Comparative-Efficacy PMTA Denials Require APA Notice-and-Comment: Fifth Circuit Treats FDA’s ENDS Standard as a Substantive Rule

1. Introduction

This consolidated Fifth Circuit decision reviews multiple marketing denial orders (“MDOs”) issued by the Food & Drug Administration (“FDA”) under the Family Smoking Prevention and Tobacco Control Act (“TCA”). The petitioners are manufacturers and retailers of electronic nicotine delivery systems (“ENDS”) and related products (including flavored e-liquids). The respondents are the FDA and related federal officials.

The central dispute concerns the FDA’s use of a “comparative-efficacy standard” in premarket tobacco product applications (“PMTAs”)—i.e., an approach that effectively demands robust evidence (often framed as randomized controlled trials (“RCTs”) or longitudinal cohort studies) comparing flavored products to tobacco-flavored products to show adult cessation benefits sufficient to outweigh youth initiation risks.

After the Supreme Court’s decision in FDA v. Wages & White Lion Invs., L.L.C., 604 U.S. 542 (2025) (“Wages”), many common challenges to flavored- პროდუქ denials (notably “change-in-position” arguments for fruit/candy/dessert flavors) were narrowed or foreclosed. The Fifth Circuit therefore centered on a question explicitly reserved in prior decisions: whether the FDA’s comparative-efficacy standard is a substantive rule that must be adopted through the Administrative Procedure Act’s (“APA”) notice-and-comment rulemaking process rather than being implemented via informal adjudication in individual MDOs.

2. Summary of the Opinion

• Relief granted: The court granted the petitions for review, vacated the challenged MDO(s), and remanded for further proceedings.
• Scope narrowed by precedent: The court treated petitioners’ arguments that FDA acted arbitrarily and capriciously by changing position (as to non-menthol sweet flavors) as foreclosed by Wages, and treated the TCA “tobacco product standard” rulemaking theory as foreclosed by VDX Distro, Inc. v. FDA, 179 F.4th 356 (5th Cir. 2026).
• Key holding (APA procedure): The FDA violated the APA by effectively promulgating a binding, prospective, generally applicable comparative-efficacy requirement through informal adjudication, without notice-and-comment.
• Venue: The court held venue was proper even where a co-petitioner’s principal place of business was outside the Fifth Circuit, relying on circuit precedent allowing venue when at least one joint petitioner is properly venued, and distinguishing Trump v. CASA, 606 U.S. 831 (2025).
• What the court did not decide: The panel declined to reach whether FDA was arbitrary and capricious in applying the comparative-efficacy standard to menthol, tobacco-flavored, or zero-nicotine products, resting instead on the procedural APA defect.

3. Analysis

3.1 Precedents Cited (and how they shaped the outcome)

A. The Supreme Court’s framework and its “reserved question”

• FDA v. Wages & White Lion Invs., L.L.C., 604 U.S. 542 (2025):
  • Influence: The panel treated Wages as foreclosing the claim that FDA unlawfully changed position about what evidence may be demanded for non-tobacco sweet flavors (fruit/candy/dessert). The court also relied on Wages for the baseline proposition that the TCA’s APPH inquiry is “inherently comparative,” legitimizing comparative reasoning as a concept.
  • Why it mattered here: Critically, the Fifth Circuit emphasized that Wages expressly did not decide whether the FDA’s approach violated other APA/TCA provisions requiring notice-and-comment; Wages “express[ed] no view” on that issue. The panel treated this as permission—indeed an “invitation”—to decide the APA procedural question.
• FDA v. R.J. Reynolds Vapor Co., 606 U.S. 226 (2025):
  • Influence: Used primarily on standing/venue context: the Supreme Court recognized a retailer can be sufficiently injured by an MDO to petition for review, while reserving whether each joint petitioner must independently establish venue under the TCA.
  • Why it mattered here: The Fifth Circuit filled that gap using its own venue precedents (below).
• Trump v. CASA, 606 U.S. 831 (2025):
  • Influence: The FDA invoked CASA to suggest remedies should be limited to plaintiffs’ injuries and to question joint-petitioner venue. The Fifth Circuit distinguished CASA as a decision about universal injunctions and “virtual representation,” whereas NicQuid was an “actually present party” seeking APA vacatur and remand.

