APA Notice-and-Comment Required for FDA’s “Comparative Efficacy” PMTA Standard When Imposed Through Informal Adjudication

I. Introduction

This consolidated Fifth Circuit decision addresses the Food and Drug Administration’s denial of premarket tobacco product applications (PMTAs) for electronic nicotine delivery system (ENDS) products under the Family Smoking Prevention and Tobacco Control Act (TCA). The TCA requires FDA to deny a PMTA unless the applicant shows the product is “appropriate for the protection of the public health” (APPH), a population-wide balancing that accounts for both youth initiation and adult cessation.

Petitioners—manufacturers and retailers of ENDS and related products—challenged an FDA marketing denial order (MDO) that applied what the opinion calls the agency’s “comparative efficacy standard” (also described as a “comparative-efficacy requirement”). Petitioners contended that FDA, through internal memoranda and consistent denials, effectively required comparative-efficacy evidence (e.g., randomized controlled trials or longitudinal cohort studies comparing flavored to tobacco-flavored products) and denied applications lacking it, all without notice-and-comment rulemaking.

The key issues, as narrowed by intervening precedent, were:

• APA procedure: Whether FDA’s comparative efficacy standard is a substantive (legislative) rule that must be adopted through APA notice-and-comment rulemaking, rather than developed via informal adjudication through MDOs.
• Scope of adjudication authority: Whether SEC v. Chenery Corp. (Chenery II) permits FDA to impose a binding, prospective, broadly applicable evidentiary requirement through adjudication.
• Venue: Whether an out-of-circuit co-petitioner may proceed in the Fifth Circuit when a co-petitioner has its principal place of business in the circuit.
• What the court does not decide: Given its procedural holding, the court expressly avoids reaching whether FDA acted arbitrarily and capriciously in applying the standard to menthol, tobacco-flavored, or zero-nicotine products.

II. Summary of the Opinion

The Fifth Circuit vacated the FDA’s MDO and remanded, holding that FDA unlawfully “sidestepped” the APA’s notice-and-comment requirement by using informal adjudication to promulgate and apply a substantive rule—its comparative efficacy standard—that (1) binds agency decisionmakers to a particular evidentiary approach, (2) prospectively applies to an unbounded set of applicants, and (3) functions as a de facto ban given its breadth and uniformity of application.

The court emphasized that prior decisions (including the Supreme Court’s FDA v. Wages & White Lion Invs., L.L.C. and the Fifth Circuit’s VDX Distro, Inc. v. FDA) foreclosed some arguments (e.g., change-in-position and the TCA “tobacco product standard” theory), but those decisions expressly reserved the distinct question whether the comparative efficacy standard required APA notice-and-comment. The Fifth Circuit took up that reserved question and resolved it against FDA.

On venue, the court held venue was proper for all petitioners because at least one co-petitioner (Wood Creek Vapory) had its principal place of business in the Fifth Circuit, relying on circuit precedent and distinguishing the Supreme Court’s universal-injunction decision in Trump v. CASA.

