Gate Pharmeceuticals, a Division of the Lemmon Company v. Tennessee Board of Medical Examiners ( 1996 )

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT NASHVILLE
FILED
November 8, 1996
GATE PHARMACEUTICALS, a ) Cecil W. Crowson
Division of the Lemmon Company, )
Appellate Court Clerk
)
Petitioner/Appellant, ) Davidson Equity No. 94-2391-I
)
vs. )
)
TENNESSEE BOARD OF MEDICAL ) Appeal No. 01A01-9510-CH-00451
EXAMINERS, )
)
Respondent/Appellee. )
APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR
For the Respondent/Appellee: For the Petitioner/Appellant:
Charles W. Burson James Dunbar
Sue A. Sheldon Baltimore, MA
Nashville, Tennessee D. Alexander Fardon
Nashville, Tennessee
AFFIRMED
HOLLY KIRBY LILLARD, J.
CONCUR:
ALAN E. HIGHERS, J.
DAVID R. FARMER, J.
OPINION
This case involves a challenge to the validity of a rule promulgated by the Tennessee Board
of Medical Examiners. Gate Pharmaceuticals appeals the judgment of the trial court upholding the
rule’s validity. We affirm.
In March 1990, the Tennessee Board of Medical Examiners (the “Board”) enacted Rule
0880-2-.10(2), which regulated amphetamines and amphetamine-like substances. The rule became
effective on November 12, 1990. Effective April 12, 1991, the Board repealed the original version
of this rule, replacing it with Rule 0880-2-.14(3) (the “Rule”). The Rule provides in part:
It shall be a [prima facie]1 violation of T.C.A. §§ 63-6-214(b)(1) and 63-6-
214(b)(12) to prescribe, order, administer, sell or otherwise distribute any
amphetamine-like substance listed below, except when the licensee has applied for
and received from the Board of Medical Examiners a written approval for the clinical
investigation of such drugs under a protocol satisfactory to the Board . . . .
(1) The list of amphetamine-like substances governed by the rule are the following
controlled substances . . .
(vii) Phentermine; (examples are Ionamin, Fastin, Adipex and others) . . . .
Pursuant to Tenn. Code Ann. § 63-6-214(b)(1) and (b)(12), the Board has the authority to deny,
suspend, or revoke a medical license for “[u]nprofessional, dishonorable or unethical conduct” or
“[d]ispensing, prescribing or otherwise distributing any controlled substance or any other drug not
in the course of professional practice, or not in good faith to relieve pain and suffering, or not to cure
an ailment, physical infirmity or disease.” Tenn. Code Ann. § 63-6-214(b)(1), (b)(12) (1990 & Supp.
1996).
Gate Pharmaceuticals (“Gate”) is the marketing division of a pharmaceutical company that
manufactures Adipex-P, an anorectic drug used as an appetite suppressant in the treatment of obesity.
Phentermine is the drug’s active ingredient. In October 1993, Gate filed a petition challenging the
Rule. The Board held a contested case hearing on May 4, 1994, rejecting Gate’s petition. Gate then
filed this lawsuit seeking review of the Rule pursuant to Tenn. Code Ann. § 4-5-322.
After a hearing, the trial court issued an order upholding the Rule. The trial court noted that
prescribing Adipex-P without approval from the Board is merely a prima facie, and not an
automatic, violation of the statute and observed that the physician may put on proof to rebut the
presumption. Consequently, the trial court reasoned that the Rule does not proscribe Adipex-P, but
1
This Board added this language in its amendment to the original version of the rule.
rather controls its distribution. The trial court held that such restrictions were well within the
Board’s authority.
Gate now appeals the decision of the trial court upholding the Rule. On appeal, Gate argues
that the Board exceeded its statutory authority in enacting the Rule and that the Board’s decision to
promulgate the Rule was arbitrary and capricious.
Under the Tennessee Administrative Procedures Act, we may reverse the Board’s decision
only if Gate’s rights have been prejudiced because the Board’s decision was:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Arbitrary or capricious or characterized by abuse of discretion or clearly
unwarranted exercise of discretion; or
(5) Unsupported by evidence which is both substantial and material in the light of the
entire record.
Tenn. Code Ann. § 4-5-322(h) (1991 & Supp. 1996).
In this appeal, Gate first challenges the Board’s authority to promulgate the Rule. An
administrative agency’s authority must be based on an express grant of statutory authority or must
arise by necessary implication therefrom. Wayne County v. Tennessee Solid Waste Disposal
Control Bd., 756 S.W.2d 274, 282 (Tenn. App. 1988); Tennessee Pub. Serv. Comm’n v. Southern
Ry., 554 S.W.2d 612, 613 (Tenn. 1977). If an agency’s actions exceed its statutory authority, this
Court may vacate the agency’s decision. Tennessee Cable Television Ass’n v. Tennessee Pub. Serv.
