Chevron has fallen; the rise of the Loper Bright framework

The Chevron doctrine reflected a two-step analysis courts employed when confronted with certain legal challenges to an agency’s statutory interpretation. At Step One, courts analyzed whether the statute was clear on the precise question at issue. If so, the statute’s plain language won out, and the analysis ended. If the statute did not unambiguously address the issue — if there was uncertainty about the meaning of a key term, or a statutory gap — then, at Step Two, courts analyzed whether the agency’s interpretation was reasonable. The agency’s interpretation did not need to be the best reading, or even the reading the court would have reached if left to its own devices. If the court found the agency’s interpretation reasonable, it was upheld. Unsurprisingly, under this deferential standard, when the analysis reached Step Two, agencies frequently prevailed.

Although the Court has chipped away at the Chevron doctrine for years,[i] the Loper Bright Enterprises v. Raimondo[ii] decision marks the end of the doctrine, replacing the former agency-friendly Chevron with a more neutral approach. Under the new Loper Bright framework, the court must determine the “best” interpretation of a statute. The Loper Bright framework will likely incentivize life science companies to challenge agency actions on a more frequent basis and could improve their likelihood of success in some cases, by eliminating the presumption that statutory ambiguities should be treated as a delegation of authority to the agencies.

Loper Bright strengthens the court’s role by empowering them to use all relevant judicial interpretive tools to ascertain “the reading the court would have reached” if no agency were involved. However, there are important caveats which may limit Loper Bright’s reach:

• Forward-looking: The decision is forward-looking and does not automatically overturn cases already decided that relied on the Chevron framework. However, it could open the door for challenges to long-held agency positions which were never litigated, and agency actions for which there is no express delegation of authority. It is also unclear whether an agency decision that was previously upheld under Chevron step two is subject to challenge under new circumstances or by a new party.  But the demise of Chevron will at the very least make it easier for litigants to take a run at ambiguous statutes, potentially including those that have previously been upheld in other challenges by other litigants in other courts.

• Technical expertise: FDA is still entitled to deference on questions of fact, science, and policy to varying degrees. In many ways, fights that used to focus on legal interpretations of statutory language may now morph into disputes about the facts and science to which those legal interpretations are applied. As such, we can expect to see FDA providing more scientific and factual justification or explanation for its decisions going forward. FDA can be expected to characterize its administrative actions as answering questions of fact or policy. This may also result in FDA deprioritizing rulemaking efforts, given the increased burden to develop, implement and defend such regulations.

• Skidmore. While Chevron has fallen, Skidmore still seems to stand. Post-Loper Bright, courts may still seek guidance from agencies on their views of the best interpretation of a statute. Under Skidmore, the agency’s interpretations may be informative for the court to the extent such interpretations have “the power to persuade” based on “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements.”

• Express and implied delegation of authority: Congress’ express delegation of authority to an agency will be the key that opens the door to agencies stepping in to resolve gaps and ambiguities, including Congress’ delegation of authority for an agency to “fill up the details” of a statutory scheme through by stating so expressly (“the agency shall define this term”) or through an implicit delegation, signaled by the use of terms such as “reasonable” or “appropriate.”

As life science companies enter the Loper Bright era, they now have a new tool in their arsenal for challenging agency decisions, especially those for which Congress has not delegated express or implied authority to FDA or the Department of Health and Human Services (HHS). The implications for industry may be a change in how FDA thinks and acts with respect to administrative action, including a potential slow-down of formal agency decision-making.

The Court’s release of Loper Bright may have eclipsed another administrative law decision that may prove helpful in APA challenges. Corner Post, Inc. v. Board of Governors of the Federal Reserve System has potentially opened the flood gates for new suits by transforming and likely delaying the start date of the statute of limitations in many circumstances. In Corner Post, the same six-Justice majority ruled that the default six-year limitations period for APA challenges begins to toll when a particular plaintiff is injured by the agency rule (not six years from the agency action itself). In practical terms, this decision can be expected to open challenges to decades-old regulations and agency decisions. Note, however, that Corner Post does not apply where a more specific statute provides a shorter time period to challenge agency action, like the 60-day provision in 21 U.S.C. § 348(g)(1) governing challenges to certain FDA orders involving food additives.