III. Analysis

A. Precedents Cited and Their Role

• FDA v. Wages & White Lion Invs., L.L.C., 604 U.S. 542 (2025) (“Wages”)
  The Supreme Court held FDA did not unlawfully change position regarding what information must be included in PMTAs when evaluating flavored (non-tobacco, i.e., fruit/candy/dessert) products under comparative efficacy concepts, and reaffirmed agencies’ general ability (absent statutory constraint) to develop standards via adjudication under Chenery II. Crucially here, Wages expressly declined to decide whether APA/TCA notice-and-comment requirements were violated by standards developed in adjudication. The Fifth Circuit treats that as a deliberate carveout and uses it as permission—not prohibition—to reach the APA procedural issue.
• Wages and White Lion Invs., L.L.C. v. FDA, 90 F.4th 357 (5th Cir. 2024) (en banc)
  The en banc Fifth Circuit decision was reversed by the Supreme Court. The present panel cites it primarily to note that, depending on how broadly one reads the Supreme Court’s reversal, the en banc court’s suggestion about rulemaking procedure retained persuasive force, but the panel does not treat it as controlling.
• VDX Distro, Inc. v. FDA, 179 F.4th 356 (5th Cir. 2026)
  VDX Distro foreclosed petitioners’ argument that the comparative efficacy standard is a TCA-defined “tobacco product standard” requiring the TCA’s specific notice-and-comment mechanism. Yet VDX Distro explicitly reserved “for another day” the separate question whether APA notice-and-comment applies. That reservation is a linchpin: this case is framed as “another day.”
• R.J. Reynolds Vapor Co. v. FDA, 65 F.4th 182 (5th Cir. 2023)
  This is the panel’s principal internal-circuit anchor. While parts of R.J. Reynolds on change-in-position were abrogated by Wages, the Fifth Circuit here treats R.J. Reynolds as still binding on the APA-substantive-rule analysis—particularly its conclusion that the comparative efficacy approach, as operationalized through internal memoranda and “box-checking” review, functions as a substantive rule requiring notice-and-comment. The panel quotes its earlier assessment: “This is not a close call.”
• Texas v. EEOC, 933 F.3d 433 (5th Cir. 2019) and Texas v. United States, 809 F.3d 134 (5th Cir. 2015)
  These cases supply the Fifth Circuit’s tests for distinguishing policy statements from substantive rules: binding effect on agency discretion and effects on broad, unspecified classes. The court analogizes FDA’s uniform denials to the “binding in practice” analysis used in the DAPA litigation (e.g., high rates of uniform outcomes indicating constrained discretion).
• City of Arlington v. FCC, 668 F.3d 229 (5th Cir. 2012) and Syncor Int'l Corp. v. Shalala, 127 F.3d 90 (D.C. Cir. 1997)
  Cited for the proposition that a substantive rule affects “broad classes of unspecified individuals,” and for the notion that legislative rules add to or modify legal norms and “bind the public.”
• SEC v. Chenery Corp., 332 U.S. 194 (1947) (Chenery II) and NLRB v. Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267 (1974)
  FDA relied on Chenery II to justify adjudication. The court turns Chenery II against FDA, emphasizing Chenery II’s rationale for case-by-case evolution (unforeseen problems, insufficient experience, or highly specialized facts) does not fit a rigid, prospective, broadly applicable evidentiary mandate. Bell Aerospace is used to highlight that adjudication-based standard-setting is tolerable where affected parties receive a “full opportunity to be heard” through a comparatively formal process—something the court finds lacking in FDA’s informal MDO process.
• United States v. Mead Corp., 533 U.S. 218 (2001)
  Invoked to support the more general principle that administrative action with “the effect of law” is associated with relatively formal procedures fostering deliberation—supporting the court’s skepticism of using informal adjudication to generate binding, law-like standards.
• Brown-Forman Corp. v. NLRB, 169 F.4th 646 (6th Cir. 2026)
  Treated as persuasive authority limiting agencies’ use of adjudication to create “rigid” rules of general applicability not derived from case-specific facts. The Fifth Circuit uses Brown-Forman to reinforce the view that “hard-and-fast” prospective rules are ill-suited to adjudication.
• Neustar, Inc. v. FCC, 857 F.3d 886 (D.C. Cir. 2017)
  Used to illustrate when informal adjudication is appropriate (polycentric, fact-sensitive selections) and, by contrast, why imposing broadly applicable evidentiary burdens through informal adjudication is not.
• Trump v. CASA, 606 U.S. 831 (2025) and FDA v. R.J. Reynolds Vapor Co., 606 U.S. 226 (2025)
  CASA is addressed in the venue/remedy discussion: the court distinguishes universal injunctions from relief to actual parties and emphasizes APA vacatur/remand as an available remedy. FDA v. R.J. Reynolds Vapor Co. is cited for recognizing retailer injury and for noting the Supreme Court’s reservation on whether each joint petitioner must independently establish venue under the TCA—a question the Fifth Circuit answers using its own precedent.

B. The Court’s Legal Reasoning

1. What was still open after Wages and VDX Distro

The court begins by narrowing the battlefield. Arguments that FDA acted arbitrarily and capriciously by changing evidentiary expectations for non-tobacco flavors are “foreclosed” by Wages. The statutory claim that comparative efficacy is a TCA “tobacco product standard” requiring the TCA’s own rulemaking mechanism is “foreclosed” by VDX Distro. But both higher courts expressly reserved the distinct APA notice-and-comment question. The Fifth Circuit treats that reservation as decisive: it will now decide whether the comparative efficacy standard is a substantive rule that must be adopted through APA procedures.

2. The “substantive rule” finding under Fifth Circuit doctrine

Applying its own precedent (especially R.J. Reynolds Vapor Co. v. FDA, Texas v. EEOC, and Texas v. United States), the court characterizes FDA’s comparative efficacy standard as a substantive rule because it:

• Applies to “broad classes of unspecified individuals” and to an “unbounded set” of future applicants.
  The opinion repeatedly stresses scale: millions of products, more than one million denials, and a tiny fraction of approvals—used to infer that the agency is not engaging in truly individualized adjudication.
• Is “binding” in practice and retracts reviewer discretion.
  The court relies on evidence of internal memoranda (including the late-added 2022 Dr. King and Dr. Apelberg memos, and the previously discussed 2021 memo) and on the uniformity of outcomes to conclude reviewers were not genuinely free to exercise discretion outside the comparative efficacy framework.
• Operates prospectively as a policy “born” in internal policymaking.
  The court views the standard as crafted behind closed doors and then “publicly debuted” via denials—rather than emerging inductively from case-specific adjudication. That prospectivity aligns it with “rulemaking” under the APA’s definition of a “rule” (future effect).
• Imposes new obligations.
  Though FDA framed the approach as an evaluation method, the court treats it as effectively requiring comparative efficacy evidence (e.g., RCTs/longitudinal studies) as a prerequisite for success for flavored products, thus “modif[ying] or add[ing] to a legal norm” in a way associated with legislative rules.

