Republic of the Philippines vs. Drugmaker's Laboratories, Inc.

Administrative agencies may issue circulars or internal memoranda to implement existing legislative rules without complying with the prior notice, hearing, and publication requirements under the Administrative Code of 1987, provided such circulars do not create new substantive rights or obligations but merely facilitate the enforcement of existing law.

The Food and Drug Administration (FDA) was created under Republic Act No. 3720 to establish safety standards for food and drugs. In 1989, the Department of Health issued Administrative Order No. 67 requiring bioavailability/bioequivalence (BA/BE) testing for certain pharmaceutical products before issuance of Certificates of Product Registration (CPR), but implementation was deferred due to lack of local testing facilities. By 1997, local BA/BE testing facilities became available, prompting the FDA (then BFAD) to issue Circular Nos. 1 and 8, s. 1997 to enforce the testing requirement for drugs listed under List B' (Prime), including rifampicin products manufactured by respondents Drugmaker's Laboratories, Inc. and Terramedic, Inc.

• The FDA was created pursuant to Republic Act No. 3720, the "Food, Drug, and Cosmetic Act," to establish safety standards for foods, drugs, and cosmetics.
• On March 15, 1989, the Department of Health issued Administrative Order No. 67, s. 1989 requiring BA/BE testing for certain pharmaceutical products before issuance of CPRs, but implementation was suspended due to lack of local testing facilities.
• In 1997, following the establishment of local BA/BE testing facilities, the FDA issued Circular No. 1, s. 1997 to resume enforcement of the BA/BE testing requirement for drugs under List B' (Prime) identified in AO 67, s. 1989.
• The FDA subsequently issued Circular No. 8, s. 1997 providing additional implementation details for the BA/BE testing requirement.
• Respondents Drugmaker's Laboratories, Inc. and Terramedic, Inc. manufacture "Refam" (rifampicin 200mg/5mL Suspension), a multisource pharmaceutical product for treating tuberculosis.
• Respondents were initially issued a CPR for Refam on November 15, 1996 valid until November 15, 2001, without BA/BE testing due to the lack of facilities at that time.
• Respondents obtained yearly renewals of their CPR until November 15, 2006, conditioned on submission of satisfactory BA/BE test results.
• Respondents submitted BA/BE test results conducted by the University of the Philippines, but the FDA found that Refam was "not bioequivalent with the reference drug" in a letter dated July 31, 2006.
• Despite the failed bioequivalence test, the FDA revalidated respondents' CPR twice until November 15, 2008, with a final warning that no further revalidations would be granted without satisfactory BA/BE results.
• Instead of submitting new test results, respondents filed a petition before the RTC seeking to annul the circulars and prohibit their enforcement.
• During the pendency of the case, Republic Act No. 9711 (the FDA Act of 2009) was enacted, renaming the BFAD to FDA.

• The FDA has the authority to issue Circular Nos. 1 and 8, s. 1997 as it is the agency mandated by law to administer and enforce laws pertaining to the registration of pharmaceutical products.
• The assailed circulars are valid administrative issuances that merely implement the provisions of AO 67, s. 1989 and RA 3720.
• The circulars do not constitute legislative rules requiring prior notice, hearing, and publication because they merely facilitate the implementation of existing law without creating new substantive obligations.

• Under RA 3720, the power to make rules to implement the law is lodged with the Secretary of Health, not with the FDA, making the circulars void as issued by an unauthorized agency.
• The assailed circulars are void for lack of prior hearing, consultation, and publication as required by the Administrative Code of 1987.
• The non-renewal of their CPR due to failure to submit satisfactory BA/BE test results would affect not only Refam but their other products as well, causing undue burden.

• Procedural Issues: N/A
• Substantive Issues: Whether the FDA has the authority to issue and implement Circular Nos. 1 and 8, s. 1997, and whether these circulars must comply with the prior notice, hearing, and publication requirements under the Administrative Code of 1987.

