FDA’s “Comparative-Efficacy” PMTA Requirement Is a Substantive Rule Requiring APA Notice-and-Comment (and Cannot Be Imposed via Informal Adjudication)

Introduction

In Breeze Smoke, L.L.C. v. FDA (consolidated with multiple ENDS manufacturer/retailer petitions), the Fifth Circuit reviewed FDA marketing denial orders (“MDOs”) issued under the Family Smoking Prevention and Tobacco Control Act (“TCA”) to applicants seeking authorization to market electronic nicotine delivery systems (“ENDS”) via premarket tobacco product applications (“PMTAs”).

The central dispute was not whether FDA may consider comparative risks and benefits under the TCA’s “appropriate for the protection of the public health” (“APPH”) standard, but whether FDA effectively transformed a “comparative efficacy” expectation into a binding, across-the-board evidentiary requirement—allegedly enforced through internal memoranda and uniform denials—without adopting that requirement through the Administrative Procedure Act (“APA”) notice-and-comment process.

The petitioners (including manufacturers and retailers) also faced threshold procedural questions about venue—particularly whether an out-of-circuit co-petitioner could proceed in the Fifth Circuit when at least one co-petitioner had its principal place of business in the circuit, and whether Trump v. CASA constrained the scope of relief.

Summary of the Opinion

The Fifth Circuit granted the petitions for review, vacated the MDOs, and remanded. It held that FDA’s “comparative efficacy standard” (as applied) is a substantive rule that required APA notice-and-comment rulemaking. By developing and deploying the standard through informal adjudication (MDOs) while treating it as effectively binding and broadly applicable, FDA “sidestepped” the APA’s procedural safeguards.

The court emphasized that 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 (change-in-position and the claim that the standard is a TCA “tobacco product standard”), but both decisions had reserved the distinct question whether APA notice-and-comment was required. The panel accepted that invitation and resolved the APA issue.

Analysis

Precedents Cited

1) TCA APPH authority and comparative assessment

  • FDA v. Wages & White Lion Invs., L.L.C., 604 U.S. 542 (2025): The Supreme Court upheld FDA’s ability to apply a comparative-efficacy type requirement in the APPH calculus for flavored (non-tobacco) vapes and rejected the Fifth Circuit’s earlier “surprise change” framing. Critically here, the Court expressly declined to reach APA notice-and-comment challenges.
  • Wages and White Lion Invs., L.L.C. v. FDA, 90 F.4th 357 (5th Cir. 2024) (en banc): The Fifth Circuit’s earlier position was reversed by the Supreme Court, narrowing the space for “change in position” and fair-notice theories (at least as to non-menthol flavored products).

2) TCA “tobacco product standard” vs. APA rulemaking

  • VDX Distro, Inc. v. FDA, 179 F.4th 356 (5th Cir. 2026): Foreclosed the argument that the comparative efficacy standard is a statutory “tobacco product standard” requiring the TCA’s specific notice-and-comment procedure. But it reserved the separate APA notice-and-comment question (noting petitioners there did not press it).

3) Fifth Circuit doctrine on “substantive rules” and binding effect

  • R.J. Reynolds Vapor Co. v. FDA, 65 F.4th 182 (5th Cir. 2023): The cornerstone for this panel’s APA analysis. Although aspects were abrogated by Wages regarding change-in-position, the panel treated R.J. Reynolds as still binding on the “substantive rule” characterization—especially where internal agency memoranda and uniform application indicated a de facto rule of decision.
  • 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): Provided the test focusing on whether an agency intends to bind itself to a legal position and whether a rule prospectively applies to broad, unspecified classes.
  • Texas v. United States, 809 F.3d 134 (5th Cir. 2015): Reinforced the “binding effect” inquiry—courts look to what the agency does in fact, not its label; also highlighted that high uniformity of outcomes can evidence a binding rule.
  • City of Arlington v. FCC, 668 F.3d 229 (5th Cir. 2012): Used for the proposition that a substantive rule affects broad classes of unspecified individuals and may amount to “de facto rulemaking.”
  • Phillips Petroleum Co. v. Johnson, 22 F.3d 616 (5th Cir. 1994): Quoted for the principle that agency labeling is not dispositive; courts examine the practical effect.

