A modification to an existing tobacco product’s label does not trigger a substantial equivalence review process under the Family Smoking Prevention and Tobacco Control Act’s (FSPTC Act) (P.L. 111-31) requirements, according to a federal court finding that aspects of an FDA guidance related to tobacco label changes was contrary to law. However, changing a tobacco product’s quantity created a "new tobacco product" requiring a substantial equivalence review. The FDA guidance was not a legislative rule and thus not subject to the demands of notice-and-comment rulemaking (Philip Morris USA Inc. v. FDA, August 16, 2016, Mehta, A.).
Background. Pursuant to the FSPTC Act, tobacco companies must secure FDA approval prior to commercially marketing a "new tobacco product," which is defined as a product commercially marketed in the U.S. after February 15, 2007, or a modification of an existing tobacco product.
The premarket approval can be accomplished via two pathways: (1) demonstrating that the "new tobacco product" is "substantially equivalent" to an existing, predicate product grandfathered in under the FSPTC Act or (2) submitting a premarket approval application with the FDA. The latter process is much more rigorous and requires submission of various data, including health risks, to the FDA.
FDA guidance. In 2011, the FDA issued a draft guidance addressing frequently received questions regarding the term "new tobacco product" and the consequences flowing from that designation. In 2015, the FDA reevaluated its position on the word "part" used to define tobacco product and revised the guidance to specify that the label is not part of a tobacco product (see FDA clears the smoke on substantial equivalence for tobacco products, March 5, 2016).
Labeling changes only result in a product becoming a "new product" if the label is modified in any way that renders the product distinct from the predicate, even if its characteristics remain the same. As a result, tobacco companies would be required to demonstrate the substantial equivalence of the new tobacco product before marketing it commercially.
In addition to addressing the impact of a labeling change, the revised guidance also addressed a completely new issue: the impact of a change in product quantity. Similar to the distinct label change, the FDA stated that a change in product quantity would constitute a new tobacco product.
The FDA subsequently issued a revision to the revised guidance reaching the same conclusion as the first revision, but relying upon provisions of the FSPTC Act to assert that a label change resulted in a new tobacco product. The process set forth by Congress to determine substantial equivalency distinguishes between "same characteristics" and "different characteristics" and the FDA reasoned that products with a distinct label change, but with physical attributes identical to the predicate product, would fall into the "same characteristics" category. Products that changed the physical attributes would fall into the "different characteristics" category.
Phillip Morris challenged the second FDA guidance on tobacco products, alleging that the FDA violated requirements under the Administrative Procedure Act and the First Amendment, and was inconsistent with the FSPTC Act. Phillip Morris argued that the revised guidance created a dilemma for tobacco makers. If they elected not to seek FDA approval, they would do so with some risk that the FDA might view their changes as violating the FSPTC Act and thus pursue an enforcement action.
Label changes. After finding that it had jurisdiction to review the matter before it, the district court first addressed Phillip Morris’ arguments that the FDA’s position on labeling changes was inconsistent with the FSPTC Act. Philip Morris argued that Congress narrowly outlined the two circumstances in which the FDA may require premarket approval of a labeling change: (1) where the label presents a modified risk claim, and (2) where a specific preapproval regulation is adopted under notice-and-comment rulemaking.
The district court agreed, noting that Congress used the word "label" or "labeling" no less than 150 times in the FSPTC Act, yet when referring to labels throughout the law, did not use that term once in its definition of a "new tobacco product" or the provisions on substantial equivalence. In addition, none of the actual terms that Congress used to define the term "new tobacco product" can be read to encompass anything other the physical attributes of the product itself, as distinct from its label or the package in which it is contained. The court held that the omission was purposeful and meant that Congress did not intend for a label change to trigger a substantial equivalence showing.
Quantity. Philip Morris argued that under the FDA guidance, if the number of cigarettes in a pack increased from 20 to 24, the resulting 24 pack constituted a "new tobacco product." Philip Morris argued that the FDA’s interpretation of the FSPTC Act was incorrect, because a package of 20 cigarettes had the identical amount of ingredients, materials, and other features as an identical cigarette in the package of 24 cigarettes. The district court disagreed, stating that an increase or decrease in quantity of a tobacco product necessarily entailed a change in the amount of the constituent ingredients and additives within a tobacco product, including nicotine. Thus, it is a modification of the tobacco product and Congress had delegated to the FDA the authority to determine the "form and manner" in which substantial equivalence reports needed to be submitted as part of the review process.
The court also held that the FDA guidance was not a legislative rule. Instead, the guidance was issued to inform the public of the FDA’s interpretation of the FSPTC Act, which is a statute it administered. The product-quantity portions of the guidance were consistent with the text and structure of the statute. All the FDA did in the guidance was to supply "crisper and more detailed lines than the authority being interpreted."
The case is No. 15-cv-1590 (APM).
Attorneys: Anthony J. Franze (Arnold & Porter LLP) and Miguel A. Estrada (Gibson, Dunn & Crutcher, LLP) for Philip Morris USA Inc. and U.S. Smokeless Tobacco Co. LLC. Mark Steven Brown (King & Spalding, LLP) and Noel John Francisco (Jones Day) for R.J. Reynolds Tobacco Co. James T. Nelson, U.S. Department of Justice, for the U.S. Food and Drug Administration, the U.S. Department of Health and Human Services, and Sylvia Mathews Burwell, Secretary, U.S. Department of Health and Human Services.
Companies: Philip Morris USA Inc.; U.S. Smokeless Tobacco Co. LLC; R.J. Reynolds Tobacco Co.; U.S. Food and Drug Administration; U.S. Department of Health and Human Services
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