Syncor Intl Corp v. Shalala, Donna E.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 11, 1997 Decided October 28, 1997

No. 96-5371

Syncor International Corporation, et al.,

Appellants

v.

Donna E. Shalala,

Secretary of Health and Human Services, et al.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(95cv1627)

Alvin J. Lorman argued the cause for appellants, with

whom Gregory R. Firehock was on the briefs.

Jay I. Bratt, Attorney, United States Department of Jus-

tice, argued the cause for appellees, with whom Frank W.

Hunger, Assistant Attorney General, and Eric H. Holder, Jr.,

U.S. Attorney at the time the briefs were filed, were on the

brief.

Before: Silberman, Rogers and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: Appellants Syncor International

Corporation, American College of Nuclear Physicians, Society

of Nuclear Medicine, and American Pharmaceutical Associa-

tion (collectively, Syncor) appeal the district court's decision

that FDA's 1995 "Notice," entitled "Regulation of Positron

Emission Tomography Radiopharmaceutical Drug Products;

Guidance; Public Workshop," was a "non-substantive" rule

not subject to notice and comment rulemaking. We reverse.

I.

Positron emission tomography (PET) is a diagnostic imag-

ing method that uses a subset of radioactive pharmaceuticals,

called PET drugs, to determine biochemistry, physiology,

anatomy, and pathology within various body organs and

tissues by measuring the concentration of radioactivity in a

targeted area of the body. The active component of PET

drugs is a positron-emitting isotope.1 This component has a

short half-life, so the drug remains effective for only brief

periods of time. As a consequence, PET drugs are not

manufactured by pharmaceutical companies; instead, they

are prepared by physicians and pharmacists operating accel-

erators in facilities known as nuclear pharmacies, which most

often are part of major teaching hospitals or their adjacent

universities, and always are located very near to the place

where the PET drug will be administered to patients. These

nuclear pharmacists compound the isotope with a chemical

__________

1 Positrons are positively charged subatomic particles with the

same mass and magnitude of charge as electrons, and are regarded

as the antiparticle of negatively charged electrons because the two

mutually annihilate each other when brought together. Isotopes

are atoms of a certain element with an atypical number of neutrons

in their nuclei. An isotope is positron-emitting when it is neutron

deficient.

solution called a substrate. The substrate is used to carry

the isotope to the targeted organ or tissue, and the precise

solution used depends on the targeted area. For example, a

nuclear pharmacist might combine an isotope with a glucose

substrate if the brain was being targeted, since the brain is

an area of high glucose uptake. In part for this reason, PET

drugs are compounded pursuant to a prescription.

On February 25, 1995, FDA announced that PET radio-

pharmaceuticals "should be regulated" under the drug provi-

sions of the Federal Food, Drug, and Cosmetic Act.2 In this

publication, labeled a "Notice," and referred to alternatively

in its text as "guidance" and a "policy statement," FDA

indicated that it would require PET "radiopharmaceutical

manufacturers" to comply with the adulteration provision of

s 501(a)(2)(B) of the Act (drugs are considered adulterated

unless manufactured in conformance with current good manu-

facturing practices); the misbranding provision of s 502 of

the Act (drugs are considered misbranded if the product

labeling is false or misleading, if the drug is dangerous to

health when used as suggested in the labeling, or if the

labeling fails to include certain required information); the

new drug provision of s 505 of the Act (new drugs must be

the subject of approved new drug applications or abbreviated

new drug applications before marketing); and the registra-

tion and listing provisions of s 510 of the Act (drug establish-

ment must register with FDA, and file a list of all drugs that

it makes or processes). See Regulation of Positron Emission

Tomography Radiopharmaceutical Drug Products; Guidance;

Public Workshop, 60 Fed. Reg. 10594, 10595 (1995).

