Court Rules FDA Acted Improperly in Regulation of Premium Cigars

Earlier today, a federal court ruled that the U.S. Food & Drug Administration’s (FDA) regulation of premium cigars is arbitrary and capricious. The ruling came as part of the Cigar Association of America et al. v. United States Food and Drug Administration et al. lawsuit that was originally filed in 2016 in the U.S. District Court for the District of Columbia by three cigar trade groups: Cigar Association of America, Cigar Rights of America and the Premium Cigar Association.

Today’s ruling is the largest win for the premium cigar industry in court as the next step of the process could very well be the deregulating of premium cigars.

In his ruling, Judge Amit P. Mehta ruled that FDA did not properly adhere to the requirements of the Administrative Procedures Act (APA) by simply ignoring the fact that there was data about premium cigar usage. When the agency announced its preliminary plans to regulate cigars in 2014, it proposed two options. One would be to treat all cigars as the same, known as Option 1, another would have allowed for some cigars, termed “premium cigars,” to be exempt from regulation, known as Option 2. As part of this process, the agency asked the public and industry for comments, specifically, whether there was evidence that would support exempting premium cigars as per Option 2.

FDA announced its finalized deeming regulations in May 2016, it chose Option 1, the decision to regulate all cigars the same.

THE CRA COMMENT

FDA claimed that there was no evidence that would support this exemption when in fact there was. Mehta specifically pointed out a comment made by Cigar Rights of America (CRA), a trade group that was also one of three plaintiffs in the lawsuit. That comment pertained to the usage patterns of premium cigars—specifically that the majority of people who consume premium cigars consume one cigar or fewer per day—and that most consumers did not inhale premium cigars. Despite this being the type of comment that FDA was asking for—specific data pertaining to the usage and health effects of premium cigars—FDA concluded that commenters “did not include data indicating that premium cigar smokers are not subject to disease risk and addiction.”

Writes Mehta:

In the end, instead of addressing the relevant data before it, the agency resorted to a common refrain to obscure the issue: “[T]here were no data provided to support the premise that there are different patterns of use of premium cigars and that these patterns result in lower health risks.” 81 Fed. Reg. at 29,020. That statement was not accurate then, and despite litigation counsel’s efforts, it is not accurate now. Where, as here, an agency speaks in absolute terms that there is no evidence, it acts arbitrarily and capriciously when there is in fact pertinent record evidence and the agency ignores or overlooks it.

While the Department of Justice attorneys representing FDA in the lawsuit tried to argue that the agency had responded to comments like the one from CRA, Mehta found the responses to be weak, at best:

Finally, the agency’s statement that “all cigars produce toxic cigar smoke” is exactly the sort of nonresponsive, circular reasoning the court faulted previously. See Cigar II, 436 F. Supp. 3d at 85–86. The relevant question is not whether premium cigars, like standard cigars, produce toxic cigar smoke. The FDA already knew that to be the case. See 79 Fed. Reg. at 23,143 (stating in the proposed rule, “all cigars are harmful and potentially addictive”); id. at 23,150 (same); id. at 23,151 (stating in the proposed rule, “[a]ll cigars, regardless of size, produce higher levels of carcinogenic tobacco-specific nitrosamines per gram in mainstream cigar smoke than cigarettes”); id. at 23,170 (same).

In the end, Mehta bought into the fundamental argument made by Michael Edney, the lead attorney for the cigar industry in the litigation, that the agency never actually seriously considered Option 2—exempting premium cigars—after it opened the door to this option in 2014.

3.8 PERCENT OF 3.3 PERCENT

Mehta also evaluated another claim made by the plaintiffs that FDA did not properly interpret the data regarding youth usage of premium cigars. This deals with a study FDA cited by Christine Delnevo that found that of youth aged 12 to 17-years-old who said they smoked cigars, 3.8 percent identified premium cigars as the brand they smoked most often.

The issue is that only 3.3 percent of the 12-17-year-olds surveyed said they smoked cigars, so the real number is 3.8 percent of 3.3 percent, which is actually .1 percent.

Mehta concludes that FDA itself acknowledged as much, though he argues that it “obscures the real math.”

All of these statements are accurate, but the reasonable reader would not be off base in understanding them to imply that a more-than-negligible number of youth smoke premium cigars. Nowhere did the agency say what it now admits: that only 3.8 percent of the only 3.3 percent of youth who reported smoking a cigar within the last 30 days, or 0.1 percent of all youth, identified a premium cigar as their preferred brand. And it never extrapolated these percentages to the entire U.S. youth population, as it does now in litigation.

However, because Mehta had already found that the agency acted arbitrarily and capriciously, he did not need to rule on this count. However, he wrote, “the court trusts that any action by the agency on remand will view the Delnevo study in its proper light.”

COST-BENEFIT ANALYSIS

While FDA lost the day, it did win one part of the ruling.

Mehta ruled that FDA was not required to do a specific cost-benefit analysis of Option 2 as part of the APA. He referenced a previous decision by the U.S. Court of Appeals for the District of Columbia Circuit that said as much.