B. Fifth Circuit building blocks: substantive-rule doctrine and ENDS context

• R.J. Reynolds Vapor Co. v. FDA, 65 F.4th 182 (5th Cir. 2023):
  • Influence: This was the panel’s doctrinal anchor. The court treated R.J. Reynolds Vapor Co. v. FDA as establishing that the comparative-efficacy standard functions as a substantive rule when it binds agency staff, broadly affects regulated parties, and constrains discretion—thereby triggering APA notice-and-comment and due process concerns.
  • Key move: Although Wages abrogated parts of R.J. Reynolds on “change-in-position,” this panel held the “substantive rule” analysis survived and remained binding circuit precedent.
  • Practical role: The court repeatedly echoed R.J. Reynolds’ characterization that this was “not a close call” as an APA procedure violation.
• VDX Distro, Inc. v. FDA, 179 F.4th 356 (5th Cir. 2026):
  • Influence: The panel treated VDX Distro, Inc. v. FDA as foreclosing the argument that comparative efficacy is a TCA-defined “tobacco product standard” requiring the TCA’s rulemaking procedure.
  • Why it didn’t control: The panel highlighted VDX Distro’s express disclaimer (footnote) leaving open the APA notice-and-comment question—making room for this decision’s APA holding.
• VDX Distro, Inc. v. FDA, 179 F.4th 356, 360 (5th Cir. 2026) (as referenced for the label “comparative-efficacy standard”):
  • Influence: Provided the Fifth Circuit’s recent vocabulary and framing for the FDA’s evidentiary approach.

C. The Fifth Circuit’s APA “binding effect” tests

• Texas v. EEOC, 933 F.3d 433 (5th Cir. 2019) (quoting Syncor Int'l Corp. v. Shalala, 127 F.3d 90 (D.C. Cir. 1997)):
  • Influence: Supplied the core test: whether the agency intends to bind itself; whether the rule has binding effect and restricts discretion.
• Texas v. United States, 809 F.3d 134 (5th Cir. 2015):
  • Influence: Reinforced the court’s skepticism of agency labels and focus on whether the policy “severely restricts” discretion; served as an analogy for high approval/denial uniformity as evidence of binding rules.
• City of Arlington v. FCC, 668 F.3d 229 (5th Cir. 2012):
  • Influence: Used for the principle that a substantive rule affects “broad classes of unspecified individuals,” supporting the court’s view that the comparative-efficacy standard’s mass application signals rulemaking, not mere case-by-case adjudication.
• Phillips Petroleum Co. v. Johnson, 22 F.3d 616 (5th Cir. 1994):
  • Influence: Bolstered the “substance over label” approach: what matters is what the agency does, not what it calls it.

D. Rulemaking vs adjudication (and limits on Chenery discretion)

• SEC v. Chenery Corp., 332 U.S. 194 (1947) (“Chenery II”):
  • Influence: The FDA leaned on SEC v. Chenery Corp. for the general idea that agencies may develop standards through adjudication. The Fifth Circuit accepted this starting point but held Chenery’s rationale did not fit a rigid, across-the-board requirement applied to vast numbers of parties.
• NLRB v. Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267 (1974):
  • Influence: The panel used NLRB v. Bell Aerospace Co. Div. of Textron, Inc. to underscore that adjudication-based policymaking is tolerable where affected parties receive a “full opportunity to be heard”—a procedural formality absent from the FDA’s informal PMTA denials.
• United States v. Mead Corp., 533 U.S. 218 (2001):
  • Influence: Provided an administrative-law sensibility: action with the “effect of law” usually comes with more formal procedures. The panel used this to argue that substantive standards should not be minted via “one-off” informal adjudications.
• Neustar, Inc. v. FCC, 857 F.3d 886 (D.C. Cir. 2017):
  • Influence: Offered a contrast case where informal adjudication was appropriate because the decision lacked hallmarks of legislative rulemaking. The panel used it to argue the FDA’s comparative-efficacy requirement is the opposite: generally applicable and binding.
• Brown-Forman Corp. v. NLRB, 169 F.4th 646 (6th Cir. 2026):
  • Influence: Persuasive authority supporting the proposition that agencies may not use adjudication to create a rigid, widely applicable rule not derived from case-specific facts and not needed to resolve the parties’ dispute. The panel found the FDA’s comparative-efficacy approach resembled the impermissible adjudicatory rulemaking condemned there.

