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Take a Label Claim, and Pay Me in the Morning: A Challenge to FDA’s Argument that its Final Rule (Jan. 2000) on Structure/Function Claims for Dietary Supplements Does Not Constitute a Compensable Regulatory Taking Under the Fifth Amendment

William D. McCants

Harvard Law School I.D. # 70406667

FOOD AND DRUG LAW

Combined Course/Third Year Paper

Winter/Spring 2000

Professor Peter Barton Hutt

March 16, 2000

TABLE OF CONTENTS

I. INTRODUCTION ..................................................................... p. 2

II. BACKGROUND OF THE FINAL RULE

Statutory and Regulatory History ..........................................................p. 5

Dietary Supplement Health and Education Act of 1994 (DSHEA) .................. p. 7

The Final Rule: Alternatives to a Regulatory Taking? .................................p. 16

III. THE TAKINGS ANALYSIS

Introduction: The Nature of the Property Interest .......................................p. 29

Takings Factor One: The Character of the Government Action ......................p. 34

Takings Factor Two: The Economic Impact of the Government Action ............p. 44

Takings Factor Three: Interference with Reasonable Investment-Backed Expectations

..................................................................................................p. 47

Comparing a Previous FDA Anti-Takings Analysis: The Tobacco Regulations ...p. 52

IV. CONCLUSION .........................................................................p. 54

Take a Label Claim, and Pay Me in the Morning: A Challenge to FDA’s Argument that its Final Rule (Jan. 2000) on Structure/Function Claims for Dietary Supplements Does Not Constitute a Compensable Regulatory Taking Under the Fifth Amendment

I. INTRODUCTION

On January 6, 2000, the Food and Drug Administration (“FDA”) published its final rule prescribing the kinds of statements which can be made about the effect of a dietary supplement [1] on the structure or function of the body (“structure/function” claims), in accordance with the Dietary Supplement Health and Education Act of 1994 (“DSHEA”). [2] Under DSHEA, dietary supplements can bear structure/function claims without prior FDA review. But they cannot, without such prior review, bear a claim that they can prevent, treat, cure, mitigate or diagnose disease (“disease claim”). [3] One of the most controversial aspects of the final rule, and the subject of this paper, is FDA’s regulation of what the agency chooses to call “implied disease claims”:

The final rule precludes express disease claims ("prevent[s] osteoporosis") and implied disease claims ("prevents bone fragility in post-menopausal women") without prior FDA review. The final rule clarifies that such express and implied disease claims can be made through the name of a product ("Carpaltum," "CircuCure"), through a statement about the formulation of a product (contains aspirin), or through the use of pictures, vignettes, or symbols (electrocardiogram tracings). The rule permits claims that do not relate to disease. These include health maintenance claims ("maintains a healthy circulatory system"), other non-disease claims ("for muscle enhancement," "helps you relax,"), and claims for common, minor symptoms associated with life stages ("for common symptoms of PMS," "for hot flashes").[4]

As will be discussed below, in close cases, deciding whether the name of a product is an implied disease claim or not is hardly a straightforward matter. In its lengthy discussion of its final rule, for example, FDA states that a product name such as “Soothing Sleep” could be considered an implied disease claim to treat insomnia, “unless the labeling made clear that the product was intended only for occasional sleeplessness.” [5] However, “use of the word ‘prescription’ or its abbreviation ‘Rx’” in a product name is not automatically classified as a disease claim; the agency will consider the “context of the labeling as a whole.” [6]

Because dietary supplement manufacturers are already required under the DSHEA to have on file substantiation of any structure/function claims they make, and must also include a disclaimer on their labels that dietary supplements are not drugs and have not received any FDA pre-market approval, [7] it is unclear to them, as discussed at length below, why so-called “implied” disease claims are being forbidden by agency regulation at all. FDA claims that consumer protection concerns justify this rule, while dietary supplement manufacturers believe that such concerns were already directly and adequately addressed by Congress in DSHEA. [8] Dietary supplement manufacturers raised several constitutional objections to the rule in its proposed form , [9] including First Amendment, [10] equal protection/Due Process Clause of the Fifth Amendment, and Takings Clause of the Fifth Amendment claims.[11] FDA responded to each in turn; the focus in this paper will be on the takings issue.[12]

As recounted by FDA, several comments on the proposed structure/function rule claimed that it would violate the Takings Clause of the Fifth Amendment [13] “because it would prohibit the use of [i.e., “take” in a constitutional sense] specific terms that now appear in product names, trademarks, trade names, symbols, and company logos, or would harm companies that use such terms in their corporate names”; therefore, the argument concludes, FDA must provide compensation for each such taking. [14] FDA disagrees with this argument, and attempts to refute the takings claim through a lengthy analysis of current takings law. Following a discussion of the history of dietary supplement regulation and DSHEA, I will undertake a point-by-point response to the FDA’s assertions, with the ultimate aim of demonstrating that, at the very least, the dietary supplement industry has a far stronger takings argument than the agency acknowledges in its final rulemaking. The key problem for FDA proves to be the fact-specific nature of takings analysis, which results in most of the Takings Clause-related cases cited by FDA either supporting a direct challenge to the agency’s conclusion that a taking has not occurred in the present case, or proving to be, at the very least, distinguishable on their facts from the takings scenario at issue here. [15]

II. BACKGROUND OF THE FINAL RULE

Statutory and Regulatory History

The Federal Food, Drug, and Cosmetic Act of 1938, as amended by DSHEA, is the main body of law governing dietary supplements. [16] As early as 1941, FDA issued regulations regarding the labeling of vitamin and mineral supplements. In 1966, FDA proposed a label disclaimer for vitamin or mineral supplements indicating that: “Vitamins and minerals are supplied in abundant amounts by commonly available foods. Except for persons with special medical needs, there is no scientific basis for recommending routine use of dietary supplements,”[17] indicating that the agency’s skepticism regarding the utility of dietary supplements has a long history. After two years of hearings, however, FDA was persuaded by overwhelming opposition from stakeholders to abandon the proposed disclaimer.[18] In fact, Congress’s “reigning in” of FDA where dietary supplements are concerned also has a long history. In 1976, for example, Congress passed legislation that “prohibited FDA from classifying vitamin and mineral supplements as drugs based solely on their combinations or potency (unless drug claims were made), from establishing a standard of identity for these products, and from limiting the quantity or combination of nutrients in them, except for reasons of safety.” [19] The Congressional “hands off” (i.e., relative to what FDA wanted) approach taken to the dietary supplement industry here bears a striking resemblance to that reflected in DSHEA, passed nearly two decades later (see DSHEA discussion, infra ).

The passage of the Nutrition Labeling and Education Act of 1990 (“NLEA”) meant that dietary supplement labels could now make, with FDA approval, “health claims” relating specific nutrients to diseases or disorders.[20] In 1993, FDA published an Advanced Notice of Proposed Rulemaking (ANPR) regarding dietary supplement regulation. Among other provisions, it proposed that “some botanical products were inherently drugs and not dietary supplements.”[21] In a striking parallel to the strong negative reaction provoked by the final rule on dietary supplement structure/function claims at issue in this paper, “The ANPR elicited considerable protest from the public and the dietary supplement industry because FDA appeared to be reproposing regulatory provisions withdrawn or struck down by court actions in previous years . The ANPR was a significant motivating factor in industry and congressional efforts to develop and secure passage of DSHEA in 1994” [22] (emphasis added).

Dietary Supplement Health and Education Act of 1994 (DSHEA)

Congressman Dan Burton, as Chair of the House Committee on Government Reform, reported regarding DSHEA that “[t]he American people demanded to be heard on this issue and Congress listened to them. More letters and faxes were received on this issue than any other piece of legislation in history.”[23] In signing DSHEA into law in 1994, President Clinton noted that “after several years of intense efforts, manufacturers, experts in nutrition, and legislators, acting in a conscientious alliance with consumers at the grassroots level, have moved successfully to bring common sense to the treatment of dietary supplements under regulation and law [24] (emphasis added). Note that manufacturers are mentioned first, and FDA not at all, in the President’s commendatory statement about reforming the regulation and law affecting dietary supplements. As will be noted below in the takings analysis, it is logical to assume that such an enthusiastic statement by the President of the United States, a Democrat, acting in concert with a Republican-majority Congress, sent an unmistakable signal to the dietary supplement industry about the liberality with which the DSHEA would be interpreted, and no doubt contributed to the flood of investment and explosive industry growth which followed, an expansion which continues unabated, as recently noted by the FDA Commissioner herself. [25] As Congressman Burton – not renowned for his bipartisanship -- went on to observe, nearly five years after the Act was passed, “We have shown that good health is not a partisan issue. We have shown on this committee that there is interest to assure that Americans have the right to make their own health care choices and have access to an integrated system of healing on both sides of the aisle.”[26] This political climate hardly signaled to the dietary supplement industry that a final rule was coming which would outlaw what FDA now chooses to call “implied disease claims.” [27]

In DSHEA itself,[28] Congress stated its findings regarding dietary supplements, noting in particular that “the importance of nutrition and the benefits of dietary supplements to health promotion and disease prevention have been increasingly documented in scientific studies,” and “the Federal Government should not take any actions to impose unreasonable regulatory barriers limiting or slowing the flow of safe products and accurate information to consumers” [29] (emphasis added). Such statements were meant to guide FDA in its formulation of implementing regulations,[30] i.e., the final rule at issue here. If FDA determined that a dietary supplement presented safety concerns, it would “bear the burden of proof on each element to show that a dietary supplement is adulterated,” and the standard of review for courts regarding issues raised in this area is to be de novo,[31] i.e., a reviewing court is not required by Congress to show a heightened level of deference to FDA judgment in this matter. In light of FDA’s long and well-documented history of resistance to dietary supplements per se, mandating such minimal judicial deference to regulatory agency expertise is not surprising. Section 6 of DSHEA allows dietary supplement labels to carry various types of statements of nutritional support without requiring premarket approval from FDA. Dietary supplement manufacturers are required to have substantiation on hand for their label claims, must notify FDA within 30 days of first marketing a product (“letter of notification”) that such a statement is being made, and the label must have a disclaimer “prominently displayed and in boldface type” which reads: “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease [32] (boldface type added). With this mandatory disclaimer appearing on all labels, many commenters on the proposed structure/function rule, speaking from both industry and consumer advocacy perspectives, logically questioned how FDA could ever find an “implied” disease claim. [33]

DSHEA also called for the establishment of an independent agency within the executive branch, the Commission on Dietary Supplement Labels (“Commission”). [34] The Commission was composed of seven members appointed by the President, all of whom were required to have some degree of “expertise and experience” with dietary supplements, and three of whom were “qualified by scientific training and experience to evaluate the benefits to health of the use of dietary supplements.”[35] The specific charge to the Commission was to conduct a study on (through, e.g., public hearings and information-gathering from relevant federal agencies) and make recommendations regarding the regulation of label claims and statements for dietary supplements, to “evaluate how best to provide truthful, scientifically valid, and not misleading information to consumers so that such consumers may make informed and appropriate health care choices for themselves and their families.”[36] The Final Report was submitted to the President, Congress, and the Secretary of Health and Human Services (“HHS”; FDA is a sub-agency of HHS) on November 24, 1997. [37] DSHEA further required that, following publication of the recommendations of the Commission for changes in the regulation of dietary supplements, HHS (through FDA) would issue a notice of proposed rulemaking on such changes, followed by opportunity for public comment.[38] This is the process which ultimately led to the issuing of the final rule under consideration here.