FDA indicated that its 1995 publication was to supersede

its prior 1984 publication--which had been directed at all

nuclear pharmacies, not just those compounding PET radio-

pharmaceuticals--entitled "Nuclear Pharmacy Guideline;

Criteria for Determining When to Register as a Drug Estab-

lishment." The 1984 Guideline had unequivocally stated that

nuclear pharmacists who operated an accelerator to produce

__________

2 The drug provisions of the Federal Food, Drug, and Cosmetic

Act are codified at 21 U.S.C. s 351 et seq. (1994).

radioactive drugs to be dispensed under a prescription--

which precisely describes the process by which nuclear phar-

macies compound PET radiopharmaceuticals--were not re-

quired to register under s 510 of the Act. The Guideline also

indicated that if a nuclear pharmacist was not required to

register, that other of the Act's requirements, including the

new drug provision and compliance with current good manu-

facturing practices, would not apply.

Syncor filed suit in the district court challenging FDA's

1995 publication. Syncor brought three claims, alleging that:

(1) FDA lacked jurisdiction over PET drugs under the new

drug provision of s 505 of the Act, which requires premarket

approval for drugs introduced or delivered for introduction

into interstate commerce, because PET drugs do not move in

interstate commerce; 3 (2) FDA violated the Tenth Amend-

ment to the United States Constitution by regulating pharma-

__________

3 Elaborating its statutory argument, Syncor claims that FDA's

theory for why it can subject nuclear pharmacies compounding PET

radiopharmaceuticals to the new drug provision of s 505 of the

Act--that if any ingredient of a compounded pharmaceutical has

moved in interstate commerce, the finished compound is itself

introduced or delivered for introduction into interstate commerce--

renders all compounding activities by pharmacists subject to s 505's

requirements. That result, according to Syncor, is also contrary to

s 510(g)(1) of the Act, which specifically exempts pharmacies in

compliance with "applicable local laws regulating the practice of

pharmacy" and "regularly engaged in dispensing prescription

drugs, upon prescriptions of [licenced] practitioners," from the

registration and drug listing requirements of s 510 and the inspec-

tion provisions of s 704(a). See 21 U.S.C. s 360(g)(1) (1994). And,

although pharmacists are not specifically exempt from other provi-

sions of the Act, FDA has largely pursued a "hands-off" approach

towards pharmacists that meet the requirements of the s 510(g)(1)

exemption from registration, listing, and inspection. Syncor sug-

gests that if FDA may define "the scope of the regular course of the

practice of the profession of pharmacy" so as not to include PET

compounding activities, that it may do so for all pharmacists'

compounding activities, whether nuclear or not, effectively circum-

venting the statutory exemption. FDA's not entirely satisfactory

response is that it will exercise its broad jurisdiction wisely.

cies in the absence of clear congressional authorization to do

so, since pharmacy is an area traditionally reserved for state

regulation; and (3) FDA violated the Administrative Proce-

dure Act's requirement that an agency engaged in rulemak-

ing give notice of its proposed rulemaking to the public, 5

U.S.C. s 553(b) (1994), and "give interested persons an op-

portunity to participate in the rule making through submis-

sion of written data, views, or arguments." 5 U.S.C. s 553(c)

(1994). The district judge granted summary judgment in

FDA's favor on all three claims. We consider the APA claim

first since if notice and comment are required we think it

prudent to defer deciding the other two issues which presum-

ably would be explored in a future rulemaking.

II.

The APA exempts from notice and comment interpretative

rules or general statements of policy. 5 U.S.C. s 553(b)(3)(A)

(1994). Before the district court the FDA characterized its

1995 publication as merely "guidance" (a general statement of

policy). The district judge disagreed, concluding that it was a

rule, but an interpretative one. Here, FDA concedes that the

publication is a "rule," and adopts the district court's conclu-

sion. Syncor still contends that the publication is a substan-

tive regulation.

