Pharmanex v. Shalala, No. 99-4087

• Citation: 221 F.3d 1151
• Decision Date: 21 July 2000
• Docket Number: No. 99-4087
• Parties: (10th Cir. 2000) PHARMANEX, a Delaware corporation authorized to do business in the State of Utah, Plaintiff-Appellee, v. DONNA SHALALA, in her official capacity as Secretary of the United States Department of Health and Human Services; MICHAEL FRIEDMAN, in his official capacity as First Deputy Commissioner of the Food and Drug Administration, Defendants - Appellants. NATIONAL ORGANIZATION OF RARE DISORDERS; MERCK & CO., INC.; NATIONAL NUTRITIONAL FOODS ASSOCIATION, Amicus Curiae
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1151

221 F.3d 1151 (10th Cir. 2000)

PHARMANEX, a Delaware corporation authorized to do business in the State of Utah, Plaintiff-Appellee, v. DONNA SHALALA, in her official capacity as Secretary of the United States Department of Health and Human Services; MICHAEL FRIEDMAN, in his official capacity as First Deputy Commissioner of the Food and Drug Administration, Defendants - Appellants.

NATIONAL ORGANIZATION OF RARE DISORDERS; MERCK & CO., INC.; NATIONAL NUTRITIONAL FOODS ASSOCIATION, Amicus Curiae.

No. 99-4087

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

July 21, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH. D.C. No. 97-CV-262-K

Richard M. Cooper (and Helen I. Dooley, Williams & Connolly, Washington, D.C. and Alan L. Sullivan, Snell & Wilmer, Salt Lake City, Utah, and Stuart M. Pape and Daniel A. Kracov, Patton Boggs, Washington, D.C., with him on the brief), for Plaintiff - Appellee.

Irene M. Solet (and Scott R. McIntosh, Attorneys, Appellate Staff, Civil Division, and David W. Ogden, Acting Assistant Attorney General, Department of Justice, Washington, D.C.; David J. Schwendiman, United States Attorney, Salt Lake City, Utah; Margaret Jane Porter, Chief Counsel and Neal Parker, Associate Chief Counsel, Food and Drug Administration, Rockville, Maryland, with her on the briefs), for Defendant - Appellant.

Kenneth C. Bass, III, David G. Adams, Nathan A. Beaver, Venable, Baetjer, Howard & Civiletti, Washington, D.C., for Amicus Curiae National Organization of Rare Disorders and Merck & Co., Inc.

Alan Charles Raul, Sidley & Austin, Washington, D.C., for Amicus Curiae National Nutritional Foods Association.

Before KELLY, PORFILIO, Circuit Judges, and ALLEY^*, Senior District Judge.

KELLY, Circuit Judge.

This case requires that we address the scope of 21 U.S.C. 321(ff)(3)(B) as it relates to the FDA's power to regulate dietary supplements. Appellants (hereinafter, "FDA") appeal from the federal district court's order setting aside the FDA's Administrative Decision of May 20, 1998. Our jurisdiction arises under 28 U.S.C. 1291, and we reverse and remand for resolution of record based arguments not reached below.

Background

Plaintiff-Appellee, Pharmanex, markets a product, Cholestin, that is intended to promote healthy cholesterol levels. Cholestin is made from red yeast rice, and contains a natural substance, mevinolin, which is chemically identical to the active ingredient, lovastatin, in the prescription drug, Mevacor.¹ Mevacor was approved by the FDA in 1987 for the treatment of high cholesterol and heart disease. On April 7, 1997, the FDA advised Pharmanex that it considered Cholestin to be a drug, which may not be marketed without FDA approval. While discussions between the parties were ongoing, the FDA issued a Notice of Detention and Hearing that prevented importation of a shipment of red yeast rice for encapsulation into Cholestin. On May 20, 1998, the FDA issued a final decision, holding that Cholestin does not meet the definition of "dietary supplement" provided by 21 U.S.C. 321(ff)(3)(B)(i), and is thus subject to regulation as a drug. Subsequently, Pharmanex filed an action in district court, seeking declaratory and injunctive relief, and asking the court to hold unlawful and set aside the FDA's decision. The district court granted a preliminary injunction, and ultimately entered a final order setting aside the FDA decision, holding that Cholestin is a "dietary supplement" within the definition set forth by 321(ff). The district court based its decision on the determination that 321(ff)(3)(B) refers unambiguously to finished drug products, rather than their individual constituents. Thus, it was unnecessary for the district court to reach a number of issues raised by both parties. It did not reach Pharmanex's claim that the FDA was arbitrary and capricious in determining (1) that Pharmanex, in manufacturing and marketing Cholestin, was manufacturing and marketing lovastatin; and (2) that lovastatin had not been marketed as a dietary supplement or as a food before its approval as a new drug. While the district court remarked in passing that red rice yeast is a food that has been consumed for centuries in China and decades in the U.S., both parties agree that this was not equivalent to ruling on the FDA's prior determinations. Moreover, the district court did not pass on Pharmanex's claims that (1) under 321(ff)(3), how a supplement is manufactured (i.e., to enhance the presence of one of its ingredients) is irrelevant; and (2) the FDA did not adequately explain its departure from its prior interpretation that approval of a new drug is an approval only of a product, not an active ingredient.