While the Commission Report is far too lengthy to address in full here, certain findings do bear directly on the matter at hand. For one thing, the Commission, required by statute to “be without bias on this issue of dietary supplements,”[39] was nonetheless in stark disagreement on the structure/function claim issue:

The Commission was divided on the distinction between DSHEA-allowable structure/function statements and drug claims for claims referring to organs. Some Commission members believed that

such statements were either drug claims or ... health claims [both of which would require FDA premarketing approval]. ... Some Commission members believe that the potential for allowing these types of statements for dietary supplements is a fundamental flaw of DSHEA, creating a loophole for quasi-drug claims. Others suggest that the ability to make such statements is implicit in DSHEA and that there is emerging scientific evidence for certain foods and other dietary ingredients having benefit for specific organs or functions of the body. These members of the Commission noted that these provisions of DSHEA were written with the explicit goal of making such information available to the public. [40]

Considering FDA’s hard-line approach to dietary supplement regulation right up to the passage of DSHEA, no doubt the views of those commissioners who found liberal allowance of structure/function claims to be “a fundamental flaw of DSHEA” appeared quite attractive to the agency. [41] But FDA reads the commission report selectively at its peril; Congress is hardly likely to agree that DSHEA is fundamentally flawed, and of course FDA (as it has been forcefully reminded in the dietary supplement regulatory area so many times before) must ultimately answer to the will of Congress, not to one faction on an advisory Commission whose statutory mandate has been long-fulfilled.

The Commission issued guidelines to FDA about “what constitutes an acceptable statement of nutritional support of the structure/function type.” [42] The Commission notes that “the context of a claim has to be considered on a case-by-case basis” (emphasis added); this makes sense, because how else can the agency determine whether statements of nutritional support “imply a link between a supplement and prevention of a specific disease or health-related condition” ?[43] Implication is, of course, in the eye of the beholder, and FDA has shown in the past a distinct inability to turn an objective regulatory eye on the dietary supplement industry. Interestingly, when the Commission itself went too far with a mere recommendation , in its draft report, that the letter of notification[44] include a summary of the required evidence supporting both the benefits and safety of the dietary supplement product, a strong negative response by stakeholders persuaded it to withdraw the proposal. The dietary supplement industry, in particular, “objected to a requirement that goes beyond the specific provisions of the DSHEA.”[45] The industry is making the same argument now, in the form of the constitutional objections noted in the introduction, supra , about FDA’s implied disease claim ban in the final rule. But while the Congressionally-sanctioned and Presidentially-appointed Commission properly backed down in the face of such valid criticism of a recommended regulation which would weaken DSHEA, FDA has, in accordance with its long-standing custom where dietary supplements are concerned, taken quite the opposite approach.[46]

Not surprisingly, FDA in its discussion of the regulations in the proposal stage chose to give itself the widest possible discretionary latitude in evaluating structure/function claims as disease claims: “FDA would also consider the context in which the statement appeared. A statement that by itself would be considered an acceptable structure/function claim could become a disease claim if, in context, an effect on disease were expressed or implied.”[47] In other words, a dietary supplement manufacturer could get the labeling statement right, and still get the label as a whole “wrong,” if FDA says so. As one commenter put it, speaking on behalf of a major dietary supplement manufacturer: “Perhaps the most glaring defect in the proposal on implied claims is FDA’s effort to define a drug or disease claim by fiat.”[48] This attitude of regulatory aggrandizement is especially ironic in light of the fact that DSHEA was passed in the first place due to a widespread feeling in Congress and among industry and consumer groups that FDA’s historical view of permissible structure/function claims had been entirely too narrow.[49] It is as if FDA, resentful that DSHEA took away its ability to give premarketing approval to most dietary supplements, is determined to get this power back through other, less direct means, all the while waving the “public safety” flag, as if Congress was not fully aware of public safety concerns when it passed DSHEA in the first place.

This historically negative attitude by FDA toward the dietary supplement industry has recently been acknowledged, albeit in a guarded manner, by FDA Commissioner Jane Henney, although apparently this acknowledgement, such as it was, did not ultimately affect the hard-line treatment of “implied disease claims” in the final rule: “The dietary supplement industry sells products on which millions of Americans rely. I am aware that in the past the relationship between FDA and some in the dietary supplement industry has been at times antagonistic and counterproductive. FDA is committed to developing a positive working relationship with the industry so that we may together meet our goals of providing safe products to the American public.”[50] This reference to antagonism with only “some in the dietary supplement industry” appears to be an understatement when compared with the statement of Ann Witt from the FDA Office of Policy, who acknowledged in a public hearing five months later that “[m ]ost of the comments we received [on the proposed structure/function rule], particularly from the dietary supplement industry, the food industry, and individuals, argue that implied claims were, in fact, permitted as structure/function claims”[51] (emphasis added). When it comes to implied disease claims, then, FDA’s rulemaking seems designed to deliberately frustrate the desires of the very constituencies for whom DSHEA was passed by Congress and signed into law by the President.[52] Again, given FDA’s unfortunate history in this area, this is not at all surprising (which is not to say that dietary supplement manufacturers should have had to count on FDA defying the will of Congress again, and therefore held back their expansion of production in this market; see discussion in “Takings Factor Three: Interference with Reasonable Investment-Backed Expectations,” infra ).

The Final Rule: Alternatives to a Regulatory Taking?

Given its historical hostility to dietary supplements, one would assume that FDA would respond to DSHEA by defining “disease claim” as broadly as possible (thereby, in most cases, making the product subject to regulation as a drug), so as to maximize its regulatory authority over dietary supplements in spite of the expressed will of Congress. And in fact, the final rule, which amends 21 C.F.R. pt. 101 (“FOOD LABELING”)(1999) to add paragraphs (f) and (g) to Section 101.93 (“Certain types of statements for dietary supplements”)[53] is so unabashedly biased in favor of FDA reassertion of control over dietary supplements that it merits extensive citation here[54] :

FDA will find that a statement about a product claims to diagnose, mitigate, cure, or prevent disease ...under 21 U.S.C. [§] 343(r)(6) if it meets one or more of the criteria listed below. These criteria are not intended to classify as disease claims statements that refer to the ability of a product to maintain healthy structure or function, unless the statement implies [emphasis added; note again that Section 343(r)(6) of the statute does not use the term, or even make reference to the concept, “implies” – see infra note 62 for actual statutory text] disease prevention or treatment. In determining whether a statement is a disease claim under these criteria, FDA will consider the context in which the claim is presented. A statement claims to diagnose, mitigate, treat, cure, or prevent disease if it claims, explicitly or implicitly [emphasis added], that the product:

....

(vii) Augments a particular therapy or drug action that is intended to diagnose, mitigate, treat, cure, or prevent a disease or class of diseases;

(viii) Has a role in the body’s response to a disease or vector of a disease;

...

(x) Otherwise suggests an effect on the disease or diseases[55] [this excerpt as a whole will be referred to hereinafter as the “implied disease claims rule”].

Note that ambiguous terms such as “augments” and highly malleable phrases such as “vector of a disease” are left to the interpretive discretion of FDA. But perhaps no single provision better exposes the aggressive anti-structure/function claim strategy of FDA than the last one, (x).[56] Not surprisingly, the agency reports that a number of stakeholders considered this provision “an over-reaching ‘catch-all’ ... that would allow FDA to treat any claim as a disease claim.”[57] This is a serious objection, as such a catch-all regulation would unequivocally violate the will of Congress as expressed in DSHEA. FDA’s response, however, is all-too-typically blasé, and almost Orwellian in its opacity and circularity: “[T]his provision is necessary to allow for implied disease claims that may not fit into the nine enumerated criteria ... [but] FDA does not believe that the [catch-all] provision will cause the agency to classify any structure/function statement as a disease claim.”[58] In sum, then, the dietary supplement industry is told by FDA to accept nine extremely broad and often ambiguous regulatory criteria, in addition to a tenth catch-all provision which the agency pledges, in spite of its long and well-documented history of hostility toward this industry, not to employ. As one commenter so aptly put it during the proposal stage, “There is inherent ambiguity in [the rule] ... that invites endless agency expansion of the scope of prohibited claims, thereby flouting the will of Congress .... the proposed rule would give the FDA greater power to suppress claims it regards as implied” [59] (emphasis added). Given such a context, a regulatory takings challenge by the dietary supplement industry hardly seems surprising.

FDA had regulatory alternatives to the implied disease claims rule, of course, the most prominent of which was not to create such an arguably extra-statutory rule in the first place, i.e., not to amend Section 101.93 to mention “implied” claims at all. Annette Dickinson, Ph.D., Vice President of Scientific and Regulatory Affairs for the Council for Responsible Nutrition, and a former member of the Commission, [60] argues, in fact, that DSHEA left FDA without the option to do otherwise:

As FDA noted in the preamble to the April 1998 [proposed rule], almost any structure/function statement could possibly be considered an implied disease claim at some extension. If this is the case and if, therefore, almost all structure/function statements could in some sense be considered to be implied disease claims, then the options available to FDA would appear to be either accept them all or reject them all.

DSHEA does not permit FDA the option of rejecting them all, since structure/function statements are specifically permitted under the law. The logical conclusion, then, is that FDA is obligated to accept them all under a broad concept of structure/function statements.[61]

Dickinson goes on to point out that only specific disease claims are prohibited by DSHEA ,[62] and so the statute clearly intends to allow for a broad range of structure/function statements which are not “direct disease claims,” and DSHEA requires FDA to now accept as structure/function claims many claims which it may have thought of as implied disease claims prior to the passage of the Act.[63] This of course was the whole point of passing the Act in the first place, a point which appears to have eluded FDA in issuing the implied disease claims rule.[64] [65]

Dickinson concludes that FDA already has ample enforcement powers, because DSHEA “gives [FDA] clear authority to act against [products] that make specific disease claims or that are not substantiated o r that are false or misleading.” [66] Indeed, Joseph A. Levitt, Director of FDA’s Center for Food Safety and Nutrition (“CFSAN”), reported to a Congressional oversight committee in May 1999 that CFSAN’s Special Nutritionals (products which include dietary supplements) Adverse Event Monitoring System (“SN/AEMS”) was already serving a critical role in consumer protection, by monitoring

dietary supplements for unexpected adverse events which represented potential threats to public health. [67] Levitt explained that “[in] the absence of premarket review data, the SN/AEMS serves as a critical source for gathering data about the safety of dietary supplements.”[68] He then described the successful recalls of dietary supplements found to contain ingredients “that cause safety concerns,” including the botanical Digitalis lantana, a powerful heart stimulant; Gamma butyrolactone (GBL), an ingredient used in “date rape” drugs; and ephedrine alkaloids, found to cause adverse cardiovascular and nervous system effects. [69]

The system, in other words, was working the way it was supposed to without any implied disease claims rule, according to FDA itself. [70] It is not enough, then, to justify this dramatically intrusive rule by merely stating the truism that “[a]lthough FDA believes that dietary supplements have potential benefits for customers, dietary supplements labeled with unproven disease claims, i.e., those that have not met the requirements for health claim authorization or new drug approval, can pose serious risks.”[71] Those dietary supplements “pos[ing] serious risks” were being handled quite capably by FDA under the previous regulatory regime. In other words, where is the evidence of a major public health crisis being created by “under-regulated” dietary supplements that would require this implied disease claim rule in the first place? FDA has provided no evidence of such a crisis. On the contrary, in April 1999 FDA, in a follow-up to a nationwide live satellite teleconference, “Talking with Stakeholders About FDA Modernization,” took an almost boastful tone[72] regarding its success in dietary supplement regulation:

FDA has a number of tools at its disposal to take enforcement actions against dietary supplements found to have safety, labeling, or other violations of the Federal Food, Drug, and Cosmetic Act, as amended by DSHEA. The agency has used a variety of regulatory tools from enforcement actions to rulemaking, when it has found dietary supplements that cause safety concerns .... Additionally, the agency has taken action against products marketed as dietary supplements, but which are illegally making claims as to usefulness in the treatment, diagnosis, cure, or prevention of disease (e.g., Pro-Symbio PLUS).[73]

Congressman Dan Burton, current Chair of the House Committee on Government Reform, noted at the outset of a March 1999 oversight hearing entitled “[DSHEA]: Is the FDA Trying to Change the Intent of Congress?” that “[as] for the safety of supplements, an interesting comparison is ... [that] 106,000 people die a year from prescription drugs, 42,000 a year from automobile accidents. It is more likely you will be struck by lightning and die in this country than it is you will die from using a dietary supplement[,] with just 16 deaths reported last year.” [74] This statistical portrait of the relative safety of dietary supplements was not challenged by senior FDA officials in successive appearances before the oversight committee.[75] It is perhaps no wonder, then, that Congressional Committee Chairman Burton had already concluded by the outset of the March 1999 hearings that “this proposed rule [which included the implied disease claims rule] would supercede legislation passed by Congress.” [76]

FDA reported that many commenters felt it should issue a guidance document instead of this final rule.[77] The agency claims to prefer the final rule because it:

creates uniform, enforceable requirements for structure/function claims ... in contrast, guidance documents, although they represent FDA’s best advice on a particular matter, are not binding on any party. Relying solely on guidance documents would not be as effective in achieving consistency in the regulation of structure/function claims on dietary supplements and would lead to case-by-case enforcement.[78]

At first glance this appears to be a strong argument, but it is undermined by FDA’s own inconsistency. For one thing, if regulation is so superior to guidance documents, why did FDA, a mere matter of weeks before this final rule was released, choose to issue such a guidance in the closely-related area of health claims?[79] Far more damning, in terms of the agency’s stated rationale, is the fact that the final rule itself will require one or more guidance documents anyway : “FDA ... intend[s] to issue a guidance document to provide additional information regarding structure/function and disease claims. The guidance document would complement, rather than substitute for, the final rule.”[80] This merely “complementary” guidance document, however, is to provide quite specific examples of claims that would or would not be classified as disease claims.[81] It will also provide examples of acceptable and unacceptable product names.[82] And “FDA will issue further guidance on Sec. 101.93(g)(2)(iv)(C) [“Citation of a publication or reference”], if necessary.”[83] Finally, the agency states that it may issue additional guidance concerning substantiation for Section 403(r)(6) (dietary supplement label) statements “at a future date.”[84] So much for uniformity, and avoidance of case-by-case enforcement. And why should the agency have expected to avoid such case-by-case consideration of allegedly implied disease claims, when that is exactly the type of review the Commission said FDA should engage in?[85] The problem for FDA here is that if it had just issued a non-binding guidance, it would not be facing a regulatory takings challenge. Since its own rationale for a rulemaking is so badly weakened by its acknowledgement of the need for one or more regulatory guidance documents in the future, this clearly strengthens the position of those dietary supplement manufacturers who want compensation for label claims taken by the supposedly uniform, resource-rational[86] rule.

As noted previously, many stakeholders assumed that the mandatory disclaimer appearing on all dietary supplement labels would eliminate any potential “implied disease claim” problem.[87] FDA responds that “[h]ad Congress thought the disclaimer, alone, was sufficient to distinguish between structure/function claims and disease claims, it would not have enacted the restriction against disease claims in section 403(r)(6) of the act.”[88] Once again, however, FDA conveniently ignores the fact that the category of implied disease claims was not a Congressional invention.[89] A number of commenters suggested that if the agency was concerned about what it perceived to be an implied disease claim, this concern could be addressed through specific “use of disclaimers of implied claims, disclaimers designed to disclaim the particular disease connotation.”[90] The following example helps clarify how such a disclaimer would work in practice:

Under the proposed rule, a saw palmetto supplement bearing the claim, “may improve urine flow in men over age 50,” is viewed as an impermissible implied health claim [see, e.g. , Structure/Function Proposed Rule, supra note 9, at 23626 for FDA’s discussion of its rationale for this view], said to imply a treatment for benign prostatic hypertrophy. Of course, the presumption that the claim implies a treatment for BPH is but one of many possible connotations reasonably derived from that claim [emphasis added].

To permit the claim’s health information to reach consumers but avoid misleading the public into believing that the FDA recognizes saw palmetto as a treatment for BPH, FDA may simply mandate the use of the following disclaimer, in addition to the general disclaimer specified in DSHEA[:] ... “FDA has not approved saw palmetto for use in the treatment of benign prostatic hypertrophy.”[91]

The agency rejected this and like suggestions because it believed that the coupling of an implied disease claim with a specific disclaimer “could confuse consumers.”[92] But this is a particularly weak rationale for rejecting such a reasonable alternative, since, as noted above, FDA’s long history of hostility toward dietary supplements is based on this same concern over alleged consumer confusion, and consumers themselves vigorously lobbied Congress to overrule such FDA paternalism by passing DSHEA. And the provisions of DSHEA are sufficient to protect the public, as one prominent stakeholder noted: “If the importance of [the DSHEA-mandated] disclaimer is made clear, then the significance of decisions about implied disease claims will be made moot.” [93]

Finally, one of the strongest factors weighing in favor of requiring payment by FDA for the regulatory taking effected by the implied disease claims rule is the “hair-splitting,” impossible-for-industry-to-anticipate type of distinctions which the agency is planning to use to distinguish structure/function claims from implied disease claims. This regulatory problem is perhaps most dramatically demonstrated by the case of cholesterol. Prior to DSHEA, “FDA took the position that virtually any statement related to cholesterol would be interpreted as a claim relating to the prevention of heart disease.” [94] The Commission advised that this regulatory policy needed reconsideration in light of the Act.[95] Following such reconsideration, FDA announced it would allow “maintains healthy cholesterol levels” as a structure/function claim, but “lowers cholesterol” would still be considered a disease claim.[96] One major trade association responded to this “distinction” by asking, not illogically, “´What is a healthy cholesterol level, but a lower cholesterol level?’”[97] FDA explained that the lowering of cholesterol is “inextricably linked in the public mind with treating elevated cholesterol and preventing heart disease.”[98] But if this is so, why should this same public be expected to understand the subtle difference between these two label claims? FDA opines: “[M]aintaining cholesterol levels within the normal range is essential to the structure and function of the body for reasons other than prevention of heart disease. Although many people think of cholesterol solely in terms of the negative role of elevated cholesterol in heart disease, normal cholesterol levels play a positive role in maintaining a healthy body.”[99] If this is so, then of course lowering cholesterol levels is important for the same non-heart-disease-related, structure/function-based reasons. Given such convoluted reasoning by the agency, it is no wonder that so many stakeholders concluded that FDA’s line-drawing for implied disease claims often made no predictable/intelligible sense. [100]

  1. THE TAKINGS ANALYSIS

Introduction: The Nature of the Property Interest

As discussed previously, it can be asserted under the Fifth Amendment[101] that a regulatory taking occurs when government regulatory action results in some substantial reduction in the value of a recognized interest in private property, or rights associated with it[102] ; in this case, several stakeholders charged that the implied disease claims rule would prevent, or “take,” the use of specific terms that now appear in dietary supplement product names, trademarks, trade names, symbols, and company logos, or would harm companies that use such terms in their corporate names.[103] As a link to the discussion immediately above, imagine as an example the product name, “X, the Cholesterol Reducer”[104] ; or recall the discussion of the product name “Soothing Sleep.” [105] As noted in the introduction to this paper, the approach here is to undertake a point-by-point response to FDA’s denial that a regulatory taking will occur as a result of its implied disease claims rule.[106]

Before there can even be a takings analysis, it must be determined if, in fact, a constitutionally cognizable property interest is at issue. FDA concedes, as it must in this case, that there is:

The Constitution itself does not define what qualifies as property. Rather, “existing rules or understandings derived from an independent source,” such as State or Federal law, define the interests that qualify for protection as property under the Fifth Amendment (Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1030 (1992)). The categories of names, words, and symbols mentioned by the comments are intangible property interests ... trademarks and trade names are property to the extent that they are associated with business goodwill. A trademark is a word, name, symbol, device, or combination thereof that a person uses, or intends to use and has applied to register, to identify and distinguish his or her goods from others on the market and to indicate their source (15 U.S.C. 1127). A trade name is the name a person uses to identify his or her business (15 U.S.C. 1127) and may include corporate, partnership, and other names. Symbols and logos, when used to identify a product or company, may be property insofar as they are trademarks or trade names. Likewise, product names may be property if they are protected by a trademark or trade name. For brevity [FDA refers to] the categories of names, words, and symbols mentioned by the comments on the takings issue ... collectively as “trademarks and trade names.” [107]

This is a seemingly straightforward analysis of the nature of these intangible property interests; the problem is that FDA uses this analysis as a basis throughout its takings argument to consistently downplay or understate the value of such property interests to dietary supplement manufacturers. It is clearly in the agency’s interest to do so, for in general, as will be seen in the discussion below, the less (seemingly) weighty the property interest, the less likely the owner of that property is to prevail in a takings case.

FDA asserts, based on American Steel Foundries v. Robertson , 269 U.S. 372, 380 (1926), that trademarks and trade names are property only to the extent that they are associated with the goodwill[108] of an ongoing business.[109] That statement is true so far as it goes, but it is difficult to discern what audience the agency is attempting to persuade when it then concludes on this basis, citing United Drug Co. v. Theodore Rectanus Co ., [110] that trademarks and trade names “have no intrinsic value,” and that their purpose is simply to prevent confusion with the goods of another manufacturer.[111] What United Drug actually states is that “the right to a particular [trade]mark grows out of its use, not its mere adoption,”[112] and the active use of trademarks and trade names on dietary supplement labels is simply not at issue here; that is, FDA has presented no evidence whatsoever that any dietary supplement manufacturer is attempting to assert a takings claim on behalf of a trademark or trade name not in current use on the market.

More generally, FDA’s cursory treatment of the property interest in trademarks and trade names is far too shallow and perfunctory, given the true value of this interest. A trade name, for example, “is much more than a simple identification badge that allows people to distinguish sellers. It is instead an entire array of different messages, all condensed into a single word, a short phrase, or a symbol. Those myriad messages comprise the definition of the trade emblem.” [113] Trademarks and trade names help the market itself to function better, because they give sellers a convenient, “shorthand” method of passing along the key information which consumers need to make informed purchasing choices.[114] In this sense, some commentators have observed that overly zealous government regulation in this area can actually backfire by creating additional consumer confusion, in that “by forcing sellers to change the name of their trade emblem ... shoppers [are denied] the benefit of any associative message that [may have] developed.”[115] It is also misleading in an economic investment-based sense to claim that trademarks and trade names have no intrinsic value. In the directly analogous field of pharmaceuticals, for example, one observer noted that: “Advertising, and ultimately, the success of a new pharmaceutical product will revolve around the trademark selected for it.”[116] Selecting a trademark is no easy matter, either, when there are well over half a million active federally registered marks.[117] It is perhaps no surprise, then, that “[l]etter for letter, companies invest more promotional dollars in the trademark than any other element in the product profile.” [118] In short, “[a] trademark is [arguably] the most important commercial asset that a company has in terms of promoting itself to customers[.]” [119] As even this brief discussion makes clear, then, FDA’s cursory, and almost dismissive, treatment of trademarks and trade names is wholly inappropriate.

