Chemular - Regulatory Compliance Experts

Deeming Regulations Lawsuits Amass Bringing More Uncertainty

by Chris Ford June 21, 2016

Deeming Regulations Lawsuits Amass Bringing More Uncertainty

Larry W. Faircloth (R), West Virginia House of Delegates, not only uses and sells vaping products in his spare time, he is asking, in the latest lawsuit filed against FDA earlier this month, the Southern District of West Virginia to strike down the FDA’s deeming regulation on eliquids and ecigarettes in addition to suspending its enforcement temporarily, bringing the total to five lawsuits filed against FDA since May.

Faircloth ran for the Republican nomination for West Virginia Treasurer. He was defeated by Ann Urling in the Republican primary on May 10, 2016

All of the lawsuits assert violations of the Administrative Procedure Act (APA), a federal law that establishes the processes that agencies must follow when using their rulemaking and adjudicatory power. Any agency action that violates the APA can be overturned by a reviewing court.

Challenging FDA's definition of "tobacco products," Faircloth claims that the deeming regulation exceeds statutory jurisdiction.

The term "tobacco product" means any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product. This includes, among other products, cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco.

The term "tobacco product" does not apply to raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product. Nor does it mean something that is defined as a drug, device, or combination product under the Federal Food, Drug, and Cosmetic Act.

However, FDA extends the deeming regulation's authority to "zero nic" eliquids and nicotine derived from sources other than tobacco. Meaning even though "zero nic" eliquids and synthetic nicotine contain no tobacco products whatsoever, FDA believes they are subject to the extremely stringent requirements of the deeming regulation.

The tobacco industry has been busy challenging provisions of the Tobacco Control Act since the law passed in 2009. Despite the challenges, the FDA has repeatedly stated its intention to regulate other products since the passage of the Tobacco Control Act.

A series of citizen petitions sponsored by the Tobacco Product Legal Consortium in 2013 forced the FDA to examine the differential treatment afforded to certain products at the federal level. The petitions presented compelling data on four classes of products that were unregulated by the FDA: cigars, dissolvable tobacco products, e-cigarettes and hookah, but asked the FDA to regulate all products that meet the Tobacco Control Act’s broad definition of tobacco products.

Are these lawsuits helping or hurting the vaping industry? Some manufacturers have chosen to hold out, and have not begun preparation of premarket applications. Bonnie Herzog, an analyst with Wells Fargo Securities, said she expects “litigation from several manufacturers, which could unfortunately prolong the uncertainty plaguing the entire industry.”

Nicopure Labs filed the first ecigarette lawsuit just days after FDA's announcement in May, arguing that FDA’s rulemaking process violated the Administrative Procedure Act and that the regulation violates the First Amendment.

Fairchild also argues that the deeming regulation violates the 10th Amendment to the Constitution, because West Virginia's sovereignty would be impacted by the removal of eliquids and ecigarettes.

Fairchild's lawsuit also claims that the premarket review process will not only force hundreds of manufacturers to cease operations, it will increase the costs for consumers, leading them to combustible cigarettes.

Lost Art Liquids' also filed a lawsuit in May, challenging FDA's purported authority to deem and regulate e-liquids and other vapor products as "tobacco products" under the Tobacco Control Act and asserts claims against FDA for violations of the Regulatory Flexibility Act, the 1st and 5th Amendments, and the Administrative Procedures Act. 

The company's complaint alleges that FDA's regulation of vapor products is illegal in that it exceeds the very limited and specific scope of authority Congress granted FDA to regulate "tobacco products" under the Tobacco Control Act in 2009.

On May 26, 2016, John Middleton Co. LLC, a subsidiary of Altria Group, Inc. (formerly Philip Morris Companies) that manufactures cigars and pipe tobacco, filed suit in the District Court of the District of Columbia. John Middleton has requested that the court strike down the rule in addition to temporarily suspending its enforcement.

JMC alleges that the prohibition on the use of the modified risk descriptor “mild” for cigars and pipe tobacco is not based on reliable evidence, and that the modified risk descriptor “mild” is a content-based speech restriction in violation of the First Amendment’s protection of free speech.

On June 1, 2016, Global Premium Cigars, LLC, a Florida manufacturer of cigars, and its proprietor Enrique Fernando Sanchez Icaza, filed suit in the Southern District of Florida. Global Premium Cigars' lawsuit alleges that warning labeling requirements are “arbitrary and capricious,” and the enforcement of premarket review with respect to all products marketed after February 15, 2007 violates the due process clause of the Fifth Amendment.

