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Philip Morris USA Inc. v. United States Food & Drug Administration

United States District Court, District of Columbia

August 16, 2016

Philip Morris USA Inc., et al., Plaintiffs,
v.
United States Food and Drug Administration, et al., 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 companies[1]-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 (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, depending on the nature of the modification.

         Package.

         The TCA also defines, and thus treats as distinct from a “tobacco product” itself and its “label, ” the product’s “package.” The Act defines “package” to mean “a pack, box, carton, or container of any kind or, if no other container, any wrapping (including cellophane), in which a tobacco product is offered for sale, sold, or otherwise distributed to consumers.” TCA § 900(13).

         Label.

         Congress did not define the term “label” under the TCA, because Congress already had defined it under the Federal Food, Drug, and Cosmetic Act, which the TCA amends.

The term ‘label’ means a display of written, printed, or graphic matter upon the immediate container of any article; and a requirement made by or under authority of this chapter that any word, statement, or other information appear on the label shall not be considered to be complied with unless such word, statement, or other information also appears on the outside container or wrapper, if any there be, of the retail package of such article, or is easily legible through the outside container or wrapper.

21 U.S.C. § 321(k). The related term “‘labeling’ means all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article.” Id. § 321(m). The word “article, ” as used in the definition, refers to the “tobacco product” itself.

         3. Key Statutory Sections

         Having set out the definitions central to the parties’ dispute, the court turns to the pertinent statutory provisions.

         Premarket Review.

         Under Section 910 of the TCA, unless exempted under the statute, a “new tobacco product” must first receive FDA approval before it can be introduced or delivered into interstate commerce. See generally TCA § 910. The Act sets forth two pathways-one more rigorous than the other-by which a new tobacco product can secure such premarket approval.

         The less rigorous route for a new tobacco product to receive premarket approval requires the tobacco product sponsor to file a “report” that the new tobacco product is “substantially equivalent” to an existing product. The existing or “predicate” product must have been “commercially marketed . . . in the United States as of February 15, 2007, ” and be “in compliance with the requirements of [the] Act.” Id. § 910(a)(2)(A); see also Id. § 905(j) (describing report requirements). A new tobacco product is “substantially equivalent” to the predicate tobacco product if it:

(i) has the same characteristics as the predicate tobacco product; or
(ii) has different characteristics and the information submitted [in the substantial equivalence report] contains information, including clinical data if deemed necessary by the Secretary, that demonstrates that it is not appropriate to regulate the product under this section because the product does not raise different questions of public health.

Id. § 910(a)(3)(A)(i)-(ii). The TCA defines “characteristics” to mean “the materials, ingredients, design, composition, heating source, or other features of a tobacco product”-in other words, the physical characteristics of the product. Id. § 910(a)(3)(B). If the FDA finds that the new tobacco product is substantially equivalent to the predicate, it must issue an order allowing the product to be commercially marketed.

         Section 905 sets forth the timing for filing a substantial equivalence report. If a company seeks approval for a new tobacco product through the substantial equivalence process, it must submit a report demonstrating that the product is “substantially equivalent, within the meaning of section 910, ” to a predicate product, “at least 90 days prior” to commercially marketing the new product. Id. § 905(j)(1). The report shall be “in such form and manner as the [FDA] shall prescribe.” Id.

         If a product cannot qualify for the substantial equivalence pathway, it must traverse a more rigorous pathway known as “premarket review” to obtain FDA approval. Although that process is not directly implicated in this case, the court describes it for purposes of completeness. The premarket review process requires the sponsor of the new tobacco product to submit an application that describes, among other details, the physical makeup of the tobacco product, the manufacturing process used to create it, and the health risks of such product. Id. § 910(b). The application also must contain samples of the tobacco product and its components, as well as “specimens of the labeling proposed to be used for such tobacco product.” Id. § 910(b)(1)(E)-(F).

         Upon receipt of the application, the FDA on its own initiative, or based upon the applicant’s request, may refer the application to a Tobacco Products Advisory Committee for a recommendation. Id. § 910(b)(2). The FDA must act within 180 days of receiving a premarket review application. Id. § 901(c)(1)(A). If the FDA decides to deny a premarket review application, it be must for one of four reasons delineated in the statute. Those reasons include: (1) a failure to show that the marketing of the product would be appropriate for public health; (2) a manufacturing, processing, or packing process that does not conform to statutory requirements; (3) a false or misleading label; or (4) a lack of conformity with standards set for tobacco products under Section 907 of the TCA. Id. § 910(c)(2).

         Finally, the TCA vests the FDA with discretion to exempt a new tobacco product from the need to obtain regulatory approval if the new product “would be a minor modification” of an existing product. Id. §§ 910(a)(2)(ii), 905(j)(3)(A)(i). To qualify for the exemption, the new tobacco product must have been created “by adding or deleting a tobacco additive, or increasing or decreasing the quantity of an existing tobacco additive.” Id. § 905(j)(3).

         Preapproval of Label Modifications.

         In two different sections, the TCA addresses the FDA’s authority to preapprove tobacco label-as distinct from tobacco product-modifications.

         The first such grant of authority is found in Section 903, which generally concerns the misbranding of tobacco products. Much of Section 903 addresses the labeling and packaging required to prevent tobacco products from being deemed “misbranded”-the information required, the appropriate conspicuousness of such information, etc. See generally Id. § 903. The section also grants the FDA the authority to require tobacco companies to submit certain types of label changes for approval. Id. § 903. Specifically, Section 903(b) states that

[t]he Secretary [of Health and Human Services] may, by regulation, require prior approval of statements made on the label of a tobacco product to ensure that such statements do not violate the misbranding provisions of subsection (a) and that such statements comply with other provisions of the [TCA].

Section 903(b) (emphasis added). All parties agree that the term “by regulation” means a regulation promulgated through notice-and-comment rulemaking. See, e.g., Dr. Tr. of June 9, 2016 Oral Arg., ECF No. 42 [hereinafter Dr. Tr.], at 7:11-7:16, 7:24-8:4, 8:16-8:19, 24:1-24:4, 68:14-68:22.

         The second section of the TCA that authorizes the FDA to preapprove a label change is Section 911, which addresses “modified risk tobacco products.” TCA § 911. A “modified tobacco product” refers to those tobacco products “sold or distributed for use to reduce harm of the risk of tobacco-related disease associated with commercially marketed tobacco products.” Id. § 911(b)(1). More specifically, this includes tobacco products

(i) the label, labeling, or advertising of which represents explicitly or implicitly that
(I) the tobacco product presents a lower risk of tobacco-related disease or is less harmful than one or more other commercially marketed tobacco products;
(II) the tobacco product or its smoke contains a reduced level of a substance or presents a reduced exposure ...

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