We seem to be having an administrative law moment at the DDL blog. That subject matter area is seldom sexy. It can be, frankly, quite dry. But administrative law can have a huge impact on drug and device law. Yesterday, Bexis discussed cases holding that agency rules that did not undergo required notice and comment procedures could not then be used to clobber defendants via False Claim Act claims. As the former Vice President once said in another context (because we are a G-rated, family-friendly blog, we will delete the expletive) this is a big deal.
How else could administrative law ride to the rescue of our clients? Think about how some plaintiff regulatory experts criticize drug or device makers for their alleged departures from FDA guidances. What if those guidances are not worth the paper in the Federal Register on which they are not printed? Or think about adverse regulatory actions, such as inspections, that make ugly cameo appearances in tort cases. On October 9, 2019, the White House issued a pair of Executive Orders that attempt to rein in agency rule-making that itself does not follow the rules. The two Executive Orders restrict the ability of federal administrative agencies to regulate through guidance documents. Such regulation by guidance is something that the FDA does frequently. Perhaps in the future it will happen less frequently. (Here is an example of recent FDA legislation via guidance.)
The Executive Order on Promoting the Rule of Law through Transparency and Fairness in Civil Administrative Enforcement and Adjudication (you can find it here) is more general in scope. It begins with the (we hope) unarguable proposition that agency actions should not be arbitrary and that their substantive rules and interpretations should be published in the Federal Register: “Unfortunately, departments and agencies (agencies) in the executive branch have not always complied with these requirements.” Then we get another unarguable proposition: “No person should be subjected to a civil administrative enforcement action or adjudication absent prior public notice of both the enforcing agency’s jurisdiction over particular conduct and the legal standards applicable to that conduct.” Okay. All well and good. As that great proponent of fair and humane administrative law, Vladimir Ilyich Ulyanov (known to his pals as Lenin), once asked, What is to be done?
Here is what the Executive Order requires:
“When an agency takes an administrative enforcement action, engages in adjudication, or otherwise makes a determination that has legal consequence for a person, it may apply only standards of conduct that have been publicly stated in a manner that would not cause unfair surprise.”
Everybody is against unfair surprise, right? But there is more:
“Any decision in an agency adjudication, administrative order, or agency document on which an agency relies to assert a new or expanded claim of jurisdiction — such as a claim to regulate a new subject matter or an explanation of a new basis for liability — must be published, either in full or by citation if publicly available, in the Federal Register (or on the portion of the agency’s website that contains a single, searchable, indexed database of all guidance documents in effect) before the conduct over which jurisdiction is sought occurs. If an agency intends to rely on a document arising out of litigation (other than a published opinion of an adjudicator), such as a brief, a consent decree, or a settlement agreement, to establish jurisdiction in future administrative enforcement actions or adjudications involving persons who were not parties to the litigation, it must publish that document, either in full or by citation if publicly available, in the Federal Register.”
The Executive Order also affords an opportunity to contest agency determinations. Further, within 120 days of the Order “each agency that conducts civil administrative inspections shall publish a rule of agency procedure governing such inspections.” The Order insists on appropriate procedures for information collections, and instructs agencies “to encourage voluntary self-reporting of regulatory violations by regulated parties in exchange for reductions or waivers of civil penalties” and “to provide pre-enforcement rulings to regulated parties.”
That all sounds like basic fair play. The agencies and plaintiff lawyers must hate it.
Next, let’s talk about the other Executive Order (which you can find here). As its title suggests, the Executive Order on Promoting the Rule of Law through Improved Agency Guidance Documents more specifically tackles the issue of guidance abuse. The goal is “to ensure that Americans are subject to only those binding rules imposed through duly enacted statutes or through regulations lawfully promulgated under them, and that Americans have fair notice of their obligations.” The Order observes that “Departments and agencies in the executive branch adopt regulations that impose legally binding requirements on the public even though, in our constitutional democracy, only Congress is vested with the legislative power.” True enough. The growth of the administrative state is, along with advances in nuclear physics, one of the most significant developments of the 20th Century. That administrative state (again, like physics) offers as many threats as benefits.
Here is the problem: “Agencies may clarify existing obligations through non-binding guidance documents, which the APA exempts from notice-and-comment requirements. Yet agencies have sometimes used this authority inappropriately in attempts to regulate the public without following the rulemaking procedures of the APA. Even when accompanied by a disclaimer that it is non-binding, a guidance document issued by an agency may carry the implicit threat of enforcement action if the regulated public does not comply. Moreover, the public frequently has insufficient notice of guidance documents, which are not always published in the Federal Register or distributed to all regulated parties.” Also true. Also threatening.
What is the solution? The Order requires “that agencies treat guidance documents as non-binding both in law and in practice, except as incorporated into a contract, take public input into account when appropriate in formulating guidance documents, and make guidance documents readily available to the public.” Going forward, each guidance document must “clearly state that it does not bind the public, except as authorized by law or as incorporated into a contract.” There will be ‘procedures for the public to petition for withdrawal or modification of a particular guidance document, including a designation of the officials to which petitions should be directed.” There must also be “a period of public notice and comment of at least 30 days before issuance of a final guidance document, and a public response from the agency to major concerns raised in comments.” There are other requirements, as well. The result should be less bogus agency legislation-via-guidance, and more clarity as to which guidances still have any force and what the extent of that force is.
More concretely and immediately, we harbor real doubts that, for instance, the FDA’s guidance documents concerning internet promotion/off-label promotion of drugs/devices can stand in the wake of these Executive Orders. And if the guidances cannot stand as a matter of federal administrative law procedure, their ability to influence state tort litigation is even more questionable.