E. Due process and “fair warning”

• Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012):
  • Influence: Used for the principle that regulated parties must have fair warning of what is required before being sanctioned or denied.
• Mathews v. Eldridge, 424 U.S. 319 (1976); Board of Regents of State Colls. v. Roth, 408 U.S. 564 (1972):
  • Influence: Framed the due-process stakes where agency procedure threatens vested commercial/property interests.

F. Venue authorities

• National Association of Private Fund Managers v. SEC, 103 F.4th 1097 (5th Cir. 2024):
  • Influence: Treated as controlling for the proposition that, under a similarly worded venue statute, venue can be proper for all petitioners when one petitioner is properly venued.
• Global Van Lines, Inc. v. ICC, 691 F.2d 773 (5th Cir. 1982):
  • Influence: Supported the joint-petitioner venue principle in administrative review proceedings.

3.2 Legal Reasoning

A. What the court treated as settled

The Fifth Circuit began by narrowing the battlefield. It recognized that after Wages it could not accept the petitioners’ broad “arbitrary and capricious change-in-position” attack (at least for fruit/candy/dessert flavors) and that after VDX Distro, Inc. v. FDA it could not treat comparative efficacy as a TCA-defined “tobacco product standard.” These holdings forced the case onto a different axis: the APA’s procedural constraints on how binding standards may be made.

B. The comparative-efficacy standard as a “substantive rule” under Fifth Circuit tests

Applying Texas v. EEOC, Texas v. United States, and City of Arlington v. FCC, the panel found three markers of substantive rulemaking:

• General applicability to an unbounded class: The standard was said to apply across-the-board to a massive present and future pool of PMTA applicants. The panel treated the scale of denials (over one million MDOs for millions of products) as evidence the FDA was not resolving truly individualized disputes.
• Binding effect and restricted discretion: Drawing on R.J. Reynolds Vapor Co. v. FDA, the panel reasoned that internal memoranda (including late-filed 2022 memoranda) and the agency’s consistent practice effectively bound reviewers to deny applications lacking comparative-efficacy evidence, disabling genuine discretion.
• Prospective policy formation “behind closed doors”: The panel emphasized that the standard appeared to be formulated prospectively through internal leadership deliberations and then implemented via denial orders—functionally substituting informal adjudication for the APA’s information-forcing notice-and-comment process.

C. Why Chenery II did not save the FDA

The FDA invoked SEC v. Chenery Corp. to justify policymaking through adjudication. The panel countered that Chenery’s reasons for adjudication—unforeseeable problems, insufficient agency experience, or problems too varying to capture in a general rule—did not match a mature, repeatedly applied evidentiary requirement used to decide vast numbers of applications.

The panel also leaned on Brown-Forman Corp. v. NLRB to argue that adjudication cannot be used to impose rigid, generally applicable rules not anchored in case-specific facts and not tailored to resolving the immediate dispute.

D. A further step: skepticism that “informal adjudication” can create lawlike substantive rules

Beyond characterizing comparative efficacy as substantive, the court questioned whether a substantive rule can ever be created through the FDA’s type of informal adjudication (licensing-style PMTA denials) rather than through notice-and-comment rulemaking or procedures akin to formal adjudication. It contrasted the FDA’s process with adjudicatory regimes like the NLRB’s discussed in NLRB v. Bell Aerospace Co. Div. of Textron, Inc., where affected parties have a fuller opportunity to be heard.

E. Remedy and remand instruction

Because the procedural defect was the adoption of a substantive rule without notice-and-comment, the panel vacated the MDOs and remanded, directing the FDA either to rethink, to re-adopt the standard through APA-compliant rulemaking, or to proceed otherwise consistent with the opinion—while taking no position on what the FDA ultimately should do on the merits.

3.3 Impact

A. Immediate operational consequences for FDA PMTA practice

• Rulemaking pressure: If the FDA intends to maintain an approach that functions as a near-necessary requirement (comparative switching benefits for flavored products versus tobacco-flavored comparators), this decision pushes the agency toward formal notice-and-comment rulemaking—creating a record, responding to comments, and defining evidentiary expectations openly.
• Increased vulnerability of MDOs relying on “check-the-box” logic: Petitioners in future cases will likely use this precedent to attack denials that appear driven by a rigid comparative-efficacy template rather than an individualized APPH assessment.
• Menthol and “special handling” claims: The case highlights internal memoranda relating to menthol-flavored ENDS. Even though the panel did not reach the substantive menthol merits, the procedural holding gives challengers a potent tool against menthol-related denials where the record suggests a binding, memo-driven standard.