We have long recognized that it is quite difficult to distin-

guish between substantive and interpretative rules. See Par-

alyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579, 587

(D.C. Cir. 1997); American Mining Congress v. Mine Safety

& Health Admin., 995 F.2d 1106, 1108-09 (D.C. Cir. 1993);

see also American Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1045

(D.C. Cir. 1987) ("spectrum between a clearly interpretive

rule and a clearly substantive one is a hazy continuum");

General Motors Corp. v. Ruckelshaus, 742 F.2d 1561, 1565

(D.C. Cir. 1984) (en banc) ("the distinction between legislative

and interpretative rules is enshrouded in considerable smog")

(citation omitted). Further confusing the matter is the ten-

dency of courts and litigants to lump interpretative rules and

policy statements together in contrast to substantive rules, a

tendency to which we have ourselves succumbed on occasion.

See Community Nutrition Inst. v. Young, 818 F.2d 943, 946

(D.C. Cir. 1987).4 That causes added confusion because in-

terpretative rules and policy statements are quite different

agency instruments. An agency policy statement does not

seek to impose or elaborate or interpret a legal norm. It

merely represents an agency position with respect to how it

will treat--typically enforce--the governing legal norm. By

issuing a policy statement, an agency simply lets the public

know its current enforcement or adjudicatory approach. The

agency retains the discretion and the authority to change its

position--even abruptly--in any specific case because a

change in its policy does not effect the legal norm. We thus

have said that policy statements are binding on neither the

public, see, e.g., Bechtel v. FCC, 10 F.3d 875, 878 (D.C. Cir.

1993); Pacific Gas & Elec. Co. v. FPC, 506 F.2d 33, 38-39

(D.C. Cir. 1974), nor the agency. See Vietnam Veterans of

Am. v. Secretary of the Navy, 843 F.2d 528, 537-39 (D.C. Cir.

1988). The primary distinction between a substantive rule--

really any rule--and a general statement of policy, then,

turns on whether an agency intends to bind itself to a

particular legal position. See United States Tel. Ass'n v.

FCC, 28 F.3d 1232, 1234 (D.C. Cir. 1994).

An interpretative rule, on the other hand, typically reflects

an agency's construction of a statute that has been entrusted

to the agency to administer. The legal norm is one that

Congress has devised; the agency does not purport to modify

__________

4 The majority in that case stated that it was considering the

question of whether an FDA pronouncement setting forth "action

levels" informing food producers of the permissible levels of aflatox-

ins in corn was a legislative rule or "nothing more than nonbinding

statements of agency enforcement policy." Community Nutrition

Inst., 818 F.2d at 946. But it also noted that FDA did not dispute

that its publication was a rule. Id. at 945 n.2. And, the third

judge, who concurred in part and dissented in part, characterized

the question as whether FDA's action levels constituted a legislative

or interpretative rule in a later case. See Alaska v. DOT, 868 F.2d

441, 445 (D.C. Cir. 1989).

that norm, in other words, to engage in lawmaking. To be

sure, since an agency's interpretation of an ambiguous statute

is entitled to judicial deference under Chevron,5 it might be

thought that the interpretative rule--particularly if it changes

a prior statutory interpretation as an agency may do without

notice and comment--is, in reality, a change in the legal

norm. Still, in such a situation the agency does not claim to

be exercising authority to itself make positive law. Instead,

it is construing the product of congressional lawmaking

"based on specific statutory provisions." See United Technol-

ogies Corp. v. EPA, 821 F.2d 714, 719 (D.C. Cir. 1987); see

also Connecticut Dep't of Children and Youth Servs. v. HHS,

9 F.3d 981, 984 (D.C. Cir. 1993) (interpretative rule "pur-

port[s] to define statutory terms"); National Latino Media

Coalition v. FCC, 816 F.2d 785 (D.C. Cir. 1987). That is why

we have said that "[t]he distinction between an interpretative

rule and substantive rule ... likely turns on how tightly the

agency's interpretation is drawn linguistically from the actual

language of the statute." Paralyzed Veterans, 117 F.3d at

588.6

We should note, in order to be complete (although this

variation is not implicated in the case before us), that an

interpretative rule can construe an agency's substantive reg-

ulation as well as a statute. See Paralyzed Veterans, 117

F.3d at 586; American Mining Congress, 995 F.2d at 1107-

08. In that event, the interpretative rule is, in a sense, even

more binding on the agency because its modification, unlike

a modification of an interpretative rule construing a statute,

will likely require a notice and comment procedure. Other-

wise, the agency could evade its notice and comment obli-

__________

5 Chevron U.S.A. Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837 (1984).

6 "If the statute ... to be interpreted is itself very general,

using terms like 'equitable' or 'fair,' and the 'interpretation' really

provides all the guidance, then the latter will more likely be a

substantive regulation," Paralyzed Veterans, 117 F.3d at 588, be-

cause then the agency's rule gives content to the legal norm in

question.

