Taoism is a Chinese philosophy that is often represented by the yin-yang—a symbol of contrasting opposites in perfect balance with each other.  From the Taoist perspective, “day” is only “day” in relationship to the night.  In other words, all things are interdependent, so life must be lived in balance. While Taoism doesn’t directly address the western notion of “justice,” the concept of due process suggests a Taoist equilibrium of sorts, where adversarial parties have an equal opportunity to be heard.

A fundamental component of that balance is the constitutional guarantee of adjudication before an impartial judge. But impartiality is precisely what is lacking when courts apply Chevron and Chevron-related deference doctrines.  As Columbia Law Professor Philip Hamburger has explained, when courts use Chevron doctrines to defer to an administrative agency’s interpretation of statute, regulation, or jurisdiction, the practical effect is judicial bias in favor of one party (the government) to the detriment of the opposing party (everyone else).  That’s the opposite of balance.  That’s the opposite of due process.

But there might be a Taoic twist to Chevron deference.  Where the framework usually serves as rubberstamp-approval for agency action, a federal court in Merck & Co. v. HHS applied Chevron to invalidate an unlawful regulation.  Did the district court restore judicial impartiality and balance?  Probably not, since the district court couldn’t overrule Chevron, so judicial bias is still a serious problem.  The decision serves as an important reminder, however, that judges have a responsibility to exercise their independent and impartial judgment where citizens challenge agency actions on the ground that the agency exceeded its statutory authority.

A Chevron Doctrine refresher

Chevron is a two-step analytical framework.  At Step 1, courts ask whether the agency’s enabling statute is ambiguous regarding the agency’s authority to regulate the proposed subject manner and the regulatory means it proposes to employ.  If the statute is ambiguous, the court proceeds to Step 2 and asks whether the agency’s interpretation is reasonable within the statutory ambiguity.  If so, the court will defer to the agency’s reasonable interpretation, even if the court believes another interpretation is more reasonable.

HHS’ WAC Disclosure Rule & NCLA’s objections

The Department of Health and Human Services used the Administrative Procedure Act’s notice-and-comment rulemaking to issue the WAC Disclosure Rule.  The Rule requires certain prescription drug television advertisements to include a statement indicating the wholesale acquisition cost (WAC) for a typical 30-day regimen or course of treatment.  HHS’ stated goal is to “address rising list prices by introducing price transparency that will help improve the efficiency of Medicare and Medicaid programs[.]”  HHS believes that the rule “will provide manufacturers with an incentive to reduce their list prices” and “it will provide some consumers with more information to better position them as active and well-informed participants in their health care decision-making.”

NCLA filed a public comment asserting that the WAC Disclosure Rule is fatally flawed in two principal ways.  First, HHS lacks the statutory authority to regulate pharmaceutical market efficiency.  Second, even if HHS has the authority to regulate drug markets, it lacks the statutory authority to regulate television advertisements.

The Merck & Co. v. HHS decision

Soon after HHS adopted the WAC Disclosure Rule, three drug companies and an industry association filed a complaint in the District Court for the District of Columbia, arguing many of the same points raised by NCLA in its public comment.  HHS countered that the Social Security Act grants it such sweeping rulemaking authority that the Rule is lawful because it is “reasonably related to the purposes of the enabling legislation[,]” which is the administration of Medicare and Medicaid.

But HHS didn’t want the court to apply the Chevron framework to the Rule.  Not because the agency didn’t want to benefit from the court’s analytical bias in its favor, but because HHS wanted even greater judicial bias.  Since the WAC Disclosure Rule is “reasonably related” to its regulatory scope under the Social Security Act, HHS argued, the court should sustain HHS’ Rule.

The court rejected HHS’ argument.  The court explained that every challenge to agency action must begin by asking “whether the agency has stayed within the bounds of its statutory authority.”  The court said that this requires a Chevron framework, not the looser standard preferred by HHS.  Since the Social Security Act gives HHS the authority only to administer Medicare and Medicaid, Congress did not authorize HHS to regulate drug markets or advertising.  While it’s true that HHS’ enabling statute does not prohibit it from making such regulations, the court said that if it were “to presume a delegation of power absent an express withholding of such power, agencies would enjoy virtually limitless hegemony[.]” The court said that Chevron’s second prong is the deferential one.  But before jumping to the second prong, courts have a duty to make an independent assessment of whether Congress delegated to the agency the regulatory authority the agency claims to wield.  Since HHS failed the first prong, the court did not defer to the agency’s interpretation of its regulatory jurisdiction, and invalidated the WAC Disclosure Rule.

Chevron bias is still too much yin and too little yang

The district court did not surrender its independent judgment to the agency when it interpreted the scope of HHS’ statutory authority to make regulations.  That’s a much more balanced approach than the one advanced by HHS, but Chevron deference is still alive, and Step 2 still requires judicial bias in favor of the government.  Its framework undermines due process and universal notions of fundamental fairness.  In other words, when courts apply Chevron bias, they create a judicial system with a lot of yin, and very little yang.

The Supreme Court should overrule Chevron at the next available opportunity—it’s patently unconstitutional to stack the deck in favor of one party over another.  But until it overrules Chevron, lower courts should exercise their independent, impartial judgment to critically examine the breadth of authority claimed by agencies in the first instance.  Courts should ask not only whether Congress did delegate the regulatory authority challenged, but whether Congress lawfully could delegate it at all.  This will help infuse more yang into the judicial system to better protect our civil liberties.

Written by Michael P. DeGrandis