Case study ... In the 1950's, congress established the FDA pursuant to the Food, Drug, and Cosmetic Act of 1957. The FDA was delegated authority to license pharmaceutical companies and establish license fee. The initial annual license fee set by FDA was $7500.

Two years ago, Congress amended the FDA's enabling legislation so that the Director of teh FDA was given broad discretion to establish "after appropriate procedures for public participation" a license fee schedule for pharmaceutical companies. Pursuant to this legislation, the Director proposed new fee schedule and utilize the informal rule making procedures under the "Notice and Comment" section of the APA (section 533). This proposed rule would increase the license fee from a flat fee of $7500 to a fee of 2% of the company's gross revenue for the immediately preceding year. New company would be exempt from any license fee util completion of their first full calendar year of operations. Based on estimates from the Department of Commerce, 7 pharmaceutical companies will be affected by the fee change.

Squiggy Labs, a licensee in Nevermore, Montana intends to challenge the proposed rule arguing that the informational rulemaking procedures utilized by the FDA do not provide the company adequate due process pf law. Squiggy believe that the director should have used a formal hearing under APA section 556 and 557. The license fee change as applied Squiggy would mean their current license fee is roughly $31,000.00.

The Director of the FDA has learned of the challenge and comes to you for advice on how to proceed with the rulemaking. Explain what you would tell him and why. Utilize the following cases: Bi-Metallica Investment Co. v. State Board of Equalization of Colorado; Marathon Oil Co. v. Enviromental Protection Agency; United States v. Florida East Coast Railway, Inc.; Natural Resource Defense Council, Inc. v. Vermont Nuclear Power Corp.; Vermont Yankee Nuclear Power Corp. v. Natural Resource Defense Council.