Court of Appeals Holds that FDA Does Not Have Inherent Authority to Reclassify Devices by Rescinding a 510(k) Clearance

By Allyson B. Mullen –

As we previously posted, in June 2011, ReGen Biologics, Inc. (“ReGen”), which was subsequently acquired by Ivy Sports Medicine, LLC (“Ivy”), sued FDA based upon the theory that FDA lacked authority under the Federal Food, Drug, and Cosmetic Act (“FDCA”) to rescind a 510(k) substantial equivalence determination for the Menaflex product.  In April 2013, the District Court for the District of Columbia granted summary judgment to FDA, concluding that FDA had the inherent authority to rescind the 510(k) substantial equivalence determination because it was done within a reasonable period of time (see our earlier post here). 

On September 26, 2014, the U.S. Court of Appeals for the District of Columbia Circuit reversed, holding that because there is a statutory procedure for FDA to reclassify devices, FDA may not “short-circuit” this procedure by rescinding a 510(k) clearance to reclassify a device – in this case from Class II to Class III.  Ivy Sports Med., LLC, v. Burwell, No. 13-5139 (D.C. Cir. Sept. 26, 2014).  The Court of Appeals directed the District Court to vacate FDA’s decision (rescission of the 510(k)) and remand the matter to FDA for further proceedings. 

The Court of Appeals generally analyzed the federal agency’s “inherent authority” to revisit a prior decision.  The Court of Appeals explained that an Agency’s “inherent reconsideration authority does not apply in cases where Congress has spoken.”  Id. at 10.  In this case, although phrased differently, the Court ruled that both FDA’s claimed inherent authority to rescind a 510(k) substantial equivalence determination and Section 513(e) of the FDCA (device reclassification) achieved the same end result – to reclassify the Menaflex product from Class II into Class III.  Thus, the Court of Appeals concluded that it would be unreasonable under the current “statutory scheme to infer that FDA retains inherent authority to short-circuit or end-run the carefully prescribed statutory reclassification process in order “to correct” a mistaken classification of a device into Class II which previously occurred through the 510(k) clearance process.  Id. at 12.

The Court’s Opinion contains an extensive and interesting discussion about allegations that FDA’s prior decision had been tainted because of alleged improper outside and inside-FDA influences on that decision.

FDA argued that even if the reclassification provision in the statute could displace its inherent authority, it would not apply in this case because there was an exception created in American Methyl Corp. v. EPA, 749 F.2d 826 (D.C. Cir. 1984), when there is fraud or misconduct shown in the administrative record.  The Court of Appeals disagreed that American Methyl created such an exception; however, even assuming such an exception had been created, the Court of Appeals determined that any misconduct in the case of the Menaflex 510(k) would not raise to the level necessary to reach the high bar that would have been set in what the court referred to as the “dicta” in American Methyl.  The Court of Appeals noted that:

no senior leaders of FDA, executives of ReGen, or Members of Congress were disciplined for their involvement in the [Menaflex 510(k)] review process.  Yet if FDA actually rendered a decision tainted by misconduct – as opposed to simply reaching a mistaken decision or a decision it no longer agrees with – that misconduct must have been due to the legally or ethically wrongful actions of some person or persons.  FDA’s inability or unwillingness to identify those wrongdoers is an indication that, in fact, no American Methyl-level misconduct occurred, at least on the record before us. 

Id. at 16.  Here, the Court of Appeals found that whatever inherent authority FDA may have in other situations does not allow the Agency to rescind a 510(k) substantial equivalence determination when it would result in the de facto reclassification of the previously 510(k)-cleared Class II device into Class III.

Since this case was first filed in 2011, the Food and Drug Administration Safety and Innovation Act (“FDASIA”) changed the statutory provisions for device reclassification.  Based on new information about a device, FDA may, on its own initiative or after petition by an interested person, reclassify the device and revoke any related regulation or requirement in effect under a PMA approval order.  Prior to FDASIA, FDA was required to issue a reclassification regulation in order to perform this reclassification.  Following FDASIA, FDA can accomplish the same thing by administrative order.  21 U.S.C. § 360c(e)(1)(A)(i).  Practically speaking, issuing an administrative order may be less burdensome for FDA than issuing a reclassification regulation because an administrative order does not necessarily have to undergo outside-FDA Executive Branch scrutiny prior to issuance as does an agency regulation. 

This decision was met by a vigorous dissent from Circuit Judge Pollard.  She concluded that the FDC Act’s “text, structure, history, and purpose, in addition to past administrative practice, all show that the FDA permissibly read the statute not to displace its otherwise-undisputed implicit authority to correct erroneous substantial equivalence decisions.”  Dissenting  Op. at 2. 

The two judges in the majority stated that their holding is very narrow and only relates to the rescission of a 510(k) substantial equivalence determination when it results in the de facto reclassification of a device.  It remains to be seen if this ruling would apply to FDA’s presumed inherent authority to rescind a 510(k) substantial equivalence determination so long as the device remained a class II device, and the 510(k) holder was merely required to submit a new 510(k) for the device.   Also, it remains to be seen if this decision will act as a check on other instances where FDA has asserted that it has the inherent authority to “correct” mistakes involving other product approval decisions and exclusivity matters.  We have seen a number of such decisions in the drug approval arena.

FDA has other remedies besides simply issuing another decision.  It can seek rehearing from the same three judges that heard the case, seek rehearing en banc from the entire D.C. Circuit, and/or seek review from the U.S. Supreme Court.  The fact that there was a vigorous dissent in the case could suggest that FDA may take one or more of these steps.