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Alliance For Natural Health Us, et al v. Kathleen Sebelius

April 6, 2011

ALLIANCE FOR NATURAL HEALTH US, ET AL., PLAINTIFFS,
v.
KATHLEEN SEBELIUS, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Beryl A. Howell United States District Judge

MEMORANDUM OPINION

Dietary supplement producers and industry groups brought this lawsuit challenging several regulations adopted by the Food and Drug Administration ("FDA") to establish current good manufacturing practices for dietary supplements. The plaintiffs argue that the challenged regulations violate the Food, Drug, and Cosmetic Act ("FDCA") and the Administrative Procedure Act ("APA") because they exceed the regulatory authority that Congress granted to the FDA under the FDCA. The plaintiffs also argue that the challenged regulations violate the Due Process Clause of the Fifth Amendment to the U.S. Constitution because they are impermissibly vague, and that, for the same reason, they also constitute arbitrary and capricious agency action in violation of the APA. The plaintiffs ask the Court to reverse the regulations and remand to the FDA for further rulemaking. For the reasons explained below, the Court must deny the plaintiffs' motion and grant judgment for the FDA.

I.Background

Under the FDCA, 21 U.S.C. § 301 et seq., a "dietary supplement" is a "product . . . intended to supplement the diet" that contains, inter alia, "a vitamin, a mineral, an herb or other botanical, an amino acid, or a dietary substance for use by man to supplement the diet by increasing the total dietary intake." 21 U.S.C. § 321(ff). A dietary supplement also "is not represented for use as a conventional food or as a sole item of a meal or the diet" and is "labeled as a dietary supplement." Id.

In 1994, Congress passed the Dietary Supplement Health and Education Act ("DSHEA"), which amended the FDCA to add several specific provisions regarding the regulation of dietary supplements, including the definition cited above. Pub. L. No. 103-417, 108 Stat. 4325. Prior to that time, the FDA had attempted to regulate dietary supplements under its authority to regulate food additives. See United States v. 29 Cartons of . . . an Article of Food, 987 F.2d 33, 35-36 (1st Cir. 1993). Since DSHEA's enactment, dietary supplements have remained generally regulated as a subset of foods, rather than drugs, but several statutory provisions now govern the regulation of dietary supplements specifically. See, e.g., 21 U.S.C. § 321(ff); 342(f)-(g).

As relevant here, DSHEA defined certain circumstances in which dietary supplements "shall be deemed to be adulterated" under the FDCA, including when a dietary supplement "has been prepared, packed, or held under conditions that do not meet current good manufacturing practice regulations." 21 U.S.C. § 342(g). The law delegated authority to the FDA "to prescribe good manufacturing practices for dietary supplements." Id. The FDA had previously prescribed good manufacturing practices ("GMP" or "CGMP") for foods, drugs, and devices, so the GMP concept was a familiar one in the sphere of FDA regulation. See, e.g., 21 C.F.R., Pt. 110 (food); Pt. 211 (drugs). DSHEA's delegation of authority to prescribe dietary supplement GMPs led to a decade-long process of administrative rulemaking that culminated in the regulations challenged in this action.

On February 6, 1997, the FDA published an Advance Notice of Proposed Rulemaking for dietary supplement GMPs. See Current Good Manufacturing Practice in Manufacturing, Packing, or Holding Dietary Supplements, 62 Fed. Reg. 5700 (Feb. 6, 1997). The FDA solicited public input on whether it should adopt dietary supplement GMPs and, if so, what the regulations should include. Id. at 5707-08. The FDA received more than 100 comments in response. See Current Good Manufacturing Practice in Manufacturing, Packing, or Holding Dietary Ingredients and Dietary Supplements, Proposed Rule, 68 Fed. Reg. 12158, 12159 (Mar. 13, 2003).