ARE PREMIUM CIGARS STILL REGULATED?

Today’s ruling does not change any cigar regulations right now. Companies that manufacture or import premium cigars are still subject to pay user fees on the cigars, there remains a prohibition on free samples, and there are some other minor parts of the regulations that remain in effect. The largest concern for the cigar industry, the premarket approval requirements—also known as “substantial equivalence”—remain unenforceable for premium cigars due to an August 2020 ruling by Mehta that remains in effect.

As for what’s next, that remains to be seen.

Because neither side has prepared briefs on the matter, Mehta is asking the two sides to meet at a further time to argue what should happen next. Perhaps most importantly, the court will need to determine what qualifies as a “premium cigar.” Notably, Mehta previously used an eight-part definition of “premium cigar” proposed by FDA that would cover most cigars sold in a retail humidor with the notable exception of flavored cigars. But just because that was the definition used in August 2020, it doesn’t mean that’s the definition that will be going forward.

Then the court will need to determine what the remedy is. For the cigar industry, the most advantageous outcome would be for Mehta to fully vacate the deeming rule for “premium cigars.” This would mean that whatever cigars qualify as “premium cigars” are no longer subject to the deeming regulations as a whole. They would be deregulated—no more substantial equivalence, no more user fees, no more bans on free cigars. If Mehta rules this way, it would mean that for products that qualify as “premium cigars” it’s back to a pre-Aug. 8, 2016 world when it comes to introducing new products or donating cigars to charities like Cigars for Warriors.

A more narrow ruling—like what Mehta did in August 2020—would be that he would ask FDA to reconsider Option 2 in light of the evidence that was mentioned in this case. Of note, there has been new evidence that has emerged after May 2016 that was mentioned throughout the case but Mehta did not consider it because it came after FDA published the deeming regulations. That evidence could come to play in a future reevaluation and it’s clear that FDA has not found compelling evidence that premium cigars increase health risks in a statistically significant way, nor has the agency found data that the youth usage of “premium cigars” is statistically significant.

This would also mean that FDA and Mehta would be forced to continue to reevaluate whether premium cigars should be regulated, something that is probably not high on either party’s priority list. For example, in 2020 the agency publicly said, “FDA’s lowest priority among these products will include relatively expensive, large hand-rolled cigars that do not have flavors (e.g., fruit, candy, or mint), given what FDA understands to be their comparatively lower youth usage rates.”

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At the most recent oral arguments, Judge Mehta went so far as apologizing for how long this litigation has gone on—it will be six years next month—and vacating the deeming regulations for premium cigars would put an end to it for him.

Yes, FDA could appeal. And furthermore, FDA could try to regulate premium cigars again, but if Mehta vacates the rule, it would need to start over from scratch. This would include a notice of proposed rulemaking, another comment period, responses to those comments, submitting the rule to the White House Office of Management and Budget, and then, inevitably, defending a new rule in court.

The support for FDA to go through this process just for premium cigars is almost certainly extremely low, but it would be particularly challenging to see the agency go through it with this at a time when FDA continues to face public pressure for its handling of e-cigarettes and vaping products, while it is in the process of banning menthol cigarettes, in the process of banning flavored cigars, and seems poised to introduce a landmark policy in the form of nicotine limits for cigarettes. Very clearly, these four things are not like the premium cigar issue in so many ways.

But there would still be the question of whether FDA has the evidence to support such an action, which as Judge Mehta points out, might not be the case at all:

The FDA never said, for example, that notwithstanding lower usage patterns among the great majority of premium cigar smokers, regulating those products is justified to protect the small percentage of users whose frequency of use does pose health risks. Again, its response was that there was “no [] evidence” submitted “on how the potential different patterns of use for premium cigars might result in different or decreased health impacts.” 81 Fed. Reg. at 29,022. The agency now tries to flip the Corey study’s findings in its favor, asserting that even if only 3.3% of premium cigar users smoke every day, that translates into approximately 120,000 adults. Defs.’ Mem. at 16. But even if it is accurate to say that there are tens of thousands of daily adult smokers of premium cigars, the FDA never explained why that number still merited deeming. Importantly, the agency never confronted Monograph 9’s finding that even daily cigar users do not exhibit a higher “all-cause” mortality rate than nonsmokers. It is a blackletter rule that “an agency cannot ignore evidence contradicting its position.” Genuine Parts Co. v. EPA, 890 F.3d 304, 312 (D.C. Cir. 2018). Yet that is precisely what occurred here.

It is not as if the court is faulting the FDA for failing to connect the dots between disparate data points; the connection was already drawn for them.

Update — The original version of this story had a headline that indicated that the court had “struck down” the rule. That was a confusing and potentially misleading way to describe what occurred. 

Update (July 21, 2022) — On July 20, Michael Edney, the lead attorney for the cigar industry requested and was granted an extension for the briefs. They are now due before Aug. 2, 2022.