4) Adjudication vs. rulemaking (and limits on Chenery discretion)

  • SEC v. Chenery Corp., 332 U.S. 194 (1947) (Chenery II): Recognizes agencies may choose between rulemaking and adjudication absent statutory constraints. The panel distinguished Chenery II’s justifications (unforeseeability, lack of experience, specialized problems) as inconsistent with FDA’s mass, uniform use of the comparative-efficacy requirement.
  • NLRB v. Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267 (1974): While approving adjudicative development of standards, the Court noted affected parties are “accorded a full opportunity to be heard”—a feature the Fifth Circuit found missing from FDA’s informal MDO practice.
  • United States v. Mead Corp., 533 U.S. 218 (2001): Cited for the idea that “action with the effect of law” is typically associated with relatively formal procedures—supporting the panel’s skepticism that informal adjudication can be used to promulgate a broadly binding substantive rule.
  • Neustar, Inc. v. FCC, 857 F.3d 886 (D.C. Cir. 2017): Used by contrast—informal adjudication is appropriate when the action lacks the characteristics of legislative rulemaking.
  • Brown-Forman Corp. v. NLRB, 169 F.4th 646 (6th Cir. 2026): Persuasive authority limiting adjudication-based policymaking where the agency announces a rigid, generally applicable rule not derived from case-specific facts or needed to resolve a particular dispute.

5) Venue and remedial scope: co-petitioners and CASA

  • FDA v. R.J. Reynolds Vapor Co., 606 U.S. 226 (2025): Confirmed retailers can be injured by MDOs, but reserved whether each joint petitioner must independently establish venue under 21 U.S.C. § 387l(a)(1).
  • Trump v. CASA, 606 U.S. 831 (2025): Limited universal injunctions as beyond equitable authority absent congressional authorization. The panel distinguished CASA because the relief sought (APA vacatur and remand) was directed to parties actually before the court, not “virtual” nonparties.
  • National Association of Private Fund Managers v. SEC, 103 F.4th 1097 (5th Cir. 2024) and Global Van Lines, Inc. v. ICC, 691 F.2d 773 (5th Cir. 1982): Supported venue for all petitioners when at least one petitioner properly satisfies the statute’s circuit-residence/principal-place requirement in a joint petition.
  • Acheson Hotels, LLC v. Laufer, 601 U.S. 1 (2023) (Jackson, J., concurring) (quoting Salazar v. Buono, 559 U.S. 700 (2010)): Cited in the opinion’s discussion of vacatur as an equitable remedy (while acknowledging academic disagreement).

6) Due process and “fair warning” themes

  • Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012): Quoted for the requirement that regulated parties receive “fair warning” of what an agency requires or prohibits before adverse action.
  • Mathews v. Eldridge, 424 U.S. 319 (1976) and Board of Regents of State Colls. v. Roth, 408 U.S. 564 (1972): Invoked to situate the procedural-protection concerns when property interests are at stake.
  • Michigan v. EPA, 576 U.S. 743 (2015) (quoting Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 (1998)): Used to ground the broader point that APA procedures promote “reasoned decisionmaking.”
  • Ohio v. EPA, 603 U.S. 279 (2024): Cited for the obligation to respond in a reasoned way to regulated parties in procedural frameworks that demand it.

Legal Reasoning

1) What the court treated as “settled” after Wages and VDX Distro

The panel accepted that FDA v. Wages & White Lion Invs., L.L.C. foreclosed the argument that FDA acted arbitrarily and capriciously merely by requiring strong evidence (including comparative evidence) for flavored products, at least in the non-menthol context addressed there. It also treated VDX Distro, Inc. v. FDA as foreclosing the claim that the comparative efficacy standard is a TCA-defined “tobacco product standard” requiring the TCA’s specific notice-and-comment pathway.

Crucially, however, the panel emphasized that both Wages and VDX Distro reserved the APA notice-and-comment question—opening the door for this decision.

2) The comparative efficacy standard as a “substantive rule” under Fifth Circuit tests

Applying Texas v. EEOC, Texas v. United States, City of Arlington v. FCC, and R.J. Reynolds Vapor Co. v. FDA, the court held the comparative efficacy standard bears the hallmarks of a substantive (legislative) rule:

  • Broad, prospective effect: It applies to “an unbounded set” of current and future PMTA applicants, not merely the parties in a single adjudication, implicating commercial and property interests.
  • Binding effect in practice: The record—particularly internal memoranda and the massive volume of denials—suggested FDA reviewers were not genuinely free to exercise discretion; rather, the standard operated as a “check-the-box” gatekeeping requirement (e.g., deny if no RCT/longitudinal cohort or similarly “robust” comparative evidence).
  • Imposition of obligations: The standard functionally required applicants to generate comparative-efficacy evidence of flavored products versus tobacco-flavored products, effectively raising the evidentiary burden beyond what many applicants understood from earlier guidance.

