Philip Morris USA Inc. v. U.S. Food & Drug Admin.

• Decision Date: 16 August 2016
• Docket Number: Civil No. 15-cv-1590 (APM)
• Citation: 202 F.Supp.3d 31
• Court: U.S. District Court — District of Columbia
• Parties: PHILIP MORRIS USA INC., et al., Plaintiffs, v. UNITED STATES FOOD AND DRUG ADMINISTRATION, et al., Defendants.

202 F.Supp.3d 31

PHILIP MORRIS USA INC., et al., Plaintiffs,

v.UNITED STATES FOOD AND DRUG ADMINISTRATION, et al., Defendants.

Civil No. 15-cv-1590 (APM)

United States District Court, District of Columbia.

Signed August 16, 2016

Anthony J. Franze, Robert Neil Weiner, Arnold & Porter LLP, Miguel A. Estrada, Amir Cameron Tayrani, Gibson, Dunn & Crutcher, LLP, Mark Steven Brown, Ashley Charles Parrish, King & Spalding, LLP, Noel John Francisco, Ryan Jeffrey Watson, Jones Day, Mark Henry Lynch, Benjamin Conrad Block, Covington & Burling LLP, Washington, DC, for Plaintiffs.

James T. Nelson, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

Amit P. Mehta, United States District Judge

I. INTRODUCTION

In 2009, Congress passed the landmark Family Smoking Prevention and Tobacco Control Act ("TCA" or "the Act"). Under the TCA, Congress made the United States Food and Drug Administration ("FDA") the "primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products." It granted the FDA the authority to "set national standards" regarding tobacco, gave the agency "new and flexible enforcement authority," and aimed to "ensure that the FDA has the authority to address issues of particular concern to public health officials."

One of the central features of the TCA is the requirement that a tobacco company secure approval from the FDA before it commercially markets a "new tobacco product," as defined by the Act. A tobacco company can obtain such premarket approval through one of two pathways. First, a sponsor of a "new tobacco product" can show that its new product is "substantially equivalent" to an existing, "predicate" product, which has been grandfathered under the Act. Or, a sponsor can submit a premarket approval application with the FDA. That process, which is more rigorous than substantial equivalence review, requires the product sponsor to submit a bevy of information about the product, including its health risks, to the agency.

The issue of what constitutes a "new tobacco product" rests at the heart of this matter. Specifically, the case presents two questions:

• First, does a modification of an existing product's label that renders the product label "distinct" from its predecessor create a "new tobacco product," such that the newly labeled product is subject to FDA approval through the substantial equivalence review pathway?

• Second, does a change in the quantity of an existing product create a "new tobacco product," such that the new-quantity product is subject to FDA approval through the substantial equivalence review pathway?

In September 2015, the FDA issued a final industry Guidance which answered both questions "yes." According to the FDA, a distinct labeling change or a quantity change to an existing product results in a "new tobacco product," which triggers the need for a showing of substantial equivalence before the product can be commercially marketed.

Plaintiffs—the country's leading tobacco companies¹ —say the FDA is wrong. In their view, neither a label modification nor a quantity change creates a "new tobacco product" and therefore neither type of alteration triggers the substantial equivalence review process. Further, Plaintiffs contend that the Guidance must be vacated because the FDA failed to adopt it through the appropriate public notice-and-comment process.

The court agrees with Plaintiffs in part and disagrees with them in part. The court concludes that, under the TCA, a modification to an existing product's label does not result in a "new tobacco product" and therefore such a label change does not give rise to the Act's substantial equivalence review process. Accordingly, the FDA's Guidance as it relates to labeling changes is contrary to the law and cannot stand. On the other hand, the court concludes that a change to an existing product's quantity does result in a "new tobacco product" and therefore does trigger the Act's substantial equivalence review process. The court further finds that the FDA's Guidance is not a legislative rule and thus was not subject to the demands of notice-and-comment rulemaking. Accordingly, in regards to quantity change, the court concludes that the Guidance need not be vacated.

The court therefore (1) denies Defendants' Motion to Dismiss, (2) grants in part and denies in part Defendants' Motion for Summary Judgment, and (3) grants in part and denies in part Plaintiffs' Motion for Summary Judgment. The FDA's industry Guidance shall be vacated insofar as it interprets a labeling change as creating a "new tobacco product" under the TCA. The Guidance will stand in all other respects. This matter is remanded to the FDA to effectuate the court's decision.

