The U.S. Court of Appeals for the Fifth Circuit recently ruled in NicQuid, L.L.C. v. FDA, No. 24-60272 (5th Cir. Aug. 19, 2026), that the U.S. Food and Drug Administration’s (FDA) “comparative efficacy standard” is a substantive rule that was adopted in violation of the Administrative Procedure Act’s (APA) notice-and-comment rulemaking requirements.

The NicQuid decision notably creates a circuit split with the Ninth Circuit, which recently held in Drip More LLC v. FDA, No. 21-71380 (9th Cir. Aug. 10, 2026) that the comparative efficacy standard is not a substantive rule under the APA’s notice-and-comment requirements. We assume that FDA will appeal its loss in NicQuid—either to an en banc panel of the Fifth Circuit or to the U.S. Supreme Court.

Background & VDX Distro Decision

To evaluate premarket tobacco product applications (PMTAs) for electronic nicotine delivery systems (ENDS), FDA developed the comparative efficacy standard, which requires applicants for non-tobacco-flavored ENDS to provide evidence that their flavored products offer greater switching benefits to adult smokers than tobacco-flavored alternatives. In March 2026, FDA issued draft guidance articulating its approach to reviewing flavored ENDS PMTAs, including the comparative efficacy framework. We previously covered this draft guidance here.

The NicQuid ruling builds on the Fifth Circuit’s earlier decision in VDX Distro, Inc. v. FDA, 179 F.4th 356 (5th Cir. 2026), issued on June 24, 2026. In VDX Distro, the court denied the petition for review and held that the comparative efficacy standard is not a “tobacco product standard” under the Family Smoking Prevention and Tobacco Control Act (TCA) and therefore was not subject to the TCA’s requirement of notice-and-comment rulemaking. The court reasoned that a “tobacco product standard” sets categorical, hard-and-fast limits (e.g., banning flavored cigarettes, capping pesticide residue levels), whereas the comparative efficacy standard is a “balancing test, not a ban.”  The VDX Distro panel, however, expressly declined to reach the question of whether the APA required notice-and-comment because the petitioners raised only the TCA-specific argument and not the broader APA claim.

NicQuid, a manufacturer of nicotine salt e-liquids, submitted PMTAs for menthol, spearmint, and other flavored products. FDA denied the applications in May 2024, finding they lacked “sufficient evidence demonstrating that [the] flavored ENDS will provide a benefit to adult users that would be adequate to outweigh the risks to youth.” In challenging the denial, NicQuid argued in relevant part that FDA was required under the APA to undergo notice-and-comment rulemaking before applying the comparative efficacy standard to PMTAs.

The Comparative Efficacy Standard Is a Substantive Rule

The Fifth Circuit held that FDA’s comparative efficacy standard constitutes a “substantive rule” that required notice-and-comment rulemaking under the APA. The court identified three key reasons. First, the standard applies broadly to any party who may submit PMTAs for flavored ENDS—not just a specific set of applicants before the agency at a given time. Second, FDA’s internal memoranda suggest that the standard is binding on the agency and leaves no discretion to deviate. Third, the standard was developed prospectively as a matter of agency policymaking, rather than in the context of evaluating a specific PMTA.

Adjudication Has Limits

In its defense, FDA principally relied on SEC v. Chenery Corp., 332 U.S. 194 (1947) (“Chenery II”) for the principle that agencies enjoy broad latitude when choosing between rulemaking and adjudication. The court reasoned that Chenery II contemplates adjudication in three scenarios — unforeseeable problems, insufficient experience to rigidify a tentative judgment, and problems too specialized for a general rule—none of which apply to FDA’s adjudication of PMTAs.

The Fifth Circuit explained that the risk of flavored ENDS to youth is foreseeable based on FDA’s own data and conclusions. FDA’s extensive experience processing PMTAs similarly forecloses any claim of inexperience. Further, the court said, FDA cannot claim that the assessment of flavored ENDS PMTAs is too specialized for a general rule because the agency appears to have applied a rigid “comparative efficacy standard” to all such PMTAs.

No Substantive Rulemaking Through Informal Adjudication

The Fifth Circuit additionally held that, even if FDA could develop the “comparative efficacy standard” through adjudication under Chenery II, the agency cannot do so through informal adjudication. Formal adjudication mirrors notice-and-comment rulemaking, the court said, because both provide notice and an opportunity for the affected parties to be heard. FDA’s PMTA process, conversely, is informal in that it offers none of those protections. Thus, the court concluded that allowing FDA to use informal adjudication to promulgate substantive rules would render the APA’s formal adjudication provisions surplusage.

Remedy

The court granted the petitions for review, vacated the MDO, and remanded the matter to FDA. The opinion also directs FDA to “rethink the rule,” re-adopt it through notice-and-comment rulemaking, or “undertake other appropriate proceedings consistent with this opinion.”

Why It Matters

The NicQuid decision has created a circuit split over whether FDA’s “comparative efficacy standard” is a substantive rule requiring notice-and-comment rulemaking. Given this posture and the significance of the ruling for ENDS PMTA evaluations, we assume FDA will appeal the ruling to an en banc panel of the Fifth Circuit or to the U.S. Supreme Court.

We will continue to monitor developments in the federal courts challenging FDA’s handling of the PMTA process. If you have questions about the implications of these decisions as they pertain to your business, our team is happy to assist.