The remainder of this paper will be structured to respond directly to FDA’s takings argument, which is presented in three parts on the basis of well-established takings doctrine:

The Supreme Court has declined to prescribe a “set formula” for identifying takings and instead has characterized takings analysis as an “essentially ad hoc, factual” inquiry (Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978)). Nonetheless, the Court has identified three factors for consideration in assessing whether a regulatory taking has occurred: The character of the governmental action; the regulation’s economic impact; and the extent to which the regulation interferes with reasonable investment-backed expectations (Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005 (1984)). The force of any one of these factors may be “so overwhelming 100 101 104 106 108 110 112 113 115 116 117 118 119 121 125 126 130 131 133 134 136 138 140 143 149 150 154 158 159 161 162 169 170 172 173 182 183 184 187 188 192 193 194 195 196 197 200 204 205 206 209 210 211 212 214 215 216 217 218 219 221 223 227 228 229 232 233 234 238 239 240 242 243 244 245 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 277 278 283 284 286 287 288 290 291 292 295 300 301 302 303 306 309 310 312 313 319 321 323 324 330 332 333 334 336 337 339 340 341 342 343 344 346 347 348 349 350 352 355 357 358 359 360 363 364 365 368 372 374 375 376 378 379 38 380 383 385 389 39 390 393 394 395 396 398 401 402 403 404 405 407 408 409 41 410 413 414 415 416 436 437 438 442 444 446 447 448 450 451 452 453 456 457 458 459 46 460 462 464 466 467 468 469 47 471 472 476 477 484 485 486 487 488 49 490 492 493 494 495 496 497 499 50 500 501 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 52 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732 733 734 735 736 737 739 74 740 742 75 750 751 752 753 754 755 756 757 759 761 762 763 764 765 766 767 768 769 77 771 772 774 775 776 777 778 780 781 783 784 785 786 787 788 789 790 791 792 793 795 796 797 798 80 802 803 804 807 82 83 84 86 88 89 90 92 93 96 98 99 that it disposes of the taking question” (Monsanto, 467 U.S. at 1005). When examined in light of these three factors, the rule does not effect a compensable taking under the Fifth Amendment. [120]

In fact, not only do the three factors indicate that the implied disease claims rule has resulted in a compensable regulatory taking, but ironically it is Monsanto , so prominently cited by FDA from the outset, which perhaps most effectively establishes that such a taking has occurred, on the basis of agency interference with reasonable investment-backed expectations (see discussion of takings factor three, infra ).

Takings Factor One: The Character of the Government Action

FDA cites the U.S. Supreme Court ruling in Keystone Bituminous Coal Ass’n v. Benedictis [121] as holding that “when a governmental action is taken in order to protect the public interest in health, safety, and welfare, this factor weighs heavily against finding a taking.”[122] To weigh heavily against is not to weigh conclusively against, of course. Also, Keystone is not analogous to the present regulatory situation for at least two reasons. First, in that case the parties challenging a state coal subsidence statute did not claim that it would make their mining activities “commercially impracticable.”[123] However, this is precisely the predicted impact of the implied disease claim rule on many dietary supplement manufacturers, as former Commission member Robert McCaleb explained at a House oversight hearing:

In the US, whole plants and their extracts have almost vanished from the pharmacy as approved drugs, but are sold as dietary supplements. This is largely the result of the high cost of drug research and gaining regulatory approval, combined with a lack of patent protection for natural products. Simply put, in the United States, natural medicines are not economically viable candidates for drug research and development. A company which spends the required $50-500 million to gain new drug approval for a plant would not have the exclusive right to sell it. In the absence of a realistic avenue for the approval of complex natural products as drugs, these products, many of which are approved as medicines in Europe and Asia, are thriving here as dietary supplements. [124]

In other words, being reclassified as a drug under the implied disease claims rule is, as a practical matter, a commercial death sentence, because the “research and regulatory costs to achieve approval of new drugs are [simply] too high for many non-patentable products.” [125] Keystone , then, is simply inapplicable to the dietary supplement industry on the commercial viability issue, for in Keystone petitioners could not “even point[] to a single mine that could no longer be mined for profit,”[126] whereas McCaleb’s testimony makes it clear that many dietary supplement manufacturers could potentially be driven from the market altogether by the new FDA rule.

On the second issue, that of protecting the public interest in health, safety, and welfare, FDA’s argument fares no better, for as discussed at length supra , the agency is singularly unable to demonstrate that there is a public health or safety crisis (e.g., analogous to the subsidence problem being addressed by the Pennsylvania statute in Keystone ) in the dietary supplement industry which was not being more than adequately handled under the regulatory regime which preceded the new rule.[127] In fact, a widely-accepted counter-argument, advanced by Congress itself in the DSHEA, is that the dietary supplement industry provides alternatives to prescription and over-the-counter (“OTC”) drugs which can ultimately promote public health and disease prevention.[128] FDA’s reference to Jarboe-Lackey Feedlots, Inc. v. United States [129] to support its claim that “[r]egulatory actions taken to protect the public health are rarely, if ever, held to constitute takings”[130] is, again, misleading in the present context. Jarboe-Lackey Feedlots concerned the seizure of meat unlawfully implanted with a prohibited drug, and the court held that such a seizure did not constitute a taking.[131] However, no one has argued in the present context that FDA does not have the authority to seize dietary supplements found to be unlawfully adulterated, or that the exercise of such authority constitutes a regulatory taking. What matters here is that the agency was able to capably conduct such seizures without the implied disease claims rule.[132]
FDA feels that the restrictions on the “use of certain terms, including terms that appear in some trademark and trade names ... do[] not rise to the level of a taking”[133] because such restrictions are “´borne to secure “the advantage of living and doing business in a civilized community”’ (Andrus v. Allard, 444 U.S. 51, 67 (1979) (quoting Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 422 (1922) (Brandeis, J., dissenting))).”[134] Andrus v. Allard involved a takings challenge to the Eagle Protection Act, which prohibited the sale of bird parts taken lawfully even before the effective date of federal protection. [135] In sharp contrast to FDA’s self-serving reading of DSHEA in the context of the implied disease claims rule, however, the Court in Andrus v. Allard found that the implementing agency’s interpretation of the Eagle Protection Act was clearly based on the plain language of the statute, wherein Congress concluded “that the possibility of commercial gain presents a special threat to the preservation of the eagles.”[136] It very much matters that the specific facts in Andrus v. Allard are so inapposite to those at issue here, because as the Court said in that case: “There is no abstract or fixed point at which judicial intervention under the Takings Clause becomes appropriate. Formulas and factors have been developed in a variety of settings [cite omitted]. Resolution of each case, however, ultimately calls as much for the exercise of judgment as for the application of logic” [137] (emphasis added). In other words, while established legal doctrine is certainly important in Takings Clause cases, case-by-case consideration of the specific facts is crucial. [138]

The agency further argues, citing Keystone ,[139] that the new rule would be of benefit to dietary supplement manufacturers, because it “will help ensure a level playing field in the dietary supplement market because no manufacturer will be able to make an implied disease claim without prior FDA review under the health claim or new drug standard.”[140] The reader of the Final Rule document, however, searches in vain for any clear indication that the dietary supplement industry itself had raised such a “level playing field” concern in the first place.[141] This is not surprising, since complaints of this nature about DSHEA deregulation of dietary supplements tend to come from the pharmaceutical industry, and arguably out of self-interest. The following statement is typical of such complaints: “If disease is defined narrowly, then dietary supplement manufacturers will consequently be permitted to make what are today generally understood to be drug claims. They will be free to do this without undertaking the extensive and costly research that is essential before the public and health professionals can rely on the safety of new drugs.”[142] But since the pharmaceutical manufacturers acknowledge that “Congress was mindful that DSHEA not erode important statutory incentives that foster pharmaceutical research and development,”[143] they should attempt to persuade Congress to amend DSHEA if they are unhappy with the ultimate outcome produced by the statute, rather than lobbying FDA to undermine the Act through regulatory subterfuge.[144]

The Supreme Court’s decision in Hanover Star Milling v. Metcalf is cited by FDA for the proposition that “deprivation of a trademark alone is not a deprivation of property[,] because the trademark is ‘merely a protection for the good will,’” [145] and so only if a regulation takes the dietary supplement manufacturer’s goodwill also would the regulation be considered a taking.[146] The agency then claims that since dietary supplement manufacturers can still choose between changing their trademark or trade name, or, for example, seeking approval for their products as drugs, the goodwill is not taken by the regulation. Further, “[even] if a manufacturer chooses to change its trade name or trademark, it will not be deprived of the goodwill underlying them but only of that particular symbol of the goodwill. The manufacturer will still be able to transfer the goodwill associated with its products to another trade name or trademark.”[147] This is disingenuous reasoning, however, for, as discussed supra , trademarks and trade names are not easily replaced, and more importantly, consumers who associate goodwill with the current trade name or trademark may in reality find it quite difficult/confusing to “transfer” that goodwill to a new trade name or trademark.[148] In Hanover Star Milling , for example, the Court speaks in approving tones about how the value of a trademark was established as a result of hard work on the part of a corporation: “In 1904 the Hanover Company began and has since prosecuted a vigorous and expensive campaign of advertising its Tea Rose flour [in the American South].”[149] The trademark at issue was found by the Court as a result to be fully deserving of legal protection in the South, but not in another region of the country in which Tea Rose flour had not yet been sold or advertised. The Court was simply making the point that a trademark has no property value unless it is used , rather than merely “adopted.”[150] There is of course no issue of this nature in the case of dietary supplements manufacturers. They are using their trademarks and trade names quite actively, which is why they have raised a takings challenge in the first place.

FDA’s more general anti-takings argument, made on the basis of the agency’s questionable interpretation of the goodwill interest, is ultimately no more convincing:

Case law on the treatment of goodwill under the Takings Clause supports the view that no taking will occur as a result of [the implied disease claims rule]. The general rule is that the owner of a place of business to which the government takes title is not entitled to compensation for loss of goodwill (United States v. General Motors Corp., 323 U.S. 373, 379 (1945)). The reason for the rule is that the business may reopen at another location to which the goodwill may be transferred (Kimball Laundry Co. v. United States, 338 U.S.1, 11-12 (1949)). Only where the

government operates the business, thereby depriving the owner of its

´´going-concern value,'' is there a compensable taking of goodwill. In

Kimball, the Supreme Court held that the government owed compensation

for the loss of goodwill associated with the temporary taking of a

laundry during World War II. This action was held to be a taking of

goodwill because the government not only physically took but also

operated the laundry during the war (Kimball, 338 U.S. at 12-13). Thus,

during the period that the government operated the laundry, there was

no business to whose benefit the goodwill associated with the private

laundry business could inure. Here, the government is not taking any

trademark or trade name for its own use, nor is it shutting down the

businesses that own them. Therefore, the goodwill symbolized by the

trademark or trade name will remain with these businesses.[151]

As noted previously, however, because of the extremely high cost of the FDA drug-approval process, the “remaining” goodwill for the many non-patentable dietary supplement products which may be caught in the regulatory web of the implied disease claims rule is potentially worthless, for there is no guarantee, without patent protection, that the investment required to get through the drug-approval process can ever be recouped in the marketplace.[152] Also, General Motors itself was about the loss of goodwill “which inheres in the location of the land [the business is situated on],”[153] for which there is certainly no clear analogy in an intangible property interest case like this one. So, too, with the (non-compensable) business moving costs discussed in Kimball Laundry [154] (i.e., even if a business must absorb costs to move to a new location, it can move its goodwill with it, in a manner not at all relevant for dietary supplement manufacturers who have lost a trademark, trade name, or related label claim). Although FDA acknowledges at the outset of its takings argument that the Supreme Court characterizes takings analysis as requiring an “´essentially ad hoc, factual inquiry,’”[155] the agency stubbornly continues throughout,[156] as here, to refer to a number of cases which are not even remotely factually relevant to the matter at hand. This suggests a sort of desperate doctrinal grasping at straws by an agency well aware of the highly tenuous nature of its position.