B. Doctrinal consequences in administrative law

• Substantive-rule policing via binding-effect analysis: The opinion reinforces the Fifth Circuit’s willingness (seen in R.J. Reynolds Vapor Co. v. FDA, Texas v. EEOC, and Texas v. United States) to treat nominal “adjudicatory” practice as de facto rulemaking when it binds staff and broadly determines private rights.
• Potential circuit tension: The panel’s skepticism about using informal adjudication to create lawlike substantive standards—paired with reliance on Brown-Forman Corp. v. NLRB—may deepen inter-circuit debates about the outer limits of Chenery discretion.
• Remedy framing post-CASA: By distinguishing Trump v. CASA and characterizing APA “set aside” as an equitable remedy (with citations including Acheson Hotels, LLC v. Laufer and Salazar v. Buono), the opinion contributes to ongoing disputes about the scope and nature of vacatur under 5 U.S.C. § 706(2).

C. Practical consequences for industry and public health regulation

• More predictable evidentiary expectations (if FDA proceeds via rulemaking): Notice-and-comment could clarify what forms of evidence (RCTs, cohorts, real-world evidence, surveys) suffice and under what conditions—reducing “surprise denials” and associated due process “fair warning” concerns (cf. Christopher v. SmithKline Beecham Corp.).
• Potential slowdown and transition risk: Rulemaking takes time, potentially delaying enforcement uniformity in the flavored ENDS market. The opinion implicitly accepts that procedural regularity can constrain even urgent public-health enforcement.

4. Complex Concepts Simplified

• PMTA (Premarket Tobacco Product Application): A submission required by the TCA to obtain FDA authorization before marketing a “new tobacco product,” including ENDS products.
• MDO (Marketing Denial Order): The FDA’s refusal to authorize marketing of a product; it effectively bars lawful marketing of the product absent further agency action.
• APPH (Appropriate for the Protection of the Public Health): The statutory standard requiring the FDA to weigh population-level risks and benefits, including youth initiation risk and adult cessation likelihood. (21 U.S.C. § 387j(c)(4).)
• Comparative-efficacy standard: The FDA’s approach requiring evidence that flavored ENDS confer adult cessation/switching benefits sufficient to outweigh youth risks, often framed as requiring robust comparative data versus tobacco-flavored products.
• Substantive (legislative) rule vs interpretive rule/policy statement: A substantive rule binds the agency and regulated parties and effectively has “the force of law,” so it generally requires APA notice-and-comment. An interpretive rule merely explains existing law; a policy statement leaves genuine discretion.
• Notice-and-comment rulemaking: The APA process (5 U.S.C. § 553) requiring public notice of a proposed rule and an opportunity for public comment, with the agency then considering and responding to significant comments.
• Informal vs formal adjudication: Informal adjudication is agency decisionmaking without trial-like hearing requirements; formal adjudication (5 U.S.C. §§ 554, 556, 557) involves more structured procedures. The court suggested that making binding, lawlike standards via informal adjudication is especially problematic.
• Vacatur and remand: The court “sets aside” the agency action and sends the matter back for further proceedings consistent with the opinion.

5. Conclusion

The Fifth Circuit’s decision in Lead by Sales, L.L.C. v. FDA establishes a procedural boundary for FDA tobacco regulation: when the agency’s comparative-efficacy approach functions as a binding, generally applicable, prospective requirement that constrains reviewer discretion and effectively dictates outcomes for large classes of PMTA applicants, it is a substantive rule that must be adopted through APA notice-and-comment rather than via informal adjudication through MDOs and internal memoranda.

The immediate result is vacatur of the challenged denials and a remand that forces the FDA to choose: undertake rulemaking to legitimize the comparative-efficacy regime, recalibrate it, or proceed on other lawful grounds. More broadly, the opinion signals that even in a heavily data-driven public health domain, the Fifth Circuit will police the line between adjudication and rulemaking when agency practice appears to create “law” without the APA’s participatory safeguards.