definition of "agency action" which includes

471 F. Supp. 1227

"the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act." 5 U.S.C. § 551(13). Promulgating a rule¹ through rulemaking proceedings,² issuing an order³ through an adjudication,⁴ taking action substantively affecting a license,⁵ and imposing a sanction⁶ are all acts falling within the statutory scheme. While courts have been reluctant to be more precise than the APA provisions, most courts which have tackled the question have proceeded on a case-by-case basis. 5 B. Mezines, J. Stein, & J. Gruff, Administrative Law § 43.01, at 43-4 (1978)

Although the defendants have voluntarily agreed to conduct traditional rulemaking proceedings in order to generate as much public involvement as possible in the publication of this information, this Court has serious reservations as to whether even with this turn of events the FDA and HCFA may be said to have undertaken "agency action." One treatise frames the issue in this fashion:

The terms an agency applies to its acts are irrelevant for purposes of determining if there is agency action. Simply because an agency refers to its act as an order, does not mean that it has issued an order within the meaning of the Administrative Procedure Act. Conversely, when an agency issues an interpretation of its organic statute, it has issued a rule, regardless of whether the agency calls it a rule.

B. Mezines, J. Stein, & J. Gruff, supra, § 43.01 at 43-9 through 43-10. See, e. g., National Ornament & Electric Light Christmas Ass'n, Inc. v. Consumer Product Safety Commission, 526 F.2d 1368 (2d Cir. 1975); Independent Broker-Dealers' Trade Association v. Securities and Exchange Commission, 142 U.S.App.D.C. 384, 389-95, 442 F.2d 132, 137-43, cert. denied, 404 U.S. 828, 92 S.Ct. 63, 30 L.Ed.2d 57 (1971). In National Ornament, the court apparently interpreted "agency action" in terms of its realistic effect rather than its nominal designation:

Broad as is the APA's definition of "agency action," 5 U.S.C. § 551(13), for which 5 U.S.C. § 704 affords review, it hardly seems broad enough to include a suggestion of what tests of plaintiffs' products should be made by retailers; the fact that the Commission initiated the Program by what it terms an order scarcely brings it within the definition when the "order" is simply an instruction to the Consumer Deputies how to conduct themselves vis-à-vis the retailers and what to report to the CPSC. If designation of the suggested tests is agency action, it may well be the sort "committed to agency discretion by law," 5 U.S.C. § 701(a)(2). The issuance of the instructions is not "made reviewable by statute" and seems to be a long way from constituting "final agency action" in the sense that the CPSC is doing or proposing to do anything

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