gation by "modifying" a substantive rule that was promul-

gated by notice and comment rulemaking. See Paralyzed

Veterans, 117 F.3d at 586.

A substantive rule has characteristics of both the policy

statement and the interpretative rule; it is certainly in part

an exercise of policy, and it is a rule. But the crucial

distinction between it and the other two techniques is that a

substantive rule modifies or adds to a legal norm based on

the agency's own authority. That authority flows from a

congressional delegation to promulgate substantive rules, to

engage in supplementary lawmaking. And, it is because the

agency is engaged in lawmaking that the APA requires it to

comply with notice and comment.

It is apparent to us, in light of the foregoing discussion,

that FDA's 1995 publication is not an interpretative rule. It

does not purport to construe any language in a relevant

statute or regulation; it does not interpret anything. In-

stead, FDA's rule uses wording consistent only with the

invocation of its general rulemaking authority to extend its

regulatory reach. See American Mining Congress, 995 F.2d

at 1112. The publication is entitled "Regulation of Positron

Emission Tomography Radiopharmaceutical Drug Products."

In the text, FDA explained that "as [PET] technology has

advanced, questions have been raised about the most appro-

priate approach to regulation of PET radiopharmaceuticals."

And then FDA stated, "[h]aving considered the available

information, including that presented to the agency at the

hearing and in written materials, FDA has concluded that

radiopharmaceuticals should be regulated under the drug

provisions of the Federal Food, Drug, and Cosmetic Act." 7

FDA made a careful, considered decision not to exercise

the full extent of its regulatory authority--whatever that may

be--over nuclear pharmacies in 1984. In its "Nuclear Phar-

__________

7 FDA did say that "facilities that manufacture PET radiophar-

maceuticals are not exempt from registration under s 1A207.10 [21

C.F.R. s 207.10 (1997)] because their activities do not fall within the

scope of the regular course of the profession of pharmacy," but it

does not claim that this statement made the rule interpretative.

macy Guideline; Criteria for Determining When to Register

as a Drug Establishment," it said that "the criteria for

registration as a drug establishment for nuclear pharmacies

should be the same as those for traditional pharmacies"

under the pharmacy exemption of s 510(g)(1) of the Act.

And, therefore, "in a situation where the nuclear pharmacy is

operating within applicable local laws regulating the practice

of pharmacy and only prepares and dispenses a radioactive

drug upon receipt of a 'valid prescription,' the pharmacy

exemption clearly applies." Persons who simply operated an

accelerator in the course of compounding radioactive drugs to

be dispensed under a prescription specifically were found not

to be required to register.

Syncor tells us, and FDA does not dispute, that PET

manufacturers today operate within applicable local laws gov-

erning pharmacy, and only prepare and dispense PET radio-

pharmaceuticals under a prescription, as they did in 1984.

FDA does claim that PET technology has advanced and that

PET has many more applications today than it did in 1984.

And, after "[h]aving considered the available information,"

FDA has concluded, by way of its challenged rule, that PET

manufacturers "should be regulated." Their activities--

which clearly fell within the scope of the regular course of the

practice of the profession of pharmacy in 1984--are thought

no longer to fall within that scope. This is not a change in

interpretation or in enforcement policy, but rather, is funda-

mentally new regulation. The reasons FDA has advanced for

its rule--advancement in PET technology, the expansion of

procedures in which PET is used, and the unique nature of

PET radiopharmaceuticals--are exactly the sorts of changes

in fact and circumstance which notice and comment rulemak-

ing is meant to inform. Cf. Bechtel v. FCC, 957 F.2d 873, 881

(D.C. Cir. 1992) (changes in factual and legal circumstances

may impose upon an agency the obligation to reconsider

settled policy or explain its failure to do so); American Horse

Protection Ass'n v. Lyng, 812 F.2d 1, 5 (D.C. Cir. 1987)

(rulemaking may be required on the basis of a radical change

in the factual premises underlying a previous position).