This tenuousness is nowhere better demonstrated than in the following statement: “Finally, although trademarks and trade names can be property when they symbolize and protect the goodwill associated with a business, there can be no property interest in an illegal product.”[157] This is the ultimate in circular reasoning; the product becomes “illegal” only as a result of FDA’s interpretation of its own thoroughly arbitrary line-drawing.[158] If FDA wants to draw such a line more narrowly than Congress indicated would be the case in DSHEA, then there has been a regulatory taking, and the agency must pay up. FDA cites Lucas [159] as a basis to insist that its implied disease claims rule “merely clarif[ies] the line between acceptable structure/function claims and prohibited disease claims. ([Lucas , 505 U.S. at 1030, holds that] the use of [property] for what are now expressly prohibited purposes was always unlawful, and ... it was open to the State at any time to make the implication of those background principles of ... law explicit” without paying compensation.)”[160] But Lucas will not serve FDA’s purpose, for at least two major reasons. First, the principle stated in the quoted excerpt does not apply here, since any “background principles of law” were superceded by DSHEA, with its explicit statement that Congress wanted regulation of the dietary supplement market liberalized.[161] In fact, FDA has been reigned in by both Congress and stakeholders so many times for its overzealous regulation of dietary supplements[162] that it would be arguably foolish for the industry to perceive yet another dramatic FDA regulatory departure of this type (i.e., a departure from the stated will of Congress) as somehow authoritative enough to defeat a takings challenge. Second, Lucas himself “did not take issue with the validity of the [state agency regulatory ban on construction] as a lawful exercise of South Carolina’s police power, but contended that the Act’s complete extinguishment of his property’s value entitled him to compensation regardless of whether the legislature had acted in furtherance of legitimate police power objectives.”[163] The Lucas Court’s acceptance that such a contention could be valid depending on the specific facts and applicable law (the case was remanded to the state supreme court on that basis[164] ), combined with the reasonable assumption that DSHEA provides the only relevant “background principles of law,” arguably means that even if dietary supplement manufacturers were to accept the implied disease claims rule as a facially valid exercise of agency power under DSHEA, they might still be entitled to compensation if the regulatory taking of trademarks and trade names resulted in “complete extinguishment” of their property’s value. Such “complete extinguishment” of property value is, as previously noted, a very real threat for many dietary supplement manufacturers.[165]

Takings Factor Two: The Economic Impact of the Government Action

While it is true that a regulation’s economic effect may be great without rising to a level of a taking,[166] in the discussion of the second factor in its takings analysis FDA fails to cite any relevant case in which a takings challenge was rejected by a federal court when the potential diminution in value was 100 percent. The agency relies on Pace Resources, Inc. v. Shrewsbury Township [167] instead, which proves to be a singularly odd choice in the present context. In Pace , a developer alleged that it had been denied all economically viable uses of its 37 acres of property by a zoning change, but the court found that “although there has been a substantial diminution in value, this property retains a substantial value that establishes the existence of residual economically feasible uses.”[168] In contrast, as noted in the discussion of takings factor one, supra , the implied disease claims rule could potentially result in a total loss of value for a dietary supplement product.[169] Ironically for FDA, this important distinction is emphasized in Pace itself, citing Keystone [170] for the principle that: “[E]ven where distinct, investment-backed expectations are involved [see discussion of takings factor three, infra ], a taking through exercise of the police power occurs only when the regulation ‘has nearly the same effect as the complete destruction of [the property] rights’ of the owner. Keystone ... 771 F.2d at 716.”[171]

FDA does concede that seeking new drug approval or health claim authorization as a result of the implied disease claims rule would require the dietary supplement manufacturer involved to make “significant expenditures of time and money,”[172] but for non-patentable dietary supplement products this is, as noted previously in the discussion of takings factor one, supra ,[173] a dramatic understatement. As for the time factor, one knowledgeable agency observer estimated that “[a] product that is required to proceed through the FDA regulatory mechanism imposed for new drugs is likely to be delayed in the regulatory system for up to fourteen years.”[174] FDA responds to the cost concern with a doctrinal shrug: “Obtaining new drug approval or authorization to make a health claim may be costly, but it is not the kind of economic impact that leads to a taking. ‘Requiring money to be spent is not a taking of property’ (Atlas Corp.) v. United States, 895 F.2d 745, 756 (Fed. Cir.), cert. denied, 498 U.S. 811 (1990)).”[175] Once again, however, the agency has shown poor judgment in its selection of supporting precedent. Atlas involved a regulatory challenge to the federal Uranium Mill Tailings Radiation Control Act (UMTRCA) by Western Nuclear, which alleged that UMTRCA required it to spend more money for the reclamation and decommissioning of its uranium tailings and its mill following the termination of its license than the entire value of the mill itself, “and that such a requirement is an unconstitutional taking under the Fifth Amendment.”[176] Western Nuclear fails in its takings claim, however, for lack of evidence: “[C]omparison of the cost of tailings stabilization to the value of its mill does not show the economic impact of the regulations, other than merely suggesting that the cost is a large amount. Western Nuclear has not claimed that the government has interfered with its production of uranium or has made the use of its mill unprofitable. The allegations Western Nuclear has made do not show any economic impact that would support a determination that a ‘taking’ has occurred[177] (emphasis added). The implied disease claims rule, by contrast, could clearly make a dietary supplement product completely unprofitable. Atlas , on its facts, simply does not apply to the present case.

Takings Factor Three: Interference with Reasonable Investment-Backed Expectations

Do dietary supplement manufacturers have a reasonable investment-backed expectation in continuing to use their trademarks or trade names in spite of the implied disease claims rule? FDA answers in the negative, based on two premises, which will be addressed in turn:

First, the Supreme Court has said that it is unreasonable to have high expectations in personal property (i.e., property other than land): “[I]n the case of personal property, by reason of the State’s traditionally high degree of control over commercial dealings, [the property owner] ought to be aware of the possibility that new regulation might even render his property economically worthless ....” (Lucas v. South Carolina Coastal Council, 505 U.S. at 1027-28).”[178]

FDA over-reads this passage, however: note the Court’s careful use of qualifying terms such as “possibility” (as opposed to, e.g., “certainty”) and “might” (rather than, e.g., “shall”). The Court’s careful phrasing here is not surprising, since nowhere in Lucas does it even hint that it is overruling its decision in Monsanto (see discussion, infra ), the leading takings case dealing with intangible commercial property, and hence the one most relevant to a dispute involving trademarks and trade names. FDA is guilty of misleadingly selective editing here as well, for its excerpt omits the crucial fact that this particular passage in Lucas is accompanied by a cite to Andrus v. Allard ,[179] and as has already been noted, supra , that case is clearly inapposite to the type of takings matter at issue herein.[180]

The agency’s second premise is the more substantial one, and merits lengthier treatment; but it, too, ultimately fails on its own terms:

Second, the dietary supplement and drug industries are a “focus of great public concern and significant government regulation” (Monsanto, 467 U.S. at 1008). A product that bears a disease claim, whether that claim appears in a trademark, trade name, or elsewhere, has been subject to regulation as a drug since 1906, except that since 1990 the act has permitted conventional foods and dietary supplements to bear authorized health claims without drug approval. Since 1938, drugs (with certain narrow exceptions) have been subject to a premarket approval requirement. Given this longstanding history of close regulation, it cannot be reasonable for a manufacturer or distributor to expect to be able to make disease claims without prior authorization from FDA.[181]

The agency finally reveals its true bias here, perhaps unwittingly -- note how cavalierly it lumps the “dietary supplement and drug industries” together, as both being subject to “significant government regulation.” It is as if DSHEA and other FDA-curbing measures[182] had never been passed by Congress at all. The rest of this passage suffers from a similar kind of willful blindness, as the highly problematic agency-created category of implied disease claims is not referenced at all.

In the end, however, no degree of confident posturing can save FDA’s anti-takings argument, for it is fatally undermined by the very case the agency cites here – Monsanto . The Monsanto Court held on the facts before it that trade secret data, despite its intangible nature, was property protected by the Takings Clause of the Fifth Amendment. [183] Because, as acknowledged by FDA at the outset of its anti-takings argument, trademarks and trade names are also intangible property interests,[184] Monsanto is the Supreme Court decision most directly relevant to the matter at hand. The pertinent history of the case when it reached the Court is described as follows:

The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) authorizes the Environmental Protection Agency (EPA) to use data submitted by an applicant for registration of a covered product

(hereinafter pesticide) in evaluating the application of a subsequent applicant, and to disclose publicly some of the submitted data. Under the data-consideration provisions ... as amended in 1978, applicants now are granted a 10-year period of exclusive use for data on new active ingredients contained in pesticides registered after September 30, 1978, while all other data submitted after December 31, 1969, may be cited and considered in support of another application for 15 years after the original submission if the applicant offers to compensate the original submitter .... Data that do not qualify for either the 10-year period of exclusive use or the 15-year period of compensation may be considered by EPA without limitation. Section 10, as amended in 1978, authorizes, in general, public disclosure of all health, safety, and environmental data even though it may result in disclosure of trade secrets. Appellee, a company headquartered in Missouri, is an inventor, producer, and seller of pesticides, and invests substantial sums in developing active ingredients for pesticides and in producing end-use products that combine such ingredients with inert ingredients. Appellee brought suit in Federal District Court for injunctive and declaratory relief, alleging, inter alia, that the data-consideration and data-disclosure provisions of FIFRA effected a "taking" of property without just compensation, in violation of the Fifth Amendment .... The District Court held that the challenged provisions of FIFRA are unconstitutional, and permanently enjoined EPA from implementing or enforcing those provisions.[185]

The Supreme Court’s analysis focuses on reasonable, investment-backed expectations. Because prior to 1972, FIFRA was silent as to EPA’s authorized use and disclosure of data submitted to it along with an application for registration, the Court found that there could have been no taking during that period based on such expectations.[186] This was also true after the 1978 amendments, which prescribed specific limits on confidentiality. The Court finds that a taking may have taken place, however, “under the statutory scheme in effect between October 22, 1972, and September 30, 1978, [when] a submitter was given an opportunity to protect its trade secrets from disclosure by designating them as trade secrets at the time of submission. The explicit governmental guarantee to registration applicants of confidentiality and exclusive use with respect to trade secrets during this period formed the basis of a reasonable investment-backed expectation.”[187] DSHEA arguably represents a similarly explicit governmental guarantee to the dietary supplement industry; for example, recall the Congressional finding in the statute itself: “the Federal Government should not take any actions to impose unreasonable regulatory barriers” on the dietary supplement industry.[188] Logically, this statement signaled to the industry an unequivocal rejection of pre-DSHEA constraints of the type FDA is now attempting to re-impose through the implied disease claims rule. And this important signal came to the industry from both the legislative and executive branches, for surely this rule lacks, either explicitly or implicitly, the “common sense” which the President, in his signing statement, asserted that DSHEA was bringing “to the treatment of dietary supplements under regulation and law.”[189]