Comm’n, 844 S.W.2d 151, 163 (Tenn. App. 1992). Review of the scope of an agency’s authority
necessarily involves a question of law and is therefore de novo. See Carvell v. Bottoms, 900 S.W.2d
23, 26 (Tenn. 1995).
In support of its argument, Gate cites Tennessee Public Service Commission v. Southern
Railway, 554 S.W.2d at 612. In that case, the Public Service Commission ordered Southern Railway
to restore a burned-out bridge that crossed its tracks. Id. at 612-13. The trial court reversed the
Commission’s order, and the Supreme Court affirmed, observing:
Had the legislature intended to invest the Commission with the authority to insure the
safety and convenience of the public in crossing a railroad right-of-way, it would
have been a simple matter for it to have done so explicitly . . . . [T]o the extent that
jurisdiction over rail-highway crossings has been expressly granted to a state agency,
it has been given primarily and in the first instance to the State Department of
Transportation.
Id. at 613.
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Relying on Tennessee Public Service Commission, Gate asserts that the legislature intended
for the Tennessee Commissioner of Mental Health and Mental Retardation (the “Commissioner”)
to determine the availability of drugs because it granted to the Commissioner the authority to place
controlled substances on schedules. Gate notes that the Commissioner placed phentermine on
Schedule IV, thereby indicating that the drug has a relatively low potential for abuse. Under the
statutes, the Commissioner must consider certain factors when classifying controlled substances,
such as the substance’s actual or relative potential for abuse. See Tenn. Code Ann. § 39-17-403(a)
(1991 & Supp. 1996). Gate argues that the Board failed to consider any of these factors when
enacting the Rule. Gate maintains that the legislature specifically delegated the primary authority
to determine the availability of drugs to the Commissioner and that this demonstrates that the Board
lacked the authority to enact the Rule.
In addition, Gate argues that the Rule is a de facto prohibition on Adipex-P, despite the
Rule’s statement that prescribing the drug except under an approved protocol is a “prima facie
violation.” Gate maintains that Tenn. Code Ann. § 63-6-214 only empowers the Board to impose
discipline on a case-by-case basis and that the Board exceeded its statutory authority by enacting the
presumption contained in the Rule. Gate contends that no physician would ever prescribe the drug
because of the onerous requirements of the Rule and the danger of being disciplined by the Board.
The legislature has on occasion enacted a ban prohibiting the prescription of a scheduled drug. See,
e.g., Tenn. Code Ann. § 53-10-109 (1991 & Supp. 1996) (prohibiting the use of Schedule II
amphetamines for the assistance of weight gain or loss). Gate notes that the Federal Drug
Administration has approved of phentermine as an anorectic and observes that the legislature has
never enacted a ban against Schedule IV drugs, such as phentermine, even though such drugs have
been on the market since the 1970s.
In response, the Board states that its authority to regulate and to control the prescription of
drugs by Tennessee physicians is separate and apart from the Commissioner’s authority over
scheduling controlled substances. The Board contends that the Rule is not a ban or a prohibition on
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amphetamine-like drugs. Rather, the Rule merely establishes purposes for which those drugs may
be dispensed or prescribed by Tennessee physicians.
In support of its authority, the Board relies on Tenn. Code Ann. § 53-11-301, which provides
that “the appropriate occupational or professional licensing board governing persons who may
legally dispense controlled substances may promulgate rules and charge reasonable fees relating to
the registration and control of the manufacture, distribution and dispensing of controlled substances
within this state.” Tenn. Code Ann. § 53-11-301 (1991 & Supp. 1996). “Dispense” is defined as
meaning to “deliver a controlled substance to an ultimate user or research subject by or pursuant to
the lawful order of a practitioner, including the prescribing, administering, packaging, labeling, or
compounding necessary to prepare the substance for that delivery.” Tenn. Code Ann. § 39-17-402(7)
(1991 & Supp. 1996). “Practitioner” is defined to include “[a] physician . . . in the course of
professional practice or research in this state.” Tenn. Code Ann. § 39-17-402(22) (1991 & Supp.
1996).
The Board is the appropriate professional licensing board for physicians. Tenn. Code Ann.
§§ 63-6-101, 63-6-201 (1990 & Supp. 1996). As such, the Board contends that it has authority to
place controls on the purposes for which certain controlled substances are dispensed or prescribed
by physicians, as well as the method of prescription. In the case of amphetamine and amphetamine-
like drugs, the Board maintains that the standard of professional practice requires that they be
prescribed or dispensed by physicians only when the licensee has applied for and received from the
Board written approval for a clinical investigation of such drugs under a satisfactory protocol.
