The U.S. Department of Justice (DOJ) unveiled two interim final rules intended to deal with enforcement activities in connection with policies enunciated over the past four years, including the so-called Brand memo, which banned federal prosecutors from using federal agency guidance as leverage in prosecutions of private-sector entities. While the terms of the Brand memo had been written into the Justice Manual in December 2018, this new rulemaking effort would seem to eliminate any prospect that life science companies will be prosecuted for mere violations of FDA guidance rather than for violations of the statute.

The DOJ had announced earlier in the month of August that the Administrative Procedures Act (APA) is in need of statutory reform, a discussion driven in large part by the 74 years that have passed since the APA was signed into law. One of the problems faced by life science industries in connection with the APA is that FDA draft guidances are at times administered as though they were in force despite the explicitly tentative nature of draft guidances. In turn, industry at times perceives the FDA to see final guidances as enforceable as the statute. One countervailing trend is that the courts have recently demonstrated less appetite for deference to federal agencies’ positions when defendants take those agencies to court.

Rules emerge quickly following discussion of APA reform

Scarcely two weeks had passed since the DOJ’s Aug. 11 press release regarding the purported statutory infirmity of the APA when the department posted an announcement addressing “lawfulness and transparency in the regulatory process.” The statement points to Executive Order (EO) 13891, which states that federal government agencies have attempted to circumvent the rulemaking process via guidance in instances when the matter at hand is more properly addressed in rulemaking. The first of the two interim rules announced by DOJ would make permanent a policy that prohibits the use of guidance documents “to create rights or impose obligations on persons outside of the executive branch.” This policy is based on the Sessions memo of 2017, the founding policy document for EO 13891.

This first interim rule is the subject of an entry at the Federal Register dated Aug. 19, which appears at docket number DOJ-OAG-2020-0004 with a closing comment period of Sept. 18, 2020. As of Aug. 27, no comments have been lodged in response. The FR notice states government agencies must, in most instances, engage in the notice-and-comment rulemaking process because this is required by law, but also because the process avails federal agencies of a more thoroughgoing understanding of the potential effects of a rule.

Guidance is reserved for education of regulated parties via “plain-language restatements of existing requirements” or non-binding advice on technical issues associated interpretations of the statute or regulations. The FR notice added that guidance cannot be used to “create binding standards by which the Department will determine compliance with existing regulatory or statutory requirements.”

The second interim rule set forth in the latest DOJ announcement takes up the processes and procedures used for issuance of guidance documents, limitations of which were spelled out in the 2018 Brand memo. Deputy attorney general Jeffrey Rosen said in the Aug. 26 DOJ statement that with the two rules, the DOJ “has formalized its procedures for ensuring that guidance documents will not be used to impose novel legal requirements as a shortcut around the rulemaking process.” However, this interim rule would also mandate that the DOJ create a process by which the public can petition for withdrawal or modification of existing guidance documents. The rule also requires the department to set up and maintain a publicly available DOJ guidance portal with all department guidances. The FDA website provides webpages that list draft and recent final guidances for each product center.

Peggy Little, senior counsel for the New Civil Liberties Alliance of Washington, told BioWorld that the FR notice for EO 13891 reinforces the message that federal government agencies must comply with the APA’s requirements for rulemaking. “That’s a huge problem right now. They enact regulations through guidance all the time,” Little said of federal agencies, adding that the DOJ is sending the message that any policies promulgated via guidance that are properly the domain of rulemaking are not enforceable. There are issues with the APA that are amenable only to a statutory tweak, but she said that any move on the department’s part to foster compliance with the APA is a significant win for the private sector.

Agencies now on notice for response

Caleb Kruckenberg, litigation counsel at NCLA, said the organization had met with deputy AG Rosen to emphasize that a problem with the APA is that it offers little leverage for challenging guidance, including when a guidance is misused. “There really is no good way to get into court to challenge it,” Kruckenberg said, adding that DOJ has opened the door to challenges to guidance with the stipulation that the department must respond within 90 days. “Presumably, under the APA, you can file lawsuit if their response is inadequate,” he said, another point of private-sector leverage that has not always been easily invoked.

Little noted that the 90-day turn-around on challenges to guidance is another significant development inasmuch as federal agencies are currently under little practical compulsion to respond to petitions. Any agencies that deny a petition due to a lack of adequate information with which to respond must now specify the type of information that agency requires to respond to the petition.

Kara Rollins, litigation counsel for the NCLA, said her surveillance of agencies for compliance with EO 13891 suggests that DOJ is the only cabinet-level agency that has explicitly vowed to respond to withdrawal petitions in a pre-specified time frame. The question of what constitutes final agency action is also vague at best in most instances, she said, adding that the Department of Health and Human Services is one of the few – perhaps the only – that has a formal policy stating that an agency response to a petition constitutes that final action on the petition.

“There’s a high degree of variability in how the agencies have addressed implementation of the executive order, and it’s going to be interesting to see how this plays out over the next couple of years” as the number of petitions begins to accumulate, Rollins said.

Kruckenberg noted that the elevation of a memo such as the Brand memo to an executive order and/or a formal rule creates more pressure on federal government employees to comply with the requirements, in no small part due to greater visibility. “It’s not just a rule for line attorneys: It’s in the Federal Register now and it’s a rule all must follow,” he said.

The next presidential administration, whenever it might arrive, might have more difficulty peeling back these changes thanks to their appearance in the Federal Register than would otherwise be the case. Rollins said the sheer transparency of any reversal would be a significant source of drag because any reversal would likewise have to be posted in the Federal Register. Little noted that it would also be politically awkward to explicitly make the argument that these policies should be reversed, given the well-documented legal underpinnings.

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