Discussion

As noted at the outset, this case involves an interpretation of 21 U.S.C. 321(ff)(3)(B) of the Food, Drug, and Cosmetic Act (hereinafter, "FDCA"), as amended by the Dietary Supplement Health and Education Act, Pub. L. No. 103-417 (1994) (hereinafter, "DSHEA"). Because we are confronted with conflicting interpretations of the statute that the Food and Drug Administration is charged with administering, the analytic framework set forth in Chevron, U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), governs our analysis. See FDA v. Brown & Williamson Tobacco Corp., 120 S.Ct. 1291, 1300 (2000). That is, we must decide, using the traditional tools of statutory construction, "whether Congress has directly spoken to the precise question at issue." Id. (quoting Chevron, 467 U.S. at 842). If so, that is the end of the matter, and Congress' clear intent controls. If the statute is silent or ambiguous as to the specific issue before us, then we must defer to the agency's interpretation, if it is based on a permissible construction. Id. We need not conclude that the agency construction is the only one possible, or even that we would have so construed the statute had the issue arisen in a judicial proceeding. Rather, we will give effect to the agency's interpretation unless it is arbitrary, capricious, or manifestly contrary to the statute. See Chevron at 844. We accord the agency such deference, given its special institutional competence regarding the "facts and circumstances surrounding the subjects regulated," particularly those which touch and concern competing views of the public interest. See Brown & Williamson, 120 S.Ct. at 1300.

In evaluating whether Congress has squarely and unambiguously addressed the question before us, we need not limit ourselves to scrutiny of the discrete statutory section in isolation. Rather, we examine the statutory provision in context. See Brown & Williamson, 120 S.Ct. at 1300-01. We must "interpret the statute 'as a symmetrical and coherent regulatory scheme,' and 'fit, if possible, all parts into an harmonious whole.'" Id. (citations omitted). In this case, we must determine whether Congress unambiguously manifested its intent to exclude only finished drug products (rather than ingredients) from the definition of dietary supplement in 321(ff)(3)(B), which states in relevant part:

The term 'dietary supplement'. . . does . . . not include . . . an article that is approved as a new drug under section 355 of this title[²], . . .which was not before such approval, certification, licensing, or authorization marketed as a dietary supplement or as a food. . . .

The Parties' Contentions

The FDA argues that the phrase "an article that is approved as a new drug" is properly understood to contemplate active ingredients³ as well as finished drug products.⁴ To support this claim, FDA makes what is effectively a textual argument, pointing out that the word "article" is used throughout the FDCA to connote both component and finished drug product. The FDA notes that 321(ff)(1) and (2) refer to a dietary supplement as a "product" with certain qualities, whereas 321(ff)(3)(B) uses the word "article," a much broader term. Moreover, the FDA contends that the district court erred in finding that the phrase "approved as a new drug" is dispositive evidence of Congress' unambiguous intent to restrict the application of 321(ff)(3)(B) to finished drug products. Additionally, the FDA argues that the district court misconstrued judicial and regulatory authorities to support its finding of clear Congressional intent, and its conclusion that in the past, the FDA has endorsed statutory interpretations squarely contrary to those of the instant case. The FDA also asserts that the district court's reliance on legislative history was misplaced. Finally, the FDA argues that the interpretation advanced by the district court and Pharmanex would undercut the broad purposes of the FDCA, with respect to orphan drugs, pioneer drugs, and leave a gap in protection for the public.

The essence of Pharmanex's argument is that the plain meaning of 21 U.S.C. 321(ff)(3)(B)(i) cannot exclude Cholestin or lovastatin from the definition of "dietary supplement." Pharmanex contends that Cholestin cannot be "an article that is approved as a new drug" because it was never approved as a new drug. Additionally, Pharmanex asserts that "an article that is approved as a new drug" cannot apply to lovastatin because an ingredient is never "approved as a new drug." Moreover, Pharmanex claims that the definition of "new drug," 321(p), itself precludes 321(ff)(3)(B) from applying to drug components, as they are not approved, are not the subject of investigation, and do not have labeling. Additionally, Pharmanex contends that in the past, the FDA has advanced the very definition of "new drug" that it now resists. Pharmanex also argues that the FDA's interpretation defeats the unambiguously articulated policies enshrined in DSHEA and would produce absurd results. Pharmanex disputes the FDA's claim that limiting 321(ff)(3)(B) would leave a gap in public protection, arguing that dietary supplements are adequately regulated by other provisions of FDCA. Finally, Pharmanex...