As additional support for its authority to promulgate the Rule, the Board notes that it has the
authority to “make such rules and regulations as are necessary to carry out and make effective the
provisions of this chapter.” Tenn. Code Ann. § 63-6-101(3) (1990 & Supp. 1996). Two such
provisions are its power and duty to discipline licensed physicians for “[u]nprofessional,
dishonorable or unethical conduct” and for “[d]ispensing, prescribing or otherwise distributing any
controlled substance . . . not in the course of professional practice.” Tenn. Code Ann. § 63-6-
214(b)(1), (b)(14) (1990 & Supp. 1996). Because the Board may discipline physicians for conduct
outside the standards for professional practice, the Board argues that this necessarily implies
authority to enact a rule defining conduct that fails to conform to those standards.
There are no Tennessee cases directly on point; consequently, we look to cases in other
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jurisdictions. In Lemmon Co. v. New Jersey State Board of Medical Examiners, 417 A.2d 568
(N.J. Super. Ct. App. Div. 1980), the court considered the validity of a similar rule enacted by its
state board of medical examiners. Id. at 570. In Lemmon, the rule explicitly prohibited the use of
amphetamines or amphetamine-type drugs by physicians for the treatment of exogenous obesity. Id.
To determine whether the board had authority to enact the rule, the court examined the statutes from
which the board derived its authority. Id. at 571-73. In that case, the board had the authority to
refuse to grant, revoke, or suspend a medical license for dispensing controlled substances not in good
faith or without good cause. Id. at 572. Because the board could discipline a physician for such
conduct even without a rule, the court reasoned that the board must have the power to advise
physicians in advance, by rule, of conduct that could subject them to discipline. Id.
In addition, Lemmon addressed whether the challenged rule contradicted the Food and Drug
Administration’s approval of the use of amphetamines in weight management programs under
certain conditions. Id. The court reasoned that federal law merely permitted, rather than mandated,
the use of amphetamines in the treatment of obesity. Id. Therefore, the court held that the board’s
rule did not contradict federal law. Id.
Finally, the court in Lemmon considered whether the board lacked the authority to enact the
rule because the legislature had delegated to the Commissioner of Health the responsibility to
classify drugs according to schedules. Id. The court noted that the board’s purpose in enacting the
rule was not to classify controlled substances, but rather to announce that it would not consider the
prescription of amphetamines for the treatment of obesity to be with good cause. Id. at 573. As
such, the court held that the Commissioner’s authority to classify drugs did not prevent the board
from enacting the rule. Id. Thus, in a case involving facts and issues similar to those presented in
this case, the Lemmon opinion supports the trial court’s decision.
In Casey v. State Board of Registration for the Healing Arts, 830 S.W.2d 478 (Mo. Ct. App.
1992), the court also considered the validity of a rule, enacted by a state licensing board, which
regulated the prescription of amphetamines and amphetamine-like controlled substances. Id. at 479.
The Court examined the board’s enabling statute, noting that the board had only the authority to
“formulate rules and regulations to govern its actions.” Id. at 480. The court further noted, however,
that the Department of Health possessed the power to “promulgate rules and charge reasonable fees
relating to the registration and control of the manufacture, distribution and dispensing of controlled
5
substances.” Id. (emphasis supplied by original court). Accordingly, the court reasoned that the
board did not have the power to regulate the prescription of drugs because the legislature granted that
authority in the first instance to the Department of Health. Id.
Thus, as argued by Gate in this case, the court in Casey found that the Department of Health,
rather than the licensing board for physicians, had been granted the authority to promulgate rules
regarding controlled substances. However, the reasoning employed relied primarily on the enabling
legislation for each body. In Casey, the licensing board, unlike the Board in this case, had only the
authority to license and discipline physicians and to “formulate rules and regulations to govern its
actions.” In this case, the Board is authorized under Tennessee statutes to license and discipline
persons who legally dispense controlled substances and to “promulgate rules . . . relating to the . .
. dispensing of controlled substances within this state,” as well as to discipline physicians for
“prescribing . . . any controlled substance . . . not in the course of professional practice.” Tenn. Code
Ann. §§ 53-11-301 (1991 & Supp. 1996), 63-6-214(b)(1), (b)(14) (1990 & Supp. 1996). This
enabling legislation is similar to the enabling legislation for the Department of Health in Casey,
which gave it authority to “promulgate rules . . . relating to the . . . dispensing of controlled
substances within this state.” Casey, 830 S.W.2d at 480 (emphasis omitted). Thus, the reasoning
in Casey supports the decision of the trial court in this case.