3) Why Chenery II did not save FDA here

The panel did not deny that agencies often may choose adjudication over rulemaking under SEC v. Chenery Corp. (Chenery II). Instead, it held the FDA’s use of informal adjudication here conflicted with the rationales that justify Chenery discretion:

  • The youth-initiation and flavor-appeal concerns were foreseeable and central, not an unexpected “problem[]” arising in an isolated case.
  • FDA’s enormous experience (millions of applications; over a million denials; a small set of approvals) undercut any claim of insufficient experience to warrant rulemaking.
  • The uniformity and scale suggested the agency was not evolving standards case-by-case but instead applying a “hard and fast” rule.

The court also found persuasive the Sixth Circuit’s critique in Brown-Forman Corp. v. NLRB of adjudication used to create rigid, generally applicable rules not derived from case-specific facts.

4) The court’s additional structural point: informal adjudication is the wrong vehicle for substantive rules

A notable feature of the opinion is its strong skepticism that an agency may use informal adjudication (here, licensing-like MDO denials) to promulgate a substantive rule with force-of-law effect. The panel reasoned that the APA’s design ties law-like pronouncements to comparatively formal procedures (notice-and-comment rulemaking or formal adjudication), invoking United States v. Mead Corp. and contrasting NLRB v. Bell Aerospace Co. Div. of Textron, Inc., where affected parties had fuller opportunities to be heard.

5) Venue and CASA

On venue, the panel held that a joint petition may proceed in the Fifth Circuit when at least one co-petitioner satisfies the TCA venue provision, relying on National Association of Private Fund Managers v. SEC and Global Van Lines, Inc. v. ICC. It distinguished Trump v. CASA on the ground that this was not a nonparty “universal injunction” scenario; NicQuid was an actual party seeking APA vacatur and remand.

Impact

  • Procedural reset for FDA’s ENDS evidentiary regime (Fifth Circuit): FDA cannot maintain a binding, generally applicable comparative-efficacy requirement—especially one tantamount to a de facto ban—unless it is adopted through APA notice-and-comment (or otherwise through sufficiently formal procedures consistent with this opinion).
  • Strategic shift to rulemaking or revised adjudicatory practice: On remand, FDA must either “rethink” the rule, re-adopt it via notice-and-comment (with an “information-forcing” public process), or pursue other proceedings consistent with the opinion.
  • Expanded litigation focus from “surprise” to “procedure”: After Wages diminished change-in-position arguments, this decision makes APA procedural challenges a primary battleground where internal agency documents and uniform denial patterns suggest binding effect.
  • Potential nationwide influence: Though binding only within the Fifth Circuit, the opinion’s framing—particularly its doubt about informal adjudication as a vehicle for substantive rules—may be cited in other circuits reviewing PMTA denials and guidance-driven enforcement.
  • Substantive outcomes left open: The court expressly did not decide whether the FDA was arbitrary and capricious as to menthol, tobacco-flavored, or zero-nicotine products; the key holding is procedural, not a merits approval of the products.

Complex Concepts Simplified

  • PMTA / MDO: A PMTA is the application to market a “new” tobacco product; an MDO is FDA’s denial, which effectively blocks lawful marketing.
  • APPH standard: “Appropriate for the protection of the public health” requires FDA to assess population-level risks and benefits, including youth initiation versus adult switching/cessation.
  • Comparative efficacy standard: FDA’s approach requiring evidence that a flavored product’s cessation/switching benefits to adults outweigh youth risks, often framed as needing robust comparisons to tobacco-flavored products (lower youth appeal).
  • Substantive (legislative) rule vs. guidance: A substantive rule effectively binds conduct or decisionmaking and has force-of-law effect; guidance (policy statements/interpretive rules) is supposed to leave decisionmakers discretion and not impose new obligations.
  • Notice-and-comment rulemaking: The APA process requiring an agency to propose a rule publicly, solicit comments, consider them, and then issue a final rule with a reasoned explanation—designed to improve legitimacy, evidence quality, and accountability.
  • Informal vs. formal adjudication: Informal adjudication is agency decisionmaking without trial-type procedures; formal adjudication has hearing-like safeguards. The court viewed substantive rule creation as ill-suited to informal adjudication.
  • Vacatur and remand: The court “sets aside” the agency action and returns the matter to the agency to proceed lawfully; the court did not dictate the substantive outcome.

Conclusion

The Fifth Circuit’s core contribution is procedural and structural: when an agency’s evidentiary “standard” operates as a binding, broadly applicable, prospective requirement—especially one producing uniform denials at massive scale—it is a substantive rule that must be adopted through APA notice-and-comment, not imposed through informal adjudication. The court therefore vacated the MDOs and remanded, requiring FDA to either lawfully promulgate (or reconsider) the comparative efficacy regime or pursue other proceedings consistent with APA safeguards.