What does this all mean for FDA? With the courts focused exclusively on the traditional tools of interpretation, we may see FDA providing more detailed interpretive reasoning for its binding decisions going forward, such as through more extensive preambles for regulations or more detail in review documents for product approvals. Such justification could potentially assist in persuading a reviewing court that an agency interpretation is indeed the best reading of the statute.  Because there still seems to be a role for Skidmore, FDA might also provide more robust policy explanations, especially in cases where FDA relies on its scientific expertise to interpret the statutory text, like in product jurisdiction and same active ingredient determinations. Courts may also provide deference to FDA where a determination depends on FDA’s substantive review, such as the determination of the initial submission date for purposes of patent term extension. Nonetheless, we can anticipate the agency is likely taking a close look at its regulations, particularly any upcoming proposed or final regulations, to ensure its interpretations are substantiated and likely to withstand challenge even without Chevron deference. Now more than ever, it will be important for affected parties to follow developments and engage with FDA, such as through commenting on proposed regulations or guidances, and to focus their correspondence with FDA on helping the agency determine and substantiate the best interpretation of the statutory text.

HL focus areas: Implications for life science companies

For life sciences companies, Loper Bright will undoubtedly play a significant role in how FDA interprets and applies statutory provisions impacting key areas such as regulatory exclusivity, drug approval standards, drug labelling, and FDA’s approach to regulating industry moving forward. While we await future court decisions to further clarify the bounds of Loper Bright, we highlight the following key areas below that we are closely monitoring for further action:

Marketing exclusivity

The 2022 case Catalyst Pharms., Inc. v. Becerra is illustrative of how exclusivity determinations could be analyzed post-Loper Bright. FDA has long interpreted the Orphan Drug Act (ODA) in its regulations to mean that the scope of orphan drug exclusivity is limited to only to the drug’s approved indication or use, even if the underlying orphan designation is for a broader disease or condition. Consistent with its regulations, FDA approved Ruzurgi for Lambert-Eaton myasthenic syndrome (LEMS) in a subset of pediatric patients despite Firdapse’s orphan exclusivity. FDA determined that Firdapse’s exclusivity was limited to its approved use in adults, even though Firdapse was designated more generally for the treatment of LEMS (i.e., adult and pediatric patients with LEMS). The district court found the statute to be ambiguous (Chevron Step One) and FDA’s interpretation to be reasonable (Step Two), and deferred to the agency’s interpretation. The Eleventh Circuit found the statute unambiguously applies orphan drug exclusivity to the entire designated disease or condition at Chevron Step One.

While awaiting a legislative fix to the Catalyst case, FDA has applied the Eleventh Circuit’s holding narrowly to Ruzurgi, but has continued to apply its regulations to all other orphan exclusivity determinations.

It remains to be seen whether and how Loper Bright will impact FDA’s determinations on the scope of orphan drug exclusivity, but we may anticipate more decisions like Catalyst setting aside FDA’s exclusivity determinations for other FDA-granted exclusivities, where the agency’s interpretation of relevant statutory text differs from what the court determines is the “best” interpretation.

Substantial evidence

Loper Bright makes clear that courts are not limited in their ability to evaluate agency actions which rely on the agency’s technical expertise so long as the court is addressing an issue of law. However, the decision does not impact the courts’ deference to FDA’s fact-based determinations. Challenges to FDA’s refusal to approve a product under the “substantial evidence” statutory standard can be expected to be framed by the agency as a fact-based determination that the agency has the discretion to decide.