After considering the comments received in response to the Advance Notice of Proposed Rulemaking and conducting outreach efforts, including holding five public meetings and touring supplement manufacturing facilities to observe existing practices, the FDA drafted and issued a Proposed Rule in March 2003 suggesting GMPs for dietary supplements. Id. at 12158-61. Following announcement of the Proposed Rule, the FDA conducted three further public meetings and other outreach activities and received approximately 400 comments on the Proposed Rule. See Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements, Final Rule, 72 Fed. Reg. 34752, 34756 (June 25, 2007).

The FDA issued the Final Rule establishing current good manufacturing practices for dietary supplements on June 25, 2007 ("GMP Final Rule"). Id. The GMP Final Rule establishes the requirements for activities related to dietary supplement manufacturing and includes sections related to personnel, physical plant and grounds, equipment and utensils, production process and control systems, holding and distributing, returned dietary supplements, product complaints, and records and recordkeeping. See 21 C.F.R., Pt. 111.

The FDA staggered the compliance date for the Final Rule based on company size. The compliance date was June 25, 2008 for large businesses; June 25, 2009 for businesses that employ fewer than 500, but 20 or more full-time equivalent employees; June 25, 2010 for businesses that employ fewer than 20 full-time equivalent employees. 72 Fed. Reg. 34752.

Four plaintiffs brought this action challenging various regulations contained in the GMP Final Rule. Plaintiffs Duke Pearson and Sandy Shaw are scientists who formulate dietary supplements and license their formulations to dietary supplement manufacturers and retailers in exchange for royalties. See Declaration of Durk Pearson dated August 9, 2010 (hereinafter "Pearson Decl."); Declaration of Sandy Shaw dated August 9, 2010 (hereinafter "Shaw Decl."). The other two plaintiffs are organizations that claim an affiliation with dietary supplement industry participants -- the Alliance for Natural Health USA and the Coalition to End FDA and FTC Censorship. The plaintiffs seek a declaration invalidating various provisions of the GMP Final Rule and enjoining their enforcement.

The defendants are Kathleen Sebelius, in her official capacity as Secretary of the United States Department of Health and Human Services, the United States Department of Health and Human Services, Margaret A. Hamburg, M.D., in her official capacity as Commissioner of the United States Food and Drug Administration, the Food and Drug Administration, and the United States of America (collectively, the "FDA" or the "defendants").

The plaintiffs brought this action on August 12, 2009. ECF No. 3. The FDA filed the administrative record ("A.R."), which is extremely voluminous, on April 1, 2010. ECF No. 16. On April 28, 2010, the plaintiffs moved for summary judgment on their claims. ECF No. 17. The FDA cross-moved for summary judgment on July 9, 2010. ECF No. 19.

The parties' cross-motions for summary judgment are now before the Court.

II.Standards of Review

A. Summary Judgment

Pursuant to Federal Rule of Civil Procedure 56, the Court will grant a motion for summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law" based upon the pleadings, depositions, and affidavits and other materials in the record. Fed. R. Civ. P. 56(a), (c); Tao v. Freeh, 27 F.3d 635, 638 (D.C. Cir. 1994). The Court must view all inferences in a light most favorable to the non-moving party. Tao, 27 F.3d at 638 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 255 (1986)). To the extent that the plaintiffs raise constitutional claims, this standard of review applies.

B. Administrative Procedure Act

For claims involving review of a final agency action under the Administrative Procedure Act, the standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing the administrative record. See 5 U.S.C. § 706; Cottage Health Sys. v. Sebelius, 631 F. Supp. 2d 80, 89 (D.D.C. 2009); see also Local Civil Rule 7(h)(2) (in cases "in which judicial review is based solely on the administrative record," the parties are not required to submit statements of disputed or undisputed material facts). Summary judgment in the APA review context serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. Cottage Health Sys., 631 F. Supp. 2dat 90.