In Monsanto the Court found that “the force of [the third] factor,” government regulatory interference with reasonable investment-backed expectations, “so overwhelming ... that it disposes of the taking question[.]”[190] It is interesting to note in this vein that the Court denied that a taking based on a reasonable investment-backed expectation about non-disclosure of industry data could have taken place in this context prior to 1972, because: “In an industry [i.e., insecticides] that long has been the focus of great public concern and significant government regulation, the possibility was substantial the Federal Government, which had thus far taken no position on disclosure of health, safety and environmental data regarding pesticides, upon focusing on the issue, would find disclosure to be in the public interest”[191] (emphasis added). DSHEA, by contrast, represented a clear position statement by the Federal Government at literally its highest levels. For the 1972 to 1978 regulatory period, not only did the Monsanto Court find an explicit government guarantee that formed the basis of a reasonable investment-backed expectation, but the Court also found utterly unconvincing EPA’s assertion that Monsanto’s data retained usefulness for the corporation even after it was disclosed, “for example, as bases from which to develop new products or refine old products, [or] as marketing and advertising tools[,]” because the company had lost its “competitive advantage” over others enjoyed as a result of its previously exclusive access to the data.[192] Note the direct analogy here to FDA’s similarly unconvincing claims that dietary supplement manufacturers will still retain something of value even after their trademarks or trade names are taken as a result of the implied disease claim rule.[193]

Comparing a Previous FDA Anti-Takings Analysis: The Tobacco Regulations

FDA has performed one other major anti-takings analysis in recent years, in the area of tobacco regulation, [194] and while the per se legality of FDA regulation of tobacco is currently before the U.S. Supreme Court,[195] this anti-takings analysis provides a useful point of comparison for the arguments the agency presents in the case of dietary supplements. The takings claim from the tobacco industry was prompted by regulations prohibiting sponsorship of athletic and other events in the brand name of cigarette or smokeless tobacco products.[196] What matters here is that even if one concedes to FDA’s anti-takings argument in the tobacco regulation context, that same argument serves to undermine, by contrast, the agency’s anti-takings stance against the dietary supplement industry. In discussing the character of the governmental action, for example, FDA notes that the tobacco regulations “are intended to help reduce significantly the harms that use of tobacco products among this age group [under 18] causes. They do so by prohibiting the sale of tobacco products to persons under the age of 18.”[197] Because of the limited nature of this regulatory action, however, FDA can assure the tobacco industry, when discussing the potential economic impact of the government action, that while non-tobacco trademarks cannot be used any longer to market tobacco products, “they retain the vast bulk of their value as trademarks for the product or brand for which they were originally developed.”[198] No comparable assurance can be made to dietary supplement manufacturers affected by the implied disease claims rule, of course, for classifying a dietary supplement product as a drug is equivalent to destroying its market value altogether.

The “interference with reasonable investment-backed expectations” factor provides the most damning contrast of all between FDA’s anti-takings rationale in the context of tobacco regulation versus that given in relation to the implied disease claims rule for dietary supplements. The tobacco industry, for example, has experienced a steadily increasing degree of government regulation over the past few decades on the Federal, state, and local levels.[199] The particular restrictions reflected in the tobacco industry regulations had been previously proposed to and considered by Congress, and industry representatives had openly acknowledged before Congress “that pending legislation would, like several previous legislative proposals, effectively ban advertisements for tobacco products.”[200] This scenario could not be further removed from that of the implied disease claims rule, inflicted by FDA on a dietary supplement industry which had been relying on the will of Congress as expressed in DSHEA in order to plot its growth. Finally, FDA notes in supporting its anti-takings analysis in the tobacco context that “because the market in tobacco vending machines is declining, investment-backed expectations in both vending machines and vending machine contracts are not reasonable.”[201] Growth trends in the dietary supplement industry, of course, point quite spectacularly in the opposite direction.[202] In sum, then, after all three traditional takings factors are considered, the relative strengths of FDA’s anti-takings argument in the area of tobacco regulation only serve to further expose the glaring weaknesses of the anti-takings argument made in support of the implied disease claims rule.

IV. CONCLUSION

Recall that, according to the Report of the Commission on Dietary Supplement Labels, DSHEA was passed at least in part “because FDA appeared to be reproposing regulatory provisions withdrawn or struck down by court actions in previous years.”[203] Both Congress and the President assumed that DSHEA would liberalize regulation of dietary supplements. If the arguments presented in this paper are valid, then, it is possible to assert that FDA’s implied disease claims rule was passed in defiance of all three branches of the federal government, including the agency’s own. But one need not go that far to conclude that FDA’s anti-takings argument suffers from serious, and likely fatal, flaws. The agency cannot excuse its new rule from judicial scrutiny by cloaking itself in public safety concerns, because it neither presents evidence of a current or imminent public health crisis caused by “under-regulated” dietary supplements, nor does it demonstrate that its existing enforcement mechanisms were inadequate without the addition of the new rule. FDA’s rationales for rejecting regulatory alternatives to the implied disease claims rule are similarly unconvincing. Most importantly, the agency fails on the terms of its own takings analysis. It grossly undervalues the intangible property interests represented by trademarks and trade names, for example. In reviewing all three takings factors, FDA regularly cites cases which are not even remotely factually relevant to the dietary supplement context, in spite of the Supreme Court’s repeated emphasis on the need for case-specific analysis in the takings area. The one major case which clearly does apply to intangible property interests, Monsanto , quite effectively demonstrates that the implied disease claims rule could result in a regulatory taking for many dietary supplement manufacturers. And finally, FDA’s anti-takings analysis as applied to regulation of the tobacco industry serves only to highlight the weaknesses of its anti-takings analysis here. Ironically, given the quick responsiveness of Congress and the President in recent years to the loudly-expressed calls by consumers of dietary supplements for deregulation of this market, a takings challenge in court may turn out to be entirely unnecessary. One can only hope that FDA will spare itself the embarrassment of yet another Congressional reversal by retracting the implied disease claims rule in favor of some of the less extreme, but arguably no less effective, regulatory alternatives which it rejected previously.[204]


[1] The term “dietary supplement” is defined by statute at 21 U.S.C. § 321(ff) (1999), which reads in part: “(1) ... a product (other than tobacco) intended to supplement the diet that bears or contains one or more of the following dietary ingredients: (A) a vitamin; (B) a mineral; (C) an herb or other botanical; (D) an amino acid; (E) a dietary substance for use by man to supplement the diet by increasing the total dietary intake; ....”

[2] Dietary Supplement Health and Education Act of 1994 (“DSHEA”), Pub. L. No. 103-417 (1994).

[3] See FDA TALK PAPER: FDA FINALIZES RULES FOR CLAIMS ON DIETARY SUPPLEMENTS (Jan. 5, 2000) (“FDA TALK PAPER”) . See generally 21 U.S.C. § 343(r)(6) (1999).

[4] FDA TALK PAPER, supra at note 3.

[5] Regulations on Statements Made for Dietary Supplements Concerning the Effect of the Product on the Structure or Function of the Body; Final Rule, 65 Fed. Reg. 999, at 1022 (FDA 2000) (to be codified at 21 CFR pt. 101) (“Structure/Function Final Rule”).

[6] See id .

[7] See FDA TALK PAPER, supra note 3; 21 U.S.C. § 343(r)(6)(B) & (C) (1999).

[8] See , e.g. , Dietary Supplement Health and Education Act: Is the FDA Trying to Change the Intent of Congress?: Oversight Hearing Before the House Committee on Government Reform , 106th Cong. (1999) (“1999 House Oversight Hearing”): “The current proposal [see note 9, infra ] seems to be a stubborn attempt [by FDA] to reverse the major provisions of DSHEA and prevent most statements of nutritional support.” (statement of Robert S. McCaleb, President, Herb Research Foundation; McCaleb had been previously appointed by the President to serve as one of seven members of the Commission on Dietary Supplement Labels, which made recommendations to FDA on how such labels should be regulated. See infra notes 34 through 37, and accompanying text).

[9] For the rule in its proposed form, see Regulations on Statements Made for Dietary Supplements Concerning the Effect of the Product on the Structure or Function of the Body; Proposed Rule and Dietary Supplements: Comments on Report of the Commission on Dietary Supplement Labels, 63 Fed. Reg. 23623 (FDA 1998) (to be codified at 21 CFR pt. 101) (“Structure/Function Proposed Rule”).

[10] For a further discussion of First Amendment issues raised by FDA regulation of dietary supplements in the area of health claims, and a related discussion of FDA’s “unarticulated standard” of “significant scientific agreement” in this area, which was held to be “arbitrary and capricious” under the Administrative Procedure Act (5 U.S.C. § 706(2)(A) (1994)), see Pearson v. Shalala, 164 F.3d 650 (D.C. Cir. 1999). For FDA’s attempt to respond to the D.C. Circuit’s concerns in Pearson, see Guidance for Industry: Significant Scientific Agreement in the Review of Health Claims for Conventional Foods and Dietary Supplements, FDA Docket No. 99D-5424 (Dec. 22, 1999) (“Dec. 1999 Guidance on Health Claims”).

[11] See Structure/Function Final Rule, supra note 5, at 1037-1043.

[12] See id. at 1041-1043.

[13] “[N]or shall private property be taken for public use, without just compensation.” U.S. CONST. amend. V.

[14] See Structure/Function Final Rule, supra note 5, at 1041. “Regulatory takings” can be defined as “government action which does not involve involuntary relinquishments to government of a recognized interest in private property, but results from some diminution of the value of such property or rights associated with it.” Maurice J. Holland, Symposium: Ill-Assorted MusingsAbout Regulatory Takings and Constitutional Law , 77 OR. L. REV. 949, at note 6 (1998).

[15] I have purposely assumed a subjective rather than objective stance in this paper, on the assumption that FDA, in issuing its Final Rule, put forth its best possible argument on the takings issue. The goal herein, then, is to present the strongest possible challenge to the FDA position, in order to highlight its possible flaws.

[16] See 21 U.S.C. §§ 301-395 (1999). Much of this background information on dietary supplements is summarized from the Report of the Commission on Dietary Supplement Labels, U.S. G.P.O. Stock No. 017-001-00531-2 (1997) (“Commission Report”), ch. II.

[17] Commission Report, supra note 16, at 1 of 6.

[18] See id .

[19] Id. at 2 of 6.

[20] See also supra note 10.

[21] Commission Report, supra note 16, at 3 of 6.

[22] Id.

[23] 1999 House Oversight Hearing (opening statement of Chairman Dan Burton), supra note 8, at 1-2 of 4.

[24] Commission Report, supra note 16, Executive Summary at 1 of 10.

[25] “The dietary supplement industry has grown exponentially since the passage of DSHEA. Surveys show that more than half of the U.S. adult population uses dietary supplement products. Annually, consumers spend approximately $12 billion on dietary supplements ....” 1999 House Oversight Hearing (statement by Jane E. Henney, M.D., FDA Commissioner), supra note 8, at 2 of 8.

[26] Id. (opening statement of Chairman Dan Burton), at 4 of 4.

[27] See, e.g., Public Meeting on Regulations on Statements Made for Dietary Supplements Concerning the Effect of the Product on the Structure or Function of the Body , Docket No. 98N-0044: Effects of Dietary Supplements on Structure/Function of Body – Transcript Only, at 209 of 219 (FDA Aug. 4, 1999) (“FDA Aug. 1999 Public Meeting”): “We continue to believe that the FDA’s proposed regulations are designed to thwart the Congressional intent behind DSHEA to guarantee the dietary supplement industry’s ability to convey truthful and non-misleading health information to the American public” (statement of Marc Ullman, J.D., representing Traco Labs, Inc., a manufacturer and supplier of dietary supplements).

