Health Law Daily Court upholds FDA user fees, premarket review of cigar and pipe tobacco
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Friday, July 23, 2021

Court upholds FDA user fees, premarket review of cigar and pipe tobacco

By Victoria Moran, J.D., M.H.A.

To be classified as a "component or part" and subject to the Tobacco Control Act (TCA), a part is not required to be made or derived from tobacco and the FDA is not required to identify a product’s health effects to classify it as a "component or part."

The Court of Appeals for the District of Columbia was unpersuaded by the Cigar Association of America and other industry groups’ Administrative Procedure Act (APA) challenges to FDA rules requiring pre-market approval for cigar and pipe tobacco (Deeming Rule) and user fees for manufacturers and importers (User Fee Rules). Affirming the grant of summary judgment to the FDA, the appellate court concluded that the FDA’s classification of a pipe as a "component or part" is not arbitrary or capricious and the FDA was not required to include instructions about the form and manner of the substantial equivalence reports in the Deeming Rule itself. In addition, the TCA is not ambiguous about whether the FDA can impose user fees on non-enumerated classes of tobacco products and imposing these fees would require an entirely novel framework since the Fair and Equitable Tobacco Reform Act’s (FETRA) methodology cannot be used for non-enumerated classes of tobacco products like e-cigarettes (Cigar Assoc. of America v. FDA, July 20, 2021, Rogers, J.W.).

Deeming Rule. The appellate court considered and dismissed the industry groups’ five APA challenges:

  • The FDA’s failure to provide instructions about the form and manner of substantial equivalence reports specific to cigars and pipe tobacco is not an error stemming from the Deeming Rule. The preamble to the Deeming Rule stated the FDA would not enforce the TCA’s premarket review requirements for 18 months from the effective date and the FDA was not required to include instructions in the Deeming Rule itself; instructions could be provided after the Rule’s promulgation. The industry groups also failed to raise this issue before the district court.
  • The Deeming Rule is not arbitrary and capricious, and the industry groups failed to show the FDA set the Deeming Rule’s effective date and due date for substantial equivalence reports based on alleged misconceptions that it could adjust the due date at a later time.
  • The FDA did not arbitrarily conclude it lacked authority under the TCA to alter the statutory grandfather date for cigars and pipe tobacco and none of the provisions identified by the groups provide the FDA authority to alter the date.
  • The FDA’s cost-benefit analysis in its Final Regulatory Impact Analysis was not arbitrary or capricious and, assuming the analysis is reviewable by the court, the industry groups offer no authority supporting their contention the FDA needed to consider benefits of premarket review specifically for each industry or product affected by the Deeming Rule. Moreover, the purpose of the Deeming Rule does not compel the FDA’s analysis take a specific form.
  • The FDA’s classification of a pipe as a "component or part" and, therefore, subject to the TCA, is not arbitrary or capricious. The groups argue that the Deeming Rule’s definition of "component or part" contradicts the TCA’s definition of "tobacco product" under 21 U.S.C. § 321(rr)(1). Applying the two-step Chevron framework, the appellate court declined to agree with the groups noting that to interpret § 321(rr)(1) to require a component to be "made or derived" from tobacco would render superfluous the phrase "including any component, part, or accessory of a tobacco product." In addition, the TCA uses the term "component parts’ to include filer or paper of a cigarette, which further indicates that a component or part is not required to be made or derived from tobacco. The FDA’s classification of a pipe as a "component or part" survives Chevron step two since the Deeming Rule’s definition of "component or part" does not require the FDA to identify a product’s health effects to make that classification.

User Fees Rule. The industry groups argue the FDA arbitrarily assessed user fees for manufacturers and importers of cigars and pipe tobacco but not for other newly deemed tobacco products such as e-cigarettes. Further, they contend the FDA wrongly concluded that the TCA precluded it from imposing user fees on e-cigarettes.

The court noted that the groups failed to explain how the FDA could define an applicable percentage for a non-enumerated class of tobacco products consistent with the TCA and FETRA. Congress allocated 100 percent of total user fees to six enumerated classes of tobacco products and adding a percentage for a non-enumerated class would increase the total percentage to over 100 and require the FDA to assess user fees beyond the amount for a fiscal year as et forth in the statute. Forcing such an interpretation would ignore the statutory limitation imposed by Congress. Also, Congress relied on FETRA’s methodology to determine the assessment of user fees under the TCA, and it cannot be used for non-enumerated classes of products like e-cigarettes. Lastly, the FDA explained that imposing fees on non-enumerated classes of tobacco products would require an "entirely novel framework" to determine percentage allocations. The FDA’s explanations survive the "highly deferential" review under Chevron.

The case is No. 20-5266.

Attorneys: Michael J. Edney (Steptoe & Johnson LLP) for Cigar Association of America. Lindsey Powell, U.S. Department of Justice, for U.S. Food and Drug Administration.

Companies: Cigar Association of America; U.S. Food and Drug Administration

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