The lawsuits collectively allege 19 violations, including arbitrary and capricious enforcement of the premarket review requirements, inappropriate interpretation of the definition of “tobacco product” to include e-cigarettes, failure to conduct adequate cost-benefit analysis, and various violations of the First, Fifth and Tenth Amendments to the Constitution.

Interpretation of Tobacco Product

  1. FDA’s interpretation of the term, “tobacco product” is “not in accordance with the law” and “in excess of statutory jurisdiction,” a violation of the APA;

Premarket Review

  1. the enforcement of premarket review against e-cigarette companies will be costly and stifle innovation, rendering the FDA’s action “arbitrary and capricious,” a violation of the APA;
  2. the enforcement of premarket review against cigar companies will be costly and there is no evidence to support the requirement that cigar boxes carry a warning label covering 30% of the principal display panel, actions that are “arbitrary and capricious,” violations of the APA;
  3. the enforcement of premarket review against e-cigarette will drive up the costs for devices and liquids for consumers and push consumers toward cigarettes, rendering the FDA’s action “arbitrary and capricious,” a violation of the APA;

Cost-Benefit Analysis

  1. FDA’s cost-benefit analysis for the rule overstates the benefits and understates the costs, an action that is “without observance of procedure required by law,” a violation of the APA;
  2. FDA’s Initial Regulatory Flexibility Analysis did not properly quantify the costs of the rule or identify significantly less costly alternatives to the rule, a violation of the RFA;

First Amendment to the Constitution

  1. e-cigarette manufacturers will be prohibited from making truthful and non-misleading statements and other forms of protected expression, an action that is “contrary to [the] constitutional right” to free speech protected by the First Amendment, a violation of the APA.
  2. the prohibition on using modified risk descriptors and the requirement that products bear warning labels violate the First Amendment’s protection of free speech and the Fifth Amendment’s protection from unlawful governmental takings;
  3. the required warning labels and the enforcement of premarket review with respect to labeling violate the First Amendment’s protection of free speech;
  4. consumers will be unable to receive truthful and non-misleading statements and other forms of protected expression, such as free samples of products, an action that is “contrary to [the] constitutional right,” of free speech protected by the First Amendment, in violation of the APA;

Fifth Amendment to the Constitution

  1. the implementation of required warning labels on cigar boxes amounts to a taking, a violation of the Fifth Amendment’s protection from unlawful governmental takings;
  2. the enforcement of premarket review with respect to all products marketed after February 15, 2007 violates the due process clause of the Fifth Amendment.

Tenth Amendment to the Constitution

  1. by removing many e-cigarettes from the market, the FDA has prevented the state of West Virginia from reducing its Medicaid costs by promoting e-cigarettes over combustible tobacco products to reduce healthcare costs, depriving the state of its sovereignty, in violation of the Tenth Amendment’s protection of federalism.

Modified Risk Descriptor

  1. the rule indiscriminately prohibits the use of the modified risk descriptor “mild,” an action that is “arbitrary and capricious,” a violation of the APA;
  2. the prohibition on the use of the modified risk descriptor “mild” for cigars and pipe tobacco is not based on reliable evidence, an action that is “arbitrary and capricious,” a violation of the APA;
  3. FDA did not explain why it rejected alternatives to prohibiting the use of the modified risk descriptor “mild,” an action that is “arbitrary and capricious,” a violation of the APA;
  4. FDA failed to respond to comments addressing the prohibition on the use of the modified risk descriptor “mild,” an action that is “arbitrary and capricious,” a violation of the APA;
  5. the prohibition on the use of the modified risk descriptor “mild” is a content-based speech restriction in violation of the First Amendment’s protection of free speech; and
  6. the prohibition on the use of the modified risk descriptor “mild” amounts to a taking of John Middleton’s trade name “Black & Mild,” a violation of the Fifth Amendment’s protection from unlawful governmental takings.

Manufacturers of tobacco products are strongly urged to take the necessary actions to comply with the Deeming Regulations without regard to potential outcomes of law suits which are pending. It is not prudent to delay while waiting for legal decisions which may not be imposed for several years. No part of the Act is expected to be delayed while litigation is pending, and manufacturers will miss critical deadlines, precluding their eligibility to take advantage of the compliance periods. 




Chris Ford
Chris Ford

Author


Leave a comment