[28] See DSHEA, supra note 2. This discussion is for practical reasons limited to only select aspects of this Act, i.e., those which relate most directly to the takings analysis presented in the text, infra .

[29] Id. § 2.

[30] See Commission Report, supra note 16, at ch. I.

[31] See DSHEA § 4; 21 U.S.C. § 342(f)(1) (1999).

[32] See Commission Report, supra note 16, at ch. I; 21 U.S.C. § 343(r)(6).

[33] See, e.g., FDA Aug. 1999 Public Meeting, supra note 27, at 83 of 219 (statement of R. William Soller, Ph.D., Consumer Healthcare Products Association): “The statutorily required disclaimer is intended to explicitly and effectively eliminate the potential for structure/function claims to be interpreted as implied disease claims ... [h]ence, there is no need for FDA to seek additional regulatory constructs to address the subject of implied disease claims.”

[34] See DSHEA,supra note 2, § 12(a).

[35] See id. at (b)(1) & (2).

[36] DSHEA, supra note 2, § 12(c).

[37] See Commission Report, supra note 16.

[38] See DSHEA, supra note 2, § 12(e)(3). For the notice of proposed rulemaking and FDA comments on the Commission Report, see supra note 9.

[39] See DSHEA, supra note 2, § 12(b)(2).

[40] Commission Report, supra note 16, ch. III at 15 of 31. The seven members of the Commission included: Chair Malden C. Nesheim, Ph.D., Professor of Nutrition at Cornell Univ.; Annette Dickinson, Ph.D., Director of Scientific and Regulatory Affairs for the Council for Responsible Nutrition (see, e.g., infra notes 60 - 66, and accompanying text); Norman R. Farnsworth, Ph.D., a Professor of Pharmacognosy at Univ. of Ill. at Chicago; Margaret Gilhooley, L.L.B., Professor of Law at Seton Hall (see infra note 41 and accompanying text); Shiriki K. Kumanyika, Ph.D., M.P.H, Professor of Nutrition and Dietetics at Univ. of Ill. at Chicago; Robert S. McCaleb, President, Herb Research Foundation (see , e.g. , supra note 8, infra note 65 and accompanying text); Anthony Podesta, President, Podesta Associates.

[41] Commission member Margaret Gilhooley, for example, later testified before a Congressional committee that she thought FDA’s proposed rule (and the final rule is somewhat less restrictive on label claims than the proposed rule) did not go far enough: “I think the FDA proposal needs to be revised to restrict supplement claims that relate to the maintenance of bodily conditions and functions closely associated with the occurrence of disease and beyond the ability of the consumer to evaluate.” 1999 House Oversight Hearing, supra note 8 (statement of Professor Margaret Gilhooley of Seton Hall Law School). Gilhooley even interprets a label claim to “maintain normal” cardiovascular function as an implied disease claim, because it “implies a need to use the product to prevent an abnormality, an abnormality which would be a disease.” See id. In light of such hard-line reasoning, which, again, goes beyond even that of FDA in its final rule, it is difficult to determine exactly what kind of structure/function claim would not be a disease claim.

[42] See Commission Report, supra note 16, ch. III at 16 of 31.

[43] See id. at 16, 17 of 31.

[44] See supra note 32 and accompanying text.

[45] See Commission Report, supra note 16, ch. III at 18 of 31.

[46] See supra notes 7 and 8, and accompanying text. In the final rule FDA did abandon its highly controversial attempt to change the definition of “disease” from what it had been at the time DSHEA was passed, a change which many commenters felt would have greatly increased its regulatory control over dietary supplements, even more than the regulatory notion of “implied disease claims” alone will. For FDA’s explanation of why it ultimately withdrew its proposed regulatory definition of disease, see Structure/Function Final Rule, supra note 5, at 1009-1011.

[47] Structure/Function Proposed Rule, supra note 9, at 23626.

[48] See FDA Aug. 1999 Public Meeting, supra note 27, at 209 of 219 (statement of Marc Ullman).

[49] See, e.g., id. at 215 of 219 (statement of Scott Bass, J.D.).

[50] 1999 House Oversight Hearing, supra note 8, at 8 of 8 (statement of Jane E. Henney, M.D., FDA Commissioner).

[51] FDA Aug. 1999 Public Meeting, supra note 27, at 134 of 219.

[52] Who, then is “made happy” by the implied disease claims regulation? Very few stakeholders, apparently: “FDA received over 235,000 submissions in response to the proposed rule. Many of these were form letters, but over 22,000 were individual letters from the dietary supplement industry, trade associations, health professional groups, and consumers. Almost all the comments from the dietary supplement industry and from individuals, which made up the vast majority of the comments, objected to all or part of the proposed rule, arguing that it inappropriately restricted the structure/function claims that could be made for dietary supplements. Most of the comments from health professional groups and groups devoted to particular diseases supported the proposed rule, or believed it did not go far enough in limiting structure/function claims for dietary supplements.” Structure/Function Final Rule, supra note 5, at 1000.

[53] See Structure/Function Final Rule, supra note 5, at 1050.

[54] See also supra notes 1 - 6 and accompanying text.

[55] Structure/Function Final Rule, supra note 5, at 1050 (to be codified at 21 C.F.R. § 101.93(g)).

[56] To be codified as 21 C.F.R. § 101.93(g)(2)(x).

[57] See Structure/Function Final Rule, supra note 5, at 1029-1030.

[58] Id. at 1030.

[59] FDA Aug. 1999 Public Meeting, supra note 27, at 196 of 219 (statement of Jonathan W. Emord, Emord and Associates, the attorney who represented the plaintiffs in the Pearson v. Shalala case (see supra note 10)).

[60] See supra notes 34 - 37 and accompanying text; see also supra note 40.

[61] FDA Aug. 1999 Public Meeting, supra note 27, at 148 of 219.

[62] That is, the relevant statutory provision reads simply: “A statement under this subparagraph [21 U.S.C. § 343(r)(6) (1999)] may not claim to diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases.”

[63] See FDA Aug. 1999 Public Meeting, supra note 27, at 186 of 219.

[64] FDA conceded “that it may be very difficult to draw clear lines between structure/function claims and disease claims. Despite the difficulty, implementing section 403(r)(6) of the act requires the agency to draw these lines. FDA would not be carrying out its statutory obligations if it abdicated responsibility for distinguishing between the two types of claims, and instead permitted dietary supplements [sic] to disseminate information about specific disease states.” Structure/Function Final Rule, supra note 5, at 1005. Of course, since nothing in Section 403(r)(6) required establishing a regulatory schema for these so-called implied disease claims, they are arguably an invention of the agency itself.

As one stakeholder explained to FDA: “[I]t was not until DSHEA that the Congress explicitly intended to broaden the type and nature of claims that could be made to consumers. As a consequence, structure/function claims may imply disease or health condition benefits. If such claims are truthful, nonmisleading, and substantiated, they are within the intent of Congress and should not be challenged by the agency” (emphasis added). FDA Aug. 1999 Public Meeting, supra note 27, at 138-139 of 219 (statement of Jack Martin (on behalf of Loren Israelson, J.D.), Utah Natural Products Alliance). Even prior to the issuance of the rule in controversy here, if such claims were found to be untruthful, misleading, or unsubstantiated, they were already subject to FDA sanction and removal under Section 343(r)(6)(B).

[65] Robert S. McCaleb, also a former member of the Commission (see, e.g., supra notes 8, 40 and accompanying text), criticized FDA’s regulatory approach in even stronger terms: “FDA’s proposed rules for implementation of DSHEA ... appear to be an attempt to circumvent the language of DSHEA by preventing the very type of claims which DSHEA was designed to allow. ... It is time for the FDA to abandon its continuing battle against dietary supplements , and against the right of the public to access truthful information about the known effects of supplements. FDA’s proposed rules are a step in the wrong direction” (emphasis added). 1999 House Oversight Hearing, supra note 8, at 4, 9 of 9 (statement of Robert S. McCaleb, President, Herb Research Foundation).

66 FDA Aug. 1999 Public Meeting, supra note 27, at 187 of 219.

[67] Statement by Joseph A. Levitt, Director, Center for Food Safety and Applied Nutrition (“CFSAN”), Food and Drug Administration, Department of Health and Human Services, Before the Committee on Government Reform, U.S. House of Representatives, at 1 of 14. (May 27, 1999) (“CFSAN Statement to Congress”).

[68] Id. at 3 of 14.

69 See id. at 9-10 of 14.

[70] FDA Commissioner Henney had about a month earlier recounted the FDA’s success in the digitalis episode before the same Congressional committee. See 1999 House Oversight Hearing, supra note 8, at 5 of 8 (statement by Jane E. Henney, M.D., FDA Commissioner).

[71] Structure/Function Final Rule, supra note 5, at 1001. Later in the same document, the FDA reiterates: “There are also serious public health questions raised by implied disease claims.” Id. at 1013. But this is mere argument by assertion; serious health questions may indeed by “raised,” yet that of course does not in any way prove that serious health problems exist in this area, which is surely necessary to justify the kind of constriction of the DSHEA-mandated regulatory scheme which the implied disease claims rule represents.

[72] This is not to imply that the agency did not have a right to be proud of its enforcement efforts, but again, if such efforts were successful, why then burden the dietary supplement industry with the implied disease claims rule? As a disproportionate response to a modest problem, the new rule is arguably akin to killing the proverbial fly with a sledgehammer. See infra note 74 and accompanying text.

[73] FDA’S OFFICE OF THE COMMISSIONER, ANSWERS TO STAKEHOLDERS’ QUESTIONS (April 28, 1999)(follow-up to live satellite teleconference)(last modified July 16, 1999)<http://www.fda.gov/oc/fdamawebcast/stakeholdersquestions/default.htm>.

74 1999 House Oversight Hearing (Opening Statement of Chairman Dan Burton), supra note 8, at 3 of 4.

[75] See id. at statement by Jane E. Henney, M.D., FDA Commissioner; CFSAN Statement to Congress, supra note 67.

[76] 1999 House Oversight Hearing (Opening Statement of Chairman Dan Burton), supra note 8, at 3 of 4.

[77] See Structure/Function Final Rule, supra note 5, at 1008.

[78] Id .

[79] See Dec. 1999 Guidance on Health Claims, supra note 10.

[80] Structure/Function Final Rule, supra note 5, at 1008.

[81] See id. at 1009, 1011.

[82] See id. at 1022.

[83] Id. at 1025.

[84] See id. at 1032.

[85] See supra notes 42 - 43 and accompanying text.

86 See id. at 1008.

[87] See supra note 33 and accompanying text.

[88] Structure/Function Final Rule, supra note 5, at 1007.

[89] That is, section 403(r)(6) of the act (21 U.S.C. § 343(r)(6)) does not make explicit reference to implied disease claims, which is of course the sole issue in controversy here.

90 FDA Aug. 1999 Public Meeting, supra note 27, at 197 of 219 (statement of Jonathan Emord; see also supra note 59).

[91] Id. at 197-198 of 219. The right to make structure/function claims for saw palmetto was vigorously defended by a number of stakeholders. See, e.g., id. at 77 of 219 (statement of Anthony Young, J.D., American Herbal Products Association: “Saw palmetto is used by many men who experience enlarged prostate, a condition as common to male aging as gray hair. It is no more a disease than menopause.”).

[92] See Structure/Function Final Rule, supra note 5, at 1014.

[93] FDA Aug. 1999 Public Meeting, supra note 27, at 144 of 219 (statement of Michael Falk, Ph.D., American Society of Nutritional Sciences).