3. The Chenery II “adjudication vs. rulemaking” rebuttal

FDA’s core defense was Chenery II: agencies may choose to develop standards through adjudication unless Congress specifies otherwise. The court does not reject Chenery II as a general principle. Instead, it holds Chenery II’s justifications do not fit the regulatory move at issue:

• Not unforeseen: youth-flavor risks were central, known, and extensively documented.
• Not tentative/inexperienced: the agency’s vast experience (millions of applications) contradicts any need for tentative, case-by-case experimentation.
• Not too specialized for a general rule: FDA’s uniform application to huge numbers of cases suggests the opposite—this is a generalized rule being applied across the board.

4. A second, more structural limit: informal adjudication is the wrong vehicle

The opinion advances a broader administrative-law principle: even if adjudication can sometimes produce new standards, informal adjudication is an especially poor vehicle for promulgating substantive, binding rules because it lacks the dialogue and procedural formality that justify law-like effect. The court points to:

• Absence of pre-denial input: manufacturers had no meaningful opportunity to comment on, contest, or shape the comparative efficacy requirement during its development.
• No meaningful cure opportunity: applicants learned of the decisive requirement only after denial.
• Contrast with NLRB processes: in Bell Aerospace, those immediately affected had “full opportunity to be heard”; by contrast, FDA’s MDO process is not trial-like and does not provide comparable participation.

Synthesizing these points, the court concludes FDA “evaded” the APA’s information-forcing procedure, and that notice-and-comment is required where the agency is effectively binding itself and reshaping private rights at scale.

C. Impact

The practical and doctrinal consequences are significant:

• Constraint on FDA PMTA denial methodology: Within the Fifth Circuit, FDA may not rely on a comparative efficacy standard as a binding, across-the-board evidentiary gatekeeper unless the agency adopts it through APA notice-and-comment (or otherwise proceeds in a manner consistent with this opinion’s procedural demands).
• Reinvigoration of Fifth Circuit “binding in practice” doctrine: The court doubles down on its line of cases treating policies as substantive rules when they effectively bind discretion—even if the agency labels them “guidance” or embeds them in adjudications.
• Potential inter-circuit dynamics: The court’s reliance on Brown-Forman Corp. v. NLRB signals convergence with at least one other circuit on limits to adjudication-driven, generally applicable policymaking, raising the stakes for nationwide administrative practice should conflicts emerge.
• Procedural leverage for regulated industries: Applicants facing uniform denial rationales may reframe challenges away from the merits of public-health balancing and toward procedural invalidity—especially where internal memoranda or consistently applied evidentiary demands suggest de facto rulemaking.
• Agency response pathways preserved: The opinion does not dictate the substantive outcome on remand. FDA may “rethink the rule,” “re-adopt it” through APA procedures, or pursue “other appropriate proceedings,” leaving room for continued aggressive youth-protection policy so long as procedural requirements are met.

IV. Complex Concepts Simplified

1. “APPH” (Appropriate for the Protection of the Public Health)

APPH is not a simple “is this product safer than cigarettes?” question. The statute requires a population-level balancing: whether authorizing the product likely increases or decreases overall public health when considering (a) youth initiation and (b) adult cessation/switching.

2. “Comparative efficacy standard”

In this opinion, the “comparative efficacy standard” is FDA’s approach that (as applied) demands robust evidence that a flavored product produces adult switching/cessation benefits relative to tobacco-flavored products that are thought to pose lower youth risk. The court treats this not as a mere analytic preference, but as an operative requirement that becomes outcome-determinative across many cases.

3. “Substantive (legislative) rule” vs. “guidance/policy statement”

A substantive rule effectively has the force of law: it binds the agency and changes what regulated parties must do to obtain approval. Guidance and policy statements can signal priorities but must leave genuine discretion. The Fifth Circuit’s focus is practical: if agency staff treat the policy as mandatory and outcomes become uniform, it looks like a substantive rule.

4. “Notice-and-comment” rulemaking (APA § 553)

Notice-and-comment is the APA’s core transparency mechanism: the agency proposes a rule publicly, receives comments, and responds before finalizing. The court emphasizes it is “information-forcing”—designed to improve rationality and legitimacy by ensuring affected parties can participate.

5. “Informal adjudication”

Informal adjudication is agency decisionmaking without trial-like hearings—common in licensing decisions. The court’s key point is that informal adjudication is ill-suited as a vehicle for creating sweeping, prospective, binding standards for everyone else.

6. “Vacatur and remand” under APA § 706

When a court “sets aside” agency action, it nullifies the challenged action (here, the MDO) and sends the matter back to the agency to proceed lawfully. The court treats vacatur/remand as an equitable APA remedy and distinguishes it from a “universal injunction” discussed in Trump v. CASA.

V. Conclusion

The Fifth Circuit’s central contribution is procedural: FDA may not impose a broadly binding, outcome-determinative “comparative efficacy” evidentiary standard through informal adjudication while avoiding APA notice-and-comment. Even after Wages and VDX Distro narrowed substantive challenges, the court holds the APA question remained open—and answers it by treating the comparative efficacy standard as a substantive rule adopted unlawfully.

The decision is a pointed reaffirmation that administrative legitimacy depends not only on public-health ends, but on lawful means: when an agency effectively changes the rules of the game for an industry at scale, the APA’s participatory procedures are not optional.