The FDA nevertheless focuses on American Mining Con-

gress, in which, recognizing that an agency often has an

option to proceed through adjudication, we warned against

construing the interpretative rule exception to the APA's

notice and comment provisions "so narrowly as to drive

agencies into pure [adjudicatory] ad hocery--an ad hocery,

moreover, that affords less notice, or less convenient notice,

to affected parties." American Mining Congress, 995 F.2d at

1112. Accordingly, we identified four factors, any one of

which, if present, would identify a supposed interpretative

rule as really legislative.8 The first of those factors, on which

FDA concentrates, is whether in the absence of the rule there

would not have been "an adequate legislative basis for en-

forcement action or other agency action to confer benefits or

ensure the performance of duties," which is another way of

asking whether the disputed rule really adds content to the

governing legal norms.

The government contends that the rule in question qualifies

as an interpretative rule, under that factor, because in the

absence of its issuance the government could have proceeded

to enforce regulatory requirements against manufacturers of

PET drugs. In the past, pursuant to FDA's 1984 Guideline,

those requirements were merely "deferred." The govern-

ment does not clearly explain what it means by "deferred,"

but seems to suggest that it exercised enforcement discretion

in not asserting regulatory authority over appellants until

1995, and therefore simply is reversing that discretionary

__________

8 The four factors are: "(1) whether in the absence of the rule

there would not be an adequate legislative basis for enforcement

action or other agency action to confer benefits or ensure the

performance of duties, (2) whether the agency has published the

rule in the Code of Federal Regulations, (3) whether the agency has

explicitly invoked its general legislative authority, or (4) whether

the rule effectively amends a prior legislative rule." American

Mining Congress, 995 F.2d at 1112.

Within the three rules at issue in that case, the Mine Safety &

Health Administration purported to be interpreting the term "diag-

nosis" as used in its own substantive regulation that had been

adopted by notice and comment rulemaking. We note, however,

that one or more of these rules might have been, at least in part,

policy statements. See id. at 1108.

decision. The obvious difficulty with the government's argu-

ment is that it is supportive of a claim that the rule was really

a policy statement--a claim which the government abandoned

on appeal. As we have said, enforcement discretion is rele-

vant in determining whether an agency intended to bind

itself, and therefore, in determining whether a pronounce-

ment is a legislative rule or a general statement of policy, but

"tells one little about whether a rule is interpretive." Ameri-

can Mining Congress, 995 F.2d at 1111.

In any event, we think the government misreads American

Mining Congress. We never suggested in that case that a

rule that does not purport to interpret any language in a

statute or regulation could be thought an interpretative rule.9

We do not have to decide, therefore, whether FDA could have

succeeded in an enforcement proceeding against a nuclear

pharmacy that was operating pursuant to the 1984 Guideline,

under the secure impression that their activities were totally

unregulated (although we find it hard to imagine the govern-

ment facing a hospitable reception in any federal district

court). We think it a kindness also to say that we doubt that

the government would have done any better in this case to

have relied on the policy statement exception on appeal. The

1995 publication is as far removed from the typical policy

statement as it is from an interpretative rule; it drew a

boundary to the agency's regulatory reach.

Accordingly, we reverse and remand to the district court

with instructions to enter summary judgment in Syncor's

favor, and to vacate FDA's rule as not in accordance with law.

The district court should also dismiss Syncor's substantive

claims without prejudice.

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9 It should also be noted that this is not a situation in which the

agency has the option to proceed to adopt its new regulatory

extension through internal adjudication; it must seek enforcement

in federal district court.