Innovative data strategies and enabling technologies

Similarly, Loper Bright may lead to more frequent challenges to FDA’s authority to scrutinize certain types of evidence or regulate specific products. For example, the decision may provide additional opportunities for sponsors to convince FDA to accept non-interventional studies (i.e., real-world evidence), on which the agency has historically been hesitant to base drug or biologic approvals despite statutory authorization to establish a framework for such approvals under 21 USC 355g. FDA’s authority and flexibility in regulating aspects of novel products, such as drug and biological products that incorporate artificial intelligence, may also be the subject of increased legal challenges where such authority is not clearly laid out in the Federal Food, Drug, and Cosmetic Act or the Public Health Service Act. Where FDA has acknowledged that it lacks the authority to adequately regulate aspects of novel products, like post-market surveillance of artificial intelligence/machine learning, FDA may focus on those areas as statutory changes to pursue and Congress may further delegate authority to FDA to ensure that FDA’s authorities are fit-for-purpose.

Laboratory Developed Tests

FDA’s regulation of laboratory developed tests (LDTs) may be an early test case in the post-Chevron era. FDA’s LDT final rule issued May 6, 2024, is already being challenged under the APA by the American Clinical Laboratory Association (ACLA) and HealthTrackRx in the Eastern District of Texas. Their complaint stresses that despite the long history of LDT’s solely being regulated under Clinical Laboratory Improvement Amendments (CLIA) as medical services regulated by CMS, FDA’s rule would let FDA regulate LDTs as medical devices under the FDC Act. The complaint contends that LDTs are processes for deriving clinical information, performed by professionals in a highly regulated laboratory as a service to prescribing physicians, rather than physical products over which FDA has authority.

While FDA has made clear the agency intends to regulate LDTs for the sake of patients and the public health, and discussed its long-standing oversight of LDTs over hundreds of pages in the preamble to the LDT final rule, Loper Bright likely will impact the plaintiffs’ odds of success by eliminating the presumption for agency deference where statutory ambiguity exists, thus allowing the court, rather than FDA, to “use every tool at their disposal to determine the best reading of the statute.”

The impacts of the Loper Bright decision will play out over many years, as agencies, litigation, and judicial precedent adapt to the new standard. The Supreme Court’s decision marks the beginning of a period of change, and we will be monitoring the evolving legal landscape.

Next steps

One feature of Chevron was that agencies could select among a range of “reasonable” interpretations, meaning that statutory interpretations often changed with the administrations. As Chief Justice John Roberts wrote for the court, “Chevron foster[ed] unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.” That means that litigation monitoring is even more crucial now. If a rule affecting your organization is challenged in court, consider whether to intervene, either in support of the agency or to offer a different interpretation. 

Loper Bright may also have unintended but far-reaching consequences for how FDA delivers and implements decisions having the force and effect of law. For example, although notice-and-comment rulemaking is a time- and resource-intensive exercise, FDA could expect pre-Loper Bright that its interpretations in regulations promulgated through that process would be entitled to Chevron deference. Now, absent Chevron, it is possible the agency may rely on less burdensome processes, such as the publication of guidance documents. It will be important for affected parties to follow developments and engage with FDA, such as through commenting on proposed regulations or guidance documents, particularly if agency interpretations go beyond what is clearly delineated in the statute.

Congressional committees appear to be taking a keen interest in understanding how agencies will adapt to Loper Bright. On June 30, 2024, Senator Cassidy, Ranking Member of the US Senate Committee on Health, Education and Labor, sent a letter to FDA Commissioner Califf cautioning FDA to consider how it will adapt to Loper Bright given what the Senator considers the agency’s track record for disregarding Congressional feedback and court rulings adverse to FDA’s policy objectives, like the LDT rule and Catalyst. Senator Cassidy requested that FDA answer questions about FDA’s intent to adhere to Loper Bright and the plain meaning of the relevant statutes FDA administers.

Companies should monitor the changes wrought by Loper Bright very carefully. It is not too early (and may often not be too late under Corner Post) to begin analyzing key regulatory schemes that may be susceptible to challenge, being careful not to overlook regulations that a company would hope withstands challenge.