Under the APA, the Court is to set aside an agency action that is "arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2). "'The party challenging an agency's action as arbitrary and capricious bears the burden of proof.'" City of Olmsted Falls, Ohio v. F.A.A., 292 F.3d 261, 271 (D.C. Cir. 2002) (quoting Lomak Petroleum, Inc. v. FERC, 206 F.3d 1193, 1198 (D.C. Cir. 2000)). While the "scope of review under the 'arbitrary and capricious' standard is narrow," the agency must "articulate a satisfactory explanation for its action including a 'rational connection between the facts found and the choice made.'" Motor Vehicle Mfrs. Ass'n of United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)); see also CSI Aviation Servs., Inc. v. DOT, No. 09-1307, 2011 WL 1229756, at *5 (D.C. Cir. Apr. 1, 2011) ("The agency must not only adopt a permissible reading of the authorizing statute, but must also avoid acting arbitrarily or capriciously in implementing its interpretation. . . . Among other things, this requires the agency to 'take whatever steps it needs to provide an explanation that will enable the court to evaluate the agency's rationale at the time of decision.'") (quoting Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654 (1990)).

Under the APA, the Court also must set aside an agency action that is found to be in excess of the agency's statutory jurisdiction, authority, or limitations. 5 U.S.C. § 706(2)(C). To determine whether an agency has exceeded its statutory authority under the APA, the Court turns to the two-step process of analysis set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). See Colorado Wild Horse and Burro Coal., Inc. v. Salazar, 639 F. Supp. 2d 87, 91 (D.D.C. 2009). First, the reviewing court must ask "whether Congress has directly spoken to the precise question at issue." FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000) (quoting Chevron, 467 U.S. at 842). If so, the inquiry is at an end; the court "must give effect to the unambiguously expressed intent of Congress." Id. (quoting Chevron, 467 U.S. at 843). "But if Congress has not specifically addressed the question, a reviewing court must respect the agency's construction of the statute so long as it is permissible." Id; see also Bhd. of R.R. Signalmen v. Surface Transp. Bd., No. 10-1138, 2011 WL 1120284, at *2 (D.C. Cir. Mar. 29, 2011).

III.Discussion

A.Standing

As a threshold question, the Court must address whether the plaintiffs have standing to bring this action. Under Article III of the Constitution, federal courts only have jurisdiction to resolve cases and controversies. Fund Democracy LLC v. SEC, 278 F.3d 21, 25 (D.C. Cir. 2002). "Therefore, in order to bring an action within our jurisdiction, the party must demonstrate that it has standing to bring that action." Id. (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). To satisfy this standing requirement, a plaintiff must "demonstrate that it has suffered a concrete and particularized injury that is: (1) actual or imminent, (2) caused by or fairly traceable to an act that the litigant challenges in the instant litigation, and (3) redressable by the court." Id. (quoting Florida Audubon Soc'y v. Bentsen, 94 F.3d 658, 663 (D.C. Cir. 1996) (en banc)); see also Commuter Rail Div. of Reg'l Transp. Auth. v. Surface Transp. Bd., 608 F.3d 24, 30 (D.C. Cir. 2010) ("The irreducible constitutional minimum of standing contains three elements: (1) injury-in-fact, (2) causation, and (3) redressability.") (internal quotation marks omitted). At the summary judgment stage, a plaintiff asserting standing can no longer rest on "mere allegations," but "must set forth by affidavit or other evidence specific facts which for purposes of the summary judgment motion will be taken to be true." Lujan, 504 U.S. at 561 (internal quotation marks omitted).

The Court will begin by analyzing whether the individual plaintiffs, Durk Pearson and Sandy Shaw, have met their burden to establish standing. As explained below, the Court concludes that Pearson and Shaw do have standing in this action.