II. BACKGROUND

A. Factual Background

1. The Family Smoking Prevention and Tobacco Control Act

Over fifty years ago, Congress began to regulate the production, advertisement, and sale of tobacco products. See Disc. Tobacco City & Lottery, Inc. v. United States , 674 F.3d 509, 518 (6th Cir.2012) (providing an overview of major legislation regarding tobacco industry practices). Not until the last decade, however, did the FDA become a significant part of that framework.

The FDA's regulatory role began with a misstep. In 1996, the FDA attempted to bring the tobacco industry within its jurisdiction by asserting that nicotine was a "drug" as defined under the Food, Drug, and Cosmetic Act. That endeavor failed, however, when the Supreme Court determined that the FDA had exceeded its statutory authority and struck down its attempts at regulation. See generally FDA v. Brown & Williamson Tobacco Corp. , 529 U.S. 120, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000).

Thirteen years later, in 2009, Congress granted the FDA the power it lacked. The Family Smoking Prevention and Tobacco Control Act ("TCA or "the Act") amended the Federal Food, Drug, and Cosmetic Act to make the FDA the "primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products." Family Smoking Prevention and Tobacco Control Act, Pub. L. 111–31 (2009) [hereinafter TCA], § 3(1). Congress passed the TCA after finding, among other problems, that "Federal and State governments have lacked the legal and regulatory authority and resources they need to address comprehensively the public health and societal problems caused by the use of tobacco products." Id. § 2(7). Congress further noted that, "[b]ecause past efforts to restrict advertising and marketing of tobacco products have failed adequately to curb tobacco use by adolescents, comprehensive restrictions on the sale, promotion, and distribution of such products are needed." Id. § 2(6). By enacting the TCA, Congress hoped to deal with these issues, in part, by allowing the FDA to "set national standards" regarding tobacco, providing it with "new and flexible enforcement authority," and ensuring that it had "the authority to address issues of particular concern to public health officials." Id. § 3(2)-(4).

The statutory scheme established by the TCA is quite comprehensive. It addresses a broad variety of issues—e.g. , the standards governing the adulteration of tobacco products, id. § 902; the standards governing the flavors and additives in tobacco products, id. § 907; the availability of judicial review, id. § 912; the jurisdiction of the Federal Trade Commission, id. § 914; and the establishment of a scientific advisory committee, id. § 917. Only a few of the Act's provisions are at issue here. They concern the various obligations and restrictions imposed on tobacco companies in regard to introducing new products into the commercial market, as well as the FDA's authority to regulate such products. The court turns first to the pertinent statutory definitions and then explains the TCA's relevant premarket approval-related regulatory scheme.

2. Key Definitions

Tobacco Product. At its core, the TCA revolves around a single object: a "tobacco product." All of the regulatory authority granted to the FDA under the TCA was based on Congress' desire to control the production, sale, and distribution of that single item. Its definition, therefore, is critical to the functioning of the Act. Per the TCA, a "tobacco product" is defined as:

[A]ny product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).

Id. § 101(a). The definition of "tobacco product" is notable in that it refers only to the product's physical characteristics. As discussed below, Congress separately defined the related—and often integrated—elements of a "package" and a "label."

New Tobacco Product. If a tobacco product is at the core of the TCA, the definition of a "new tobacco product" is at the core of this case. That term's definition is critical to the regulatory powers granted to the FDA because, if a tobacco product is "new," it cannot be commercially marketed unless first approved by the FDA. Id. § 910. A "new tobacco product" is defined under the TCA as

(A) any tobacco product ... that was not commercially marketed in the United States as of February 15, 2007; or

(B) any modification (including a change in design, any component, any part, or any constituent, including a smoke constituent, or in the content, delivery or form of nicotine, or any other additive or ingredient) of a tobacco product where the modified product was commercially marketed in the United States after February 15, 2007.

Id. § 910(a)(1). Thus, Congress placed beyond the FDA's premarket approval authority any tobacco product that was commercially marketed before February 15, 2007. In this opinion, such products shall be referred to as "existing" or "predicate" products. Modifications to such products, as will be seen, may be subject to the TCA's premarket approval requirements,...