Wellness Pharmacy, Inc. v. Azar
Civil Action No. 2020-3082
| D.D.C. | Sep 21, 2021Background
- Section 503A of the FDCA creates a new-drug exemption for patient-specific compounded drugs but conditions interstate distribution on either (a) the State’s execution of an FDA-developed standard MOU addressing “inordinate amounts” of interstate compounding, or (b) staying below a statutory five-percent interstate-distribution limit.
- FDA finalized a Standard MOU in October 2020 that defines “inordinate amounts” as when >50% of a pharmacy’s compounded prescription orders are distributed interstate and requires States that sign the MOU to identify and report certain data about such pharmacies to FDA.
- Plaintiffs are seven compounding pharmacies who challenge the Final Standard MOU on three grounds: (1) FDA should have issued regulations under §503A rather than an MOU; (2) FDA violated the Regulatory Flexibility Act (RFA) by failing to analyze impacts on small entities; and (3) FDA exceeded statutory authority by defining “distribution” to include dispensing pursuant to prescriptions (affecting application of the five-percent limit).
- The court found plaintiffs had Article III standing and that the case was ripe for review (some plaintiffs already subject to MOU or to a non‑MOU State position), and proceeded to the merits.
- The district court held the Final Standard MOU is a legislative rule (not merely interpretive), so the RFA applies; it remanded the MOU to FDA to either prepare a regulatory flexibility analysis or certify no significant impact on small entities, and requested a progress report within 60 days. The court did not resolve the merits of Counts I or III.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing / Ripeness | Pharmacies face imminent injury: (a) compliance costs if their State signs the MOU; (b) ruinous effect of five-percent limit if State does not sign. | Injuries speculative because States may or may not sign and FDA is forbearant through Oct 2022. | Plaintiffs have standing; claims are prudentially ripe. |
| Rule Type / RFA Applicability | MOU is a legislative rule that imposes obligations and economic effects on small pharmacies; RFA applies. | MOU is interpretive and informational; RFA does not apply. | MOU is a legislative rule; RFA applies. Court remanded for RFA compliance. |
| §503A procedural command (regulations vs. MOU) | §353a(c)(1)’s "shall issue regulations" required rulemaking rather than an MOU. | §353a(b)(3)(B)(i) specifically directs development of a standard MOU; FDA acted within its discretion. | Court did not decide Count I on the merits; left unresolved. |
| Statutory authority re: "distribution" / five‑percent limit | FDA exceeded its authority by counting prescription-based dispensing as "distribution," triggering five-percent limit. | FDA’s interpretation (counting dispensing) is reasonable and Congress referenced prescription orders. | Court did not decide Count III on the merits; observed plaintiffs’ injuries from the agency’s interpretation are traceable to FDA. |
Key Cases Cited
- Thompson v. W. States Med. Ctr., 535 U.S. 357 (2002) (background on compounding and §503A litigation)
- Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) (Article III injury-in-fact standard)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (third‑party causation / traceability principles)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (APA arbitrary-and-capricious standard)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (agency statutory interpretation framework)
- Nat'l Ass'n of Home Builders v. U.S. Army Corps of Eng'rs, 417 F.3d 1272 (D.C. Cir. 2005) (ripeness and RFA analysis precedents)
- Mendoza v. Perez, 754 F.3d 1002 (D.C. Cir. 2014) (interpretive vs. legislative rule taxonomy)
- POET Biorefining, LLC v. Envtl. Prot. Agency, 970 F.3d 392 (D.C. Cir. 2020) (legislative vs. interpretive rule and significance of numeric thresholds)