The reasoning in these cases is persuasive. As in Lemmon, the Board in this case has the
authority to discipline physicians for conduct not in the course of professional practice even in the
absence of a rule defining nonconforming conduct. It logically follows that the Board has the
authority to advise physicians in advance, by rule, of what conduct is subject to discipline. The
Commissioner’s authority to classify drugs according to their propensities and to place them on
schedules is separate and apart from the Board’s authority to define conduct that is subject to
discipline. Furthermore, the FDA’s recognition of the utility of anorectic drugs in the treatment of
obesity does not require the Board to permit their use without restriction. Thus, the Rule does not
contradict the FDA.
6
The reasoning in Casey also supports the Board’s position. The Board’s enabling statute in
the present case is nearly identical to the enabling statute of the Department of Health in Casey. This
statute prompted the Casey court to find that the Department of Health in that case was the agency
with the authority to enact such a rule. Likewise, the statutes in the present case grant the Board the
authority to enact the Rule.
Gate also contends that the Board exceeded its authority by enacting the presumption
contained in the Rule because Tenn. Code Ann. § 63-6-214 requires the Board to make case-by-case
determinations. In Miller v. United States, 294 U.S. 435 (1935), the United States Supreme Court
considered the validity of a regulation enacted by the Director of the Veterans’ Bureau. In that case,
the regulation provided that the loss of one hand and one eye constituted total permanent disability
as a matter of law for purposes of war risk insurance. Id. at 439-40. By statute, however, the
agency was required to make case-by-case factual determinations as to what constituted permanent
disabilities. Id. at 440. The Court held that when an agency is required to make factual
determinations, it cannot enact a rule converting a question of fact, which requires proof, into a
conclusive presumption. Id.; see also Swalbach v. State Liquor Authority, 166 N.E.2d 811 (N.Y.
1960) (holding that an agency may not avoid its duty to adjudicate on a case-by-case basis by
adopting a policy that forecloses consideration of the facts the legislature intended to be taken into
account).
In this case, the Rule provides that prescribing amphetamine-like substances without prior
Board approval is a prima facie violation of Tenn. Code Ann. § 63-6-214. As the trial court noted,
a physician may put on proof to rebut the presumption raised by the Rule. The Rule does not convert
a question of fact into a conclusive presumption of law; consequently, this case is distinguishable
from Miller. Therefore, the Board acted within its statutory authority in enacting the Rule.
Gate also argues that the Board’s decision to promulgate the Rule was arbitrary and
capricious. This Court may vacate the decision of an administrative agency when it is “[a]rbitrary
or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.”
Tenn. Code Ann. § 4-5-322(h)(4); Tennessee Cable, 844 S.W.2d at 163-64. Courts must “defer to
the decisions of administrative agencies when they are acting within their area of specialized
knowledge, experience, and expertise.” Wayne County, 756 S.W.2d at 279 (citations omitted).
7
As indicated by this narrow scope of review, “courts should be less confident that this
judgment is preferable to that of the agency.” Id. Consequently, courts should refrain from
substituting their judgment for the agency’s regarding the weight of the evidence, even when there
is evidence to support a different result. Id.; see also Hughes v. Board of Comm’rs, 204 Tenn. 298,
305, 319 S.W.2d 481, 484 (1958). In addition, courts should “not inquire into the wisdom of a rule
or determine whether a rule embodies good or bad policy.” Tennessee Cable, 844 S.W.2d at 168
(citations omitted).
The scope of review in Tennessee under the “arbitrary and capricious” standard is described
in Tennessee Cable:
Normally, an agency rule would be arbitrary and capricious if the agency has relied
on factors which Congress has not intended it to consider, entirely failed to consider
an important aspect of the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency expertise.
Id. (citing Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.
Ct. 2856, 77 L. Ed. 2d 443 (1983)). Therefore, if there is any rational basis for the agency’s
conclusions, the agency’s decision should be upheld. Blue Ridge Transp. Co. v. Pentecost, 343
S.W.2d 903, 906 (Tenn. 1961); McCallen v. City of Memphis, 786 S.W.2d 633, 641 (Tenn. 1990).
Within these narrow confines, we address Gate’s contention that the Board’s decision was
arbitrary and capricious. The record in this case indicates that the Board enacted the Rule in
response to growing public health, safety, and welfare concerns relating to the abuse of
amphetamines, central nervous system stimulants, and amphetamine-like controlled substances.
There is no evidence that the Board considered factors not intended by the legislature. The record
demonstrates that the Board formulated the Rule based on its review of the medical literature,
studies, reports, and the Board’s own knowledge and experience in relevant disciplinary actions.
Therefore, the Board’s promulgation of the Rule was not arbitrary or capricious.
8
The decision of the trial court is affirmed. Costs on appeal are taxed to the Appellant, for
which execution may issue if necessary.
HOLLY KIRBY LILLARD, J.
CONCUR:
ALAN E. HIGHERS, J.
DAVID R. FARMER, J.
9