The regulations challenged in this action do not directly apply to Plaintiffs Pearson and Shaw, who are scientists that formulate dietary supplements and license their formulations to manufacturers and retailers in exchange for royalties. See Pearson Decl.; Shaw Decl. Rather, the GMP regulations apply to third parties -- the supplement manufacturers and retailers who are the individual plaintiffs' licensees. "[W]hen the plaintiff is not himself the object of the government action or inaction he challenges, standing is not precluded, but it is ordinarily 'substantially more difficult' to establish." Summers v. Earth Island Institute, 129 S. Ct. 1142, 1149 (2009) (citing Lujan, 504 U.S. at 562). Even so, plaintiffs Pearson and Shaw have established standing here because this case is one "where the record present[s] substantial evidence of a causal relationship between the government policy and the third-party conduct, leaving little doubt as to causation and the likelihood of redress." Nat'l Wrestling Coaches Ass'n v. Dept. of Educ., 366 F.3d 930, 941 (D.C. Cir. 2004).

Pearson and Shaw submitted sworn declarations from themselves and from the CEO of one of their licensees, Life Enhancement Products, Inc. ("LEP"), to establish facts supporting their standing. Pearson and Shaw assert that they have been harmed by the GMP regulations because the increased compliance costs imposed by the GMP regulations have led their licensees to carry fewer of their products and have reduced their licensees' ability to pay royalty payments owed to them. Pearson and Shaw have licensing agreements with LEP for 60 supplement formulae. Pearson Decl.; Shaw Decl. LEP is a manufacturer, labeler, and retailer of dietary supplements and is regulated by the GMP regulations. Declaration of Will Block dated August 9, 2010 (hereinafter "Block Decl.") ¶¶ 2-3. LEP committed $112,166.56 to GMP compliance costs through the end of the 2010 fiscal year. Block Decl. ¶ 8. These expenses included salaries and benefits for compliance managers ($65,000), costs to construct upgrades in facilities (approx. $2,500), costs for testing procedures (approx. $8,000), costs for weekly quality meetings ($10,400), compensatory overtime ($6,000), label alterations ($4,000), and internal auditing ($5,000). Id. As of August 9, 2010, LEP owed Pearson and Shaw $67,752.62 in unpaid royalties, a debt that LEP asserts began to accrue in March 2009, after the company began implementing changes to comply with the GMP rules. Id. ¶ 6; see also Pearson Decl.; Shaw Decl. According to LEP, "[b]ut for the additional costs for cGMP compliance, [LEP] would have funds to pay Durk Pearson and Sandy Shaw their royalties under our licensing agreement," and "[u]ntil [LEP] began implementing business changes to comply with the FDA cGMPs, it had paid Durk Pearson and Sandy Shaw their royalties in full." Block Decl. ¶¶ 11-12. The FDA has not disputed these assertions of fact.

The Court concludes that these facts constitute substantial evidence of a causal relationship between the GMP regulations and a reduction in the individual plaintiffs' licensees' ability to pay royalties. The injury to Plaintiffs Pearson and Shaw is also redressable because an injunction of the GMP regulations would likely reverse the cause of the injury. Plaintiffs Pearson and Shaw have thus satisfied their burden to demonstrate standing by showing a concrete and particularized injury that is (1) actual, (2) caused by or fairly traceable to the GMP regulations, and (3) redressable. See Block v. Meese, 793 F.2d 1303, 1308 (D.C. Cir. 1986) (film distributor had standing to challenge government classification of films as "political propaganda" because the classification would reduce his company's profits and the distributor had presented declarations from potential customers who declined to purchase the film based on the classification); Tozzi v. U.S. Dept. of Health and Human Servs., 271 F.3d 301, 309 (D.C. Cir. 2001) (manufacturer had standing to challenge the government's classification of dioxin as a carcinogen because there was "little doubt" the classification would affect demand for the manufacturer's products).

Because Pearson and Shaw have standing, the Court need not address the independent standing of the organizational co-plaintiffs who assert the same claims as Pearson and Shaw. See, e.g., Tozzi, 271 F.3d at 310 (declining to address Article III standing of remaining plaintiffs after finding a plaintiff ...


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