Supreme Court Overrules Chevron Deference; What Now?
June 28, in a case known as Loperbright Enterprises v. Raimondo (Loperbright), the United States Supreme Court overturned a 40-year-old precedent known as Chevron deference. This precedent favored federal agencies’ interpretations of statutes that provided authority for agency rulemaking.
After the Loperbright decision, courts will no longer be required to defer to an agency’s reasonable interpretation of statutory language, and instead will be required to make their own independent judgment as to whether an agency’s interpretation is reasonable, and whether the agency’s actions are authorized by the questioned statute.
Chevron Deference
Chevron deference was established by a 1984 Supreme Court decision in Chevron v. Natural Resources Defense Council (Chevron). The decision established a two-step process for courts to review challenged agency statutory interpretations. In step one, the court determined whether the language was unambiguous. If so, the court interpreted the language according to the clear meaning of the text, without regard for the agency interpretation.
If the language was ambiguous or the statute was silent on the issue, the court would proceed to step two which required the court to determine whether the agency’s interpretation was permissible. As long as the agency’s interpretation was permissible under the statute, courts would defer to the agency’s interpretation and uphold their actions under that interpretation.
Chevron deference could be both beneficial and harmful for FDA-regulated companies, depending on one’s perspective. On one hand, deference promoted stability in the regulations and allowed companies to make strategic plans with a clear set of rules in mind, even where individuals may not have agreed with those rules. On the other hand, under Chevron, if the FDA made a rule that was “permissible” within the statute’s language but was perhaps the least logical and most restrictive choice available, courts would uphold the rule. Of course, many times in the latter case there were two companies involved and one company benefited from the court’s deference while the challenger did not.
For example, in Actavis Elizabeth LLC v. FDA (2010), the United States District Court for the District of Columbia deferred to the FDA’s decision to award 5-year new chemical entity market exclusivity for Shire Pharmaceutical’s Vyvanese (lisdexamfetamine dimesylate [LDX]) for treatment of attention deficit hyperactivity disorder. Actavis challenged the FDA’s decision that LDX was a new chemical entity because LDX is a prodrug that is metabolically converted to dextroamphetamine, which is responsible for the drug’s activity. Dextroamphetamine has no exclusivity or patent protection.
Actavis had filed an application for a generic version of Shire’s Vyvanese based on dextroamphetamine as the active ingredient. The FDA refused to file Actavis’ generic application stating that LDX is a new chemical entity within the meaning of the Food Drug, and Cosmetic Act (FD&C) because LDX contains a previously approved molecule with a covalent, non-ester amide derivative. Specifically, a non-ester that requires metabolic conversion to produce a previously approved active moiety is considered a new chemical entity.
Because the D.C. District Court deferred to this agency determination, Actavis was barred from submitting a generic application for an additional 3 years. In this case, Shire benefitted from Chevron deference while Actavis may or may not have. Remember, in the absence of Chevron deference, the court would need to decide whether the FDA’s interpretation was correct. There’s no guarantee that the court would have disagreed with the FDA’s interpretation had they considered the question rather than deferring.
Perhaps the more important question is: Who should make decisions like “what is a new chemical entity?” the FDA, who employs thousands of scientific and medical experts, or federal judges, who often have no scientific or medical background and are only able to base their decision on court briefs and oral arguments?
What’s Next
While no one really knows exactly what the regulatory landscape will look like after Loperbright. There are a few areas where we expect to see challenges to the FDA’s statutory authority and rule-making decision.
Laboratory Developed Tests (LDTs) – On April 29, 2024, the FDA announced a final rule that explicitly determined that LDTs are medical devices under the FD&C. As part of the final rule, the FDA announced a four-year phase out of its general enforcement discretion approach to LDTs, after which point all LDTs will be required to comply with the FDA’s medical device regulations. The FD&C is silent on LDTs, and some clinical laboratories have already initiated challenges to the FDA’s authority to regulate LDTs as medical devices.
Software/Artificial Intelligence – Similar to LDTs, the FD&C does not explicitly include software under the definition of medical device. It is conceivable that manufacturers of certain health-related software will challenge the FDA’s authority in this area.
The FDA will likely attempt to avoid the effects of the Loperbright decision in some cases by issuing guidance documents, which are technically nonbinding, rather than through new or revised regulations.
Conclusion
It will take time to fully understand how the Loperbright decision will impact the FDA and FDA-regulated industry. Facet’s Strategic Regulatory Innovator, Dr. Jason Mercer commented, “Many stakeholders may benefit from existing FDA interpretations of statutory provisions and may be negatively impacted by judicial scrutiny without regulatory deference. Companies may rely on FDA approvals or clearances and may have invested significant resources to comply with certain regulatory requirements that could now be subject to a greater risk of being overturned in court. On the other hand, industry may benefit from a judicial environment that doesn’t automatically defer to the FDA’s statutory interpretation in some cases.”
During the Chevron era, the FDA’s track record in court was very solid. Perhaps the deck won’t be stacked quite so strongly in the FDA’s favor now. Only time will tell.