Loper Bright Could Shift Outlook for FDA Legal Challenges

Courts’ Deferential Approach to FDA Interpretations Under Chevron

Federal courts have historically granted considerable leeway to FDA in its interpretations of the FDCA, giving respectful attention to FDA’s views as a repository of scientific expertise and champion of public health. This deferential approach was reinforced by the two-step framework established under Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), to guide judicial review of an agency’s interpretation of the statute it administers. At the first step, a reviewing court asked whether Congress had “directly spoken to the precise question at issue,” such that the “intent of Congress is clear.” If so, the court was obliged to “give effect to the unambiguously expressed” congressional intent. But if the statute was “silent or ambiguous,” the court would proceed to a second step, where it asked whether the agency’s interpretation was “reasonable.” If so, the agency’s interpretation was “permissible” and the court deferred to the agency’s view even if it would have independently favored a different interpretation.

When the Chevron framework governed, courts were likely to uphold FDA’s interpretations of the FDCA, both in legal challenges to FDA regulations, and in reviewing FDA enforcement actions against regulated entities. A 2023 Food and Drug Law Journal study surveying decisions by the federal courts of appeals since 2000 concerning challenges to FDA action found that where the statute was determined to be ambiguous at Chevron step one, the courts almost always upheld FDA’s interpretation as reasonable at step two.

Loper Bright’s “Best Reading” Standard

In Loper Bright, the Supreme Court jettisoned Chevron’s two-step framework as inconsistent with the Administrative Procedure Act (APA). The Court observed that the APA provides that “courts, not agencies, will decide ‘all relevant questions of law’ arising on review of agency action” – including legal questions “involving ambiguous laws” – and “prescribes no deferential standard for courts to employ in answering those legal questions” (emphasis added). The APA thus requires that courts “exercise their independent judgment” in construing statutes administered by agencies.

To discharge this duty to exercise independent judgment, when confronted with an ambiguous statute, courts must “use every tool at their disposal” – the “traditional tools of statutory construction” – to determine “the best reading of the statute and resolve the ambiguity.” The interpretive inquiry, the Court underlined, is focused on a singular result: instead of asking whether the agency’s assertion of authority is can be sustained under a “permissible” reading of the statute it administers, a reviewing court must instead ask whether the agency’s asserted authority is sustained under the “best” reading. “In the business of statutory interpretation, if it is not the best, it is not permissible.”

To be sure, Loper Bright acknowledged that courts may appropriately give “careful attention” to agency reasoning in determining the “best” reading of a statute. But while a reviewing court may search for a statute’s best reading “informed by” the “subject matter expertise” of the agency tasked with administering it, the agency’s interpretation “cannot bind” the court. Loper Bright, slip op. at 25 (quoting Bureau of Alcohol, Tobacco & Firearms v. FLRA, 464 U.S. 89, 98, n.8 (1983)). An agency’s expertise and experience, while having the “power to persuade,” lacks the “power to control” the distinctive responsibility of the judiciary to interpret the law. Id. at 10 (quoting Skidmore v. Swift & Co., 323 U.S. 134 (1944)).

The Court also recognized that some statutes “delegate[] discretionary authority to an agency.” This could take the form of an express delegation of authority to “give meaning to a statutory term” or to “prescribe rules to ‘fill up the details’ of a statutory scheme.” Id. at 17 (quoting Wayman v. Southard, 10 Wheat. 1, 43 (1825)). Congress might also delegate authority to an agency “to regulate subject to the limits imposed by a term or phrase,” such as “appropriate” or “reasonable,” that gives some flexibility to an agency. In these circumstances, Loper Bright directs courts to “respect the delegation” while remaining vigilant to “ensur[e] that the agency acts within” its delegated authority.

To ensure that an agency operates within “the boundaries of the delegated authority,” courts must heed the major questions doctrine, denying the agency authority to regulate issues outside the traditional scope of its authority. Courts must also carefully test whether the agency has engaged in “reasoned decisionmaking.” This will turn on application of “hard look” review as articulated in Motor Vehicle Manufacturers Association of United States, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983), and its extensive progeny, under which courts prevent agencies from taking actions that fail the hallmarks of reasoned and rational action.

The Court cautioned that its abandonment of Chevron was not a call to revisit prior cases decided pursuant to the Chevron framework. For reasons of statutory stare decisis, Loper Bright does not “call into question” prior cases simply because the court may have deferred to an agency’s “reasonable” interpretation to decide the case. Supreme Court precedent will continue to bind, and in-circuit authority may likewise continue to have precedential effect.

Impact on FDA’s Authority to Regulate

Loper Bright should result in greater scrutiny of FDA’s authority to regulate particular products. For example, FDA recently issued a final rule asserted authority to regulate laboratory-developed tests as medical “devices” under the FDCA. The laboratory-developed tests rule is currently being challenged in the courts, and the odds of success have improved in light of Loper Bright.

FDA jurisdiction over dietary supplements is another area where Loper Bright may offer regulated entities new opportunities to resist FDA overreach in asserting regulatory authority. The Dietary Supplement Health and Education Act of 1994 explicitly clarified that dietary supplements are food and may not be regulated as drugs. However, over the years, FDA has asserted additional authority to regulate dietary supplements as drugs. For example, FDA has asserted jurisdiction over supplements where they contain certain drug-related ingredients. Courts have upheld FDA’s expanded assertions of authority under the Chevron framework. Loper Bright may encourage challenges to and greater scrutiny of this and other assertions of authority that stretch the meaning of the statutory text.

FDA’s interpretations of the various market exclusivity provisions of the FDCA and the Hatch-Waxman Act also are consistently subject to challenges in courts, typically focused on the approval process for generic drugs and the Orphan Drug Act. These challenges should intensify following Loper Bright.

It is well understood that FDA often uses guidance documents rather than promulgating regulations, perhaps with a desire to avoid legal challenge. This FDA practice is already facing heavy scrutiny, and these legal challenges will likely gain yet more traction.

THE McDERMOTT DIFFERENCE

In the wake of Loper Bright, it is likely that regulated parties will be reinvigorated to challenge FDA’s interpretations of the FDCA and other statutes FDA administers. McDermott will continue to monitor the impact of Loper Bright in the lower courts. For a deeper dive, join us for a webinar on July 9, 2024, at 3:00 pm EDT that will break down the Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce decision and what lies ahead for the business community. Register today.

In the meantime, for more information on Loper Bright and its potential impacts on FDA actions, please contact one of the authors or any other member of McDermott’s Food, Drug & Medical Device Regulatory Practice Group.