• Procedural: N/A
• Substantive: The Court ruled that Circular Nos. 1 and 8, s. 1997 are valid issuances. The Court held that AO 67, s. 1989 (issued by the Secretary of Health) was the legislative rule that originally introduced the BA/BE testing requirement. The assailed circulars merely served to administer and supervise the implementation of AO 67, s. 1989 after local testing facilities became available. Since the circulars did not create new substantive rights or obligations but merely enforced existing policy, they were not legislative rules requiring prior notice, hearing, and publication. The Court emphasized that the FDA has the authority under Section 4(a) of RA 3720 to administer and supervise the implementation of the Act and rules issued pursuant to it.

• Classification of Administrative Regulations — Administrative regulations may be classified as: (1) legislative rules, which are subordinate legislation implementing primary legislation; (2) interpretative rules, which clarify or explain existing statutes; and (3) contingent rules, which depend on certain facts or events. Legislative rules require prior notice, hearing, and publication, while interpretative rules need only bare issuance.
• Test for Determining Nature of Administrative Rules — When an administrative rule merely provides for the means that can facilitate or render least cumbersome the implementation of the law without substantially increasing the burden of those governed, no prior hearing is required. However, when the rule substantially increases the burden or affects substantive rights, the agency must accord those directly affected a chance to be heard and be duly informed before the issuance is given the force of law.
• Non-Delegability of Legislative Power — Administrative agencies may exercise quasi-legislative or rule-making powers only if there exists a law delegating these powers to them, and the rules promulgated must be within the confines of the granting statute, consistent with the doctrine of separation of powers.

• "Administrative agencies may exercise quasi-legislative or rule-making powers only if there exists a law which delegates these powers to them. Accordingly, the rules so promulgated must be within the confines of the granting statute and must involve no discretion as to what the law shall be, but merely the authority to fix the details in the execution or enforcement of the policy set out in the law itself, so as to conform with the doctrine of separation of powers and, as an adjunct, the doctrine of non-delegability of legislative power."
• "When an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance, for it gives no real consequence more than what the law itself has already prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law."
• "Circular Nos. 1 and 8, s. 1997 cannot be considered as administrative regulations because they do not: (a) implement a primary legislation by providing the details thereof; (b) interpret, clarify, or explain existing statutory regulations under which the FDA operates; and/or (c) ascertain the existence of certain facts or things upon which the enforcement of RA 3720 depends."

• Holy Spirit Homeowners Association v. Sec. Defensor — Cited for the principle that administrative agencies may exercise quasi-legislative powers only if there exists a law delegating these powers to them, and rules must be within the confines of the granting statute.
• Commissioner of Internal Revenue v. Court of Appeals — Cited for the definition and distinction between legislative rules and interpretative rules, noting that legislative rules implement existing law and impose general extra-statutory obligations.
• Commissioner of Customs v. Hypermix Feeds Corporation — Cited for the test determining when prior notice and hearing are required for administrative rules, distinguishing between rules that merely facilitate implementation versus those that substantially increase the burden of those governed.
• ABAKADA GURO Party List v. Hon. Purisima — Cited regarding contingent rules issued by administrative authorities based on the existence of certain facts upon which enforcement of the law depends.

• Section 4(a) of Republic Act No. 3720 — Grants the FDA the function to administer and supervise the implementation of the Act and rules issued pursuant to it, forming the basis for the FDA's authority to issue the assailed circulars.
• Section 26(a) of Republic Act No. 3720 — Authorizes the Secretary of Health to issue rules and regulations necessary to enforce the Act, upon recommendation of the FDA Director, which was the basis for AO 67, s. 1989.
• Executive Order No. 292 (Administrative Code of 1987) — Requires prior notice, hearing, and publication for administrative regulations, except interpretative rules, as cited in determining the validity of the procedural requirements for the assailed circulars.
• Section 3(m), Rule 131 of the Rules of Court — Presumption of regularity in the performance of official duties, applied to presume that AO 67, s. 1989 complied with publication requirements.