Tobacco Companies Challenge CTP Guidance on Substantial Equivalence

By David B. Clissold –

In September 2011, the Center for Tobacco Products (“CTP”) issued a draft guidance entitled “Demonstrating the Substantial Equivalence of a New Tobacco Product: Responses to Frequently Asked Questions” (“Draft Guidance”).  In the Draft Guidance, the Food and Drug Administration (“FDA”) claimed that the Tobacco Control Act (“TCA”) requires manufacturers to submit information for FDA to review before changing the label of a tobacco product.  On March 4, 2015, FDA issued the guidance in final form (“Final Guidance”).  Among other things, the Final Guidance states that labeling changes that make a product “distinct” from the predecessor version of the product should be submitted to FDA in a “Same Characteristics SE Report.”  Although changes in product quantity were not discussed in the Draft Guidance, the Final Guidance also states that changes in the quantity of tobacco product in a package (e.g., from 20 to 24 cigarettes per pack) should be submitted in a “Product Quantity Change SE Report.”  The Final Guidance described these reports as “alternatives” to submitting a full substantial equivalence (“SE”) report or a premarket application under section 910(b) of the Federal Food, Drug, and Cosmetic Act for these types of changes.  The Final Guidance describes the contents of the “Same Characteristics SE Report” and the “Product Quantity Change SE Report.”  Among other requirements, each report must contain a certification statement, signed by a responsible official who is authorized to act on behalf of the company, using proscribed language.  For example, a “Same Characteristics SE Report” must include the following certification:

I, [insert name of responsible official], on behalf of [insert name of company], certify that [insert new tobacco product name] has a different [identify distinction] from [insert name of predicate tobacco product] but is otherwise identical to [insert name of predicate tobacco product]. I certify that [insert name of company] understands this means there is no modification, except for [identify distinction] from the predicate tobacco product, including any change in materials, ingredients, design features, heating source, or any other features. I certify that this information and the accompanying submission are true and correct, and that I am authorized to submit this on the company’s behalf. I understand that under section 1001 of title 18 of the United States Code, anyone who makes a materially false, fictitious, or fraudulent statement to the Government of the United States is subject to criminal penalties.

In a complaint filed on April 14, 2015 in the United States District Court for the District of Columbia, plaintiffs Philip Morris USA Inc., U.S. Smokeless Tobacco Company LLC, R.J. Reynolds Tobacco Company, American Snuff Company, LLC, Santa Fe Natural Tobacco Company, Inc., and Lorillard Tobacco Company argue that the Final Guidance was unlawful and ask the court to set it aside.  The tobacco company plaintiffs challenge the guidance on three principal grounds: The Administrative Procedure Act, and the First and Fifth Amendments to the U.S. Constitution.

• The Administrative Procedure Act:  The complaint alleges that the Final Guidance is arbitrary, capricious, and contrary to the TCA, and also exceeds FDA’s authority under the TCA because it conflicts with the TCA’s structure and text and with FDA’s prior interpretations of the TCA.  In addition, it does not adequately inform manufacturers which label changes may render a product “distinct,” and therefore subject to FDA pre-approval.  The complaint also alleges that the Final Guidance sets forth final agency positions, imposes legal obligations, establishes consequences for non-compliance, and effects changes in existing law, and is thus a substantive rule for which FDA is required to conduct notice-and-comment rulemaking.  Plaintiffs also state that the Final Guidance interprets statutory or regulatory requirements and represents a change in FDA’s interpretation of the TCA, and therefore FDA was required to provide an opportunity for public comment.
• First Amendment to the U.S. Constitution:  The complaint alleges that the Final Guidance prohibits manufacturers from changing the label of a tobacco product without first obtaining FDA’s pre-authorization, thus violating plaintiffs’ First Amendment right to communicate with consumers through product labels.
• First and Fifth Amendments to the U.S. Constitution:  Plaintiffs argue that the Final Guidance does not give manufacturers fair notice of the label changes that may result in a “distinct” product subject to FDA pre-approval or articulate clear standards that prevent arbitrary enforcement by FDA.  This uncertainty chills plaintiffs’ exercise of their First Amendment right to communicate with consumers through product labels because, if FDA concludes that a change rendered the product “distinct” and a Same Characteristics SE Report was not filed, the manufacturers will be subject to significant civil and criminal penalties.

Challenges to certain elements of the TCA on First Amendment grounds have been successful in the past.  For example, the D.C. Circuit struck down FDA regulations requiring graphic warnings on cigarette packaging on First Amendment grounds (see our analysis of that case here).  But what caught our eye in the latest complaint was the allegation that FDA is attempting to regulate industry through guidance instead of notice-and-comment rulemaking (we have previously commented on that issue here and here).  That allegation reminded us about a letter sent to FDA by Senator Lamar Alexander (R-TN), the ranking member of the Senate HELP Committee, along with Senators Richard Burr (R-NC), Johnny Isakson (R-GA), and Orrin Hatch (R-UT) “to express significant concern about [FDA’s] use of draft guidances to make substantive policy changes” (see our post on that letter here).  Last month, FDA responded to that letter with a letter of its own.  While the focus of the inquiry was on the use of draft guidances to implement FDA policy, FDA also explained how it uses guidance documents more generally:

Guidance documents generally do not create legally enforceable rights or responsibilities and do not legally bind the public or FDA—importantly, they do represent the Agency’s current thinking.  Therefore, FDA employees may depart from guidance documents only with appropriate justification and supervisory concurrence.  Because guidance is not binding, affected parties may choose to use an approach other than the one set forth in a guidance document . . . [but any] alternative approach must comply with the relevant statutes and regulations.  FDA is willing to discuss an alternative approach with affected parties to ensure it complies with the relevant statutes and regulations.

But if a guidance compels a submission to FDA, to be accompanied by a certificate made under penalty of perjury, and FDA believes that submission is required under its interpretation of the statute, doesn’t that “legally bind” the public to follow the guidance?  What “alternative approach,” following any amount of discussion with FDA would satisfy that perceived requirement?  We hope the court will address these issues during the course of this litigation.