# FILED
Novemb er 8, 1996 Cecil W. Crowson Ap pellate Cou rt Clerk IN THE COURT OF AP PEALS OF

TENNESSEE WESTERN SECTI ON AT NASHVILLE

GATE PHARMACEUTICALS, a ) Division of the Lemmon Company, ) ) Petitioner /Appella nt, ) Davidson Equity No. 94-2391-I

) vs. ) ) TENNESSEE BOAR

D OF MED ICAL ) Appeal No. 01A01-9510-CH-00451 EXAMINERS, ) ) Respondent/Appellee. )

APPEAL FROM THE CHANCERY COURT OF DAVI DSON COUNTY AT NASHVIL

LE, TENNESSEE

THE HONORABLE I

RVIN H. KI

LCREASE, JR., CHANCELL OR
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

HOL LY KI RBY LI LL ARD , J.

CONCUR:
AL AN E . HI GHE RS, J
. DAV ID R. F ARM ER, J.1 This Board added this language in its amendment to the original version of the rule. OPINION

This case inv olves a challeng e to the validity of a rule pr omulgated

by the Tennessee Board of Medical Examiners. Gate Pharmaceuticals appeals the judgment of the trial court upholding the rule’s validity. We affir m. In March 1990, the Ten nessee B oard of M edical E xaminers (the “Bo ard”) e nacted R ule 0880-2-.10(2), which regulated amphetamines and ampheta mine-like substanc es. The r

ule beca me effectiveon November 12, 1990. Effective April 12, 1991, the Board repealed the orig inal version of this rul e, repla

cing it w ith Rule 088 0-2-.14( 3) (the “ Rule”). T he Rule pr

ovides in p art: It sha ll be a [

prima facie ] 1 violation of T.C.A. §§ 63-6-214(b)(1) and 63-6

- 214(b)(12) to presc

ribe, or der, adm i nist er, 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 sa tisfactory to the B oard . . . . (1) The list of amphetamine-like substances governed by the rule are the following controlled substances . . . (vii) Phentermine; (examples are Iona min, Fastin, Adipex and others) . . . . Pursuant to Tenn . Code Ann. § 63 -6 -2 14 (b )( 1) an d ( b) (1 2) , t he Bo ar d h as th e a ut ho ri ty t o d en y, suspe n d, or revoke a medical license for “[u]nprofessional, dishonorable or unethical conduct” or “[d] ispen sing, prescribing or otherwise distributing any controlled substanc e or any other drug not in the cour se of professional practice, or not in good faith to relieve pain and suffering, or not to cur e
an ailment, physical infirmity or disease.” Tenn. Code Ann. § 63-6-214(b)(1), (b)(12) (1990 & Supp. 1996). Gate

Pharmaceuticals (“Gate”) is the marke ting division of

a pharmaceutical company that manuf actures Adi pe x- P, an an or ec ti c d ru g u se d a s a n a pp et it e s up pr es sa nt in th e t re at me nt of ob es it y. 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 heari ng, 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 pri ma facie , and not an automatic, violation of the s tatute and observed that the phy sician may put on proof to re but the presumption. Consequently, the trial court re asoned that the Rule does not proscribe Adipex-P, but2

rather controls it s 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 appe al, Gate argues that the Board

exceeded its statutory authority in enacting the Rule a

nd that the

Board’ s decisio n to promulgate the Rule was arbitrary and capricious. Under the Tennessee AdministrativeProcedures Act, we may reverse the Board’s decision only if Gate’ s rights have be en preju diced be cause th e Boar d’s deci sion was: (1) I n violation

of constitutional or

statutory provision s; (2 ) In ex ce ss of

th e s ta tu to ry a ut ho ri ty o f t he ag en cy; (3) Made upon unlawful procedure; (4) Arbitrary or ca

pricious or char

acterize d by

abuse of

discreti on or cle arly unwarranted exercise of discretion; or (5) Unsupported by evide

nce 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 th e Board’s authority to promulgate the Rule. An administrative agency ’s authority must be based on an expres s grant o f statutor y a uthority or must arise by nece ssary implication theref rom. Wayne County v. Ten nessee Solid Waste Disposal ControlBd. , 756 S.W.2d 274, 282 (Ten n. App. 19 88); Tennessee Pub. Serv. Comm’n v. Southern Ry. , 554 S.W.2d 612, 613 (Tenn. 1977). If an a gency ’s actions exceed its statutory authority , this Courtmay vaca

te the agency ’s decision. Tennesse e Cable Te levision Ass’n v. Te nnessee Pub. Serv. Comm’n , 844 S.W.2d 151, 163 (Tenn. App. 1992). Review of the scope of an age ncy ’s author

ity
necessa rily involves a question of law and is therefore de novo
. See Carv ell v. B otto ms , 900 S.W.2d 23, 26 (Tenn. 1995). In support of

its argument, Ga

te cites Tennessee Public Service Commission v. Southern Railway , 554 S. W. 2d a t 6 12. In that case, the Public Service Commission ordered Southern Railway to restore a burned-out bridge that c rossed its tracks. Id. at 612- 13. The trial court reversed the Comm issi on’s o rder, a nd th e Supr eme Co urt affirme d, obs ervin g: Hadthe 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 matte r for it to have done so exp licit

ly . . . . [ T]o the extent that jurisdiction over rail-highway crossings has been ex pr es sl y gr an te d t o a st at e a ge nc y, it has been given p rimarily and in the

first i n stance to the State Department of Transportation. Id. at 613.3

Relying on Tennesse e Public Serv ice 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 grante d to the Commissioner the autho rity to place controlled su bstances on schedules. Gate notes that the Commissioner placed phentermine on Schedule IV, t hereby indicatin g that the drug

has a relatively

low poten

tial for a buse
. Under the statutes, the Commissioner must consider certain factors when classify ing cont ro lled substa

nces, such as the substance’s actual or relative potential for a buse. See Tenn. Code Ann. § 39-17-403(a) (1991 & Supp. 1996). Gate argues that the B oard failed to consider a ny of these fa

ctors when enacting theRule. Gate maintains that the legislature specific ally

delega ted the pr imary 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 R ule’s statement that prescribing the drug except under an approved protocol is a “ pri ma faci e violation.” Gate maintains that Tenn . Code Ann . § 63-6-2 14 only empower s the Boa

rd to impose discipline on a case-by -case basis and that the Boa rd excee ded its sta

tutory 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 enacte d a ban prohi biti ng the p rescri ptio n of a s chedu led dr ug. See, e.g., Tenn. Code Ann. § 53-1 0-109 (199 1 & S upp . 19 96) (pr ohi bi ti ng t he u se o f Sc hed ul