[94] Commission Report, supra note 16, ch. III at 16 of 31

[95] See id.

96 See Structure/Function Final Rule, supra note 5, at 1018.

[97] See id.

[98] Id. at 1019.

[99] Id. at 1018.

[100] FDA readily and quite publicly admitted that the weight of stakeholder opinion was against its position: “[the] comments from industry and individuals tended to argue that ... both ‘lowers cholesterol’ and ‘maintains healthy cholesterol’ should be permitted structure/function claims.” FDA Aug. 1999 Public Meeting, supra note 27, at 135 of 219 (statement of Ann Witt, FDA Office of Policy). More specifically, Annette Dickinson (see supra notes 60 - 66 and accompanying text) noted on behalf of the Council for Responsible Nutrition (“CRN”):

FDA appears to view some, but not all, effects of products on risk factors or markers to be implied disease claims. CRN believes that virtually all statements about risk factors or markers are permissible structure/function statements. Examples of these include statements such as “maintains a healthy heart,” “maintains cholesterol,” “lowers cholesterol,”.... Regarding the question of whether consumers may view some of these statements as disease claims, I think that is largely irrelevant to the question of what claims FDA should permit. We already know from consumer surveys ... that many consumers interpret even straightforward nutrient content claims to be disease claims . Therefore, the extensions that a consumer may make from an innocuous statement cannot be used as the basis for a conclusion that the statement itself is an implied disease claim [emphasis added].

FDA Aug. 1999 Public Meeting, supra note 27, at 149 of 219. Another line drawing problem is found in the area of joint pain versus arthritis claims: “GMA [Grocery Manufacturers of America] opposes consideration of severity as a determining criteria [for express or implied disease claims]. Thus, the claim “reduces joint pain” is a proper structure/function claim even though the natural pain and stiffness resulting from age or a brisk workout may be quite severe. A claim to treat the disease arthritis, on the other hand, would not be appropriate for a dietary supplement ....” Id. at 83 of 219 (statement of Stacey Zawel, Ph.D., Grocery Manufacturers of America).

[101] See supra note 13 and accompanying text.

[102] See supra note 14. Because these various terms (e.g., trademarks, trade names, etc.) describe, at least for present purposes, a single type of intellectual property, the discussion of trademarks and trade names-as-property which follows should be interpreted as applying to this class of property interests as a whole.

[103] See supra notes 13 - 14 and accompanying text.

[104] This hypothetical example brings to mind a much more difficult/ambiguous case for FDA, even if one accepts the agency’s rationale for rejecting “reduces cholesterol” as an implied disease claim: “Y, the Cholesterol Fighter.” Is the product “fighting” to maintain the blood cholesterol level, making this acceptable as a structure/function claim, or to reduce it? FDA may look at the “whole label” for clues, see infra note 105, but such an unbridled exercise of agency discretion could, again, easily be used to defeat the legislative intent of DSHEA to liberalize FDA regulation of dietary supplements.

105 See supra note 5 and accompanying text. FDA says it will decide whether such a product name is an implied disease claim or not based on “the context of the labeling as a whole,” see supra note 6 and accompanying text, which is why the agency’s questionable evaluation of various label claims merited so much discussion above, i.e., the rejection of such claims can lead directly to the rejection of a trademark or trade name, even if the trademark or trade name, standing alone, would not otherwise be considered an implied disease claim.

[106] See supra note 15 and accompanying text.

[107] Structure/Function Final Rule, supra note 5, at 1041.

[108] Goodwill is “[a] business’s reputation, patronage, and other intangible assets that are considered when appraising the business, especially for purchase.” BLACK’S LAW DICTIONARY 279 (Pocket ed. 1996).

109 See Structure/Function Final Rule, supra note 5, at 1041.

[110] 248 U.S. 90, 97 (1918).

[111] See Structure/Function Final Rule, supra note 5, at 1041.

[112] See United Drug , supra note 110.

[113] John T. Cross, Language and the Law: The Special Role of Trademarks, Trade Names, and Other Trade Emblems , 76 NEB. L. REV. 95, 97 (1997).

[114] See id . at 100.

115 Id. at 130.

[116] Martha M. Rumore, The Role of Pharmacists in the Pharmaceutical Trademark Evaluation Process , 6 J. PHARMACY & LAW 83 (1996).

[117] See id. at 86.

[118] Id. at 95.

[119] Michelle B. Lee, Section 2(a) of the Lanham Act as a Restriction on Sports Team Names: Has Political Correctness Gone Too Far? 4 SPORTS LAW. J. 65, 71 (1997).

[120] Structure/Function Final Rule, supra note 5, at 1041.

[121] 480 U.S. 470, 488 (1987).

[122] Structure/Function Final Rule, supra note 5, at 1041.

[123] See Keystone , supra note 121, at 495.

[124] 1999 House Oversight Hearing (statement of Robert S. McCaleb, President, Herb Research Foundation), supra note 8, at 3 of 9.

[125] Id. at 8 of 9.

[126] Keystone , supra note 121, at 495.

[127] See supra notes 66 - 76 and accompanying text.

[128] See supra note 29 and accompanying text.

[129] 7 Cl. Ct. 329 (1985).

[130] Structure/Function Final Rule, supra note 5, at 1041.

[131] See Jarboe-Lackey Feedlots, supra note 129, at 339.

[132] See supra notes 69 - 70 and accompanying text.

[133] Structure/Function Final Rule, supra note 5, at 1041.

[134] Id. at 1042.

[135] See 444 U.S. 51, 58 (1979).

[136] Id .

137 Id. at 65.

[138] See also supra note 120 and accompanying text, where at the outset of its takings analysis FDA acknowledged the need for such case-by-case inquiry.

139 “(See Keystone, 480 U.S. at 491 (“While each of us is burdened somewhat by such restrictions, we, in turn, benefit greatly from the restrictions that are placed on others.”).).” Structure/Function Final Rule, supra note 5, at 1042.

[140] Id. at 1042.

[141] See generally Structure/Function Final Rule, supra note 5.

[142] FDA Aug. 1999 Public Meeting, supra note 27, at 33 of 219 (statement of Bert Spilker, Ph.D., M.D., Pharmaceutical Research Manufacturers of America).

[143] Id.

[144] See also the statement of H. Logan Holtgrewe, M.D., American Urological Association: “It is our feeling that we must maintain an open mind regarding medications, but at the same time ... these [dietary supplement] products should be considered just as are other [drug] products. They should be subjected to randomized clinical trials, both for their efficacy and safety. We feel that these trials are currently not available with these products.” Id. at 92 of 219. Holtgrewe’s statement is worth noting because it may in fact represent the “true” position of FDA – and certainly the implied disease claims rule could force many dietary supplements to be subjected to the drug trial process – a regulatory approach which Congress explicitly rejected in DSHEA.

[145] 240 U.S. 403, 414 (1916).

[146] See Structure/Function Final Rule, supra note 5, at 1042.

[147] Id .

[148] See supra notes 113 - 119 and accompanying text.

[149] Hanover Star Milling , supra note 145, at 410.

[150] See id. at 413.

[151] Structure/Function Final Rule, supra note 5, at 1042.

[152] See supra notes 124 - 125 and accompanying text.

[153] 323 U.S. 373, 379 (1945).

[154] 338 U.S.1, 11-12 (1949)

[155] See supra note 120 and accompanying text.

[156] See, e.g., supra notes 137 - 138 and accompanying text.

[157] Structure/Function Final Rule, supra note 5, at 1042.

[158] See, e.g., supra notes 94 - 100 and accompanying text.

[159] 505 U.S. 1003 (1992); see supra note 107 and accompanying text.

[160] Structure/Function Final Rule, supra note 5, at 1042.

[161] See supra note 29 and accompanying text.

[162] See supra notes 19 - 33 and accompanying text.

[163] Lucas , supra note 159, at 1009.

[164] See id. at 1031.

[165] See supra notes 124 - 125 and accompanying text.

[166] See Structure/Function Final Rule, supra note 5, at 1043.

[167] 808 F.2d 1023 (3rd Cir. 1987), cert. denied , 482 U.S. 906 (1987). “(citing Hadacheck v. Sebastian, 239 U.S. 394 (1915) (reduction in value from $800,000 to $60,000); Euclid v. Amber Realty Co., 272 U.S. 365 (1926) (75 percent diminution in value)).” Structure/Function Final Rule, supra note 5, at 1043.

[168] Pace , supra note 167, at 1031.

[169] See supra notes 124 - 125 and accompanying text.

[170] See supra note 121.

[171] Pace , supra note 167, at 1033.

[172] Structure/Function Final Rule, supra note 5, at 1043.

[173] See supra note 124 and accompanying text.

[174] J odie K. Frederickson, R.Ph., Umbilical Cord Stem Cells: My Body Makes Them, but Do I Get to Keep Them? Analysis of the FDA Proposed Regulations and the Impact on Individual Constitutional Property Rights , 14 J. CONTEMP. HEALTH L. & POL’Y 477, 498 (1998).

[175] Structure/Function Final Rule, supra note 5, at 1043.

[176] 895 F.2d 745, 756 (Fed. Cir. 1990).

[177] Id . at 758.

[178] Structure/Function Final Rule, supra note 5, at 1043.

[179] See Lucas , supra note 159, at 1028.

[180] See supra notes 135 - 138 and accompanying text.

[181] Structure/Function Final Rule, supra note 5, at 1043.

[182] See supra notes 19 - 33 and accompanying text.

[183] 467 U.S. 986 (1984). See also supra note 120 and accompanying text.

[184] See supra note 107 and accompanying text.

[185] Monsanto , supra note 183.

[186] See id. at 987-988.

[187] Id. at 988.

[188] See supra note 29 and accompanying text.

[189] See supra note 24 and accompanying text.

[190] See Monsanto , supra note 183, at 1005.

[191] Id. at 1008-1009.

[192] See id. at 1012.

[193] See, e.g., supra notes 124 - 125 and accompanying text.

[194] On August 28, 1996, FDA announced “Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents; Final Rule.” The agency’s anti-takings analysis can be found in 61 Fed. Reg. 44395, 44550-44555 (1997) (to be codified at 21 CFR pt. 801, et al.) (“FDA Tobacco Regulations”).

[195] Coyne Beahm, Inc. v. U.S. Food & Drug Admin.(“FDA”), 966 F.Supp. 1374 (M.D.N.C. Apr. 25, 1997), rev’d Brown & Williamson Tobacco Corp. (“Brown & Williamson”) v. FDA, 153 F.3d 155 (4th Cir. Aug. 14, 1998), reh’g and reh’g en banc denied Brown & Williamson v. FDA, 161 F.3d 764 (4th Cir. Nov. 10, 1998), cert. granted FDA v. Brown & Williamson, 119 S.Ct. 1495 (Apr. 26, 1999).

[196] See 21 CFR § 897.34 (1999). For an interesting discussion of the takings issue from a point of view sympathetic to the property interests of the tobacco industry, see Andrew B. Dzeguze, Has the FDA Bought the Winston Cup?: A Takings Analysis of the Proposed Ban on Sports Sponsorships by Tobacco Companies as Applied to NASCAR , 20 HASTINGS COMM./ENT. L.J. 445 (1998).

[197] See FDA Tobacco Regulations, supra note 194, at 44553.

[198] Id .

[199] See id.

[200] See id. at 44553-44554.

[201] Id. at 44554.

[202] See supra note 25.

[203] See supra note 22 and accompanying text.

[204] See supra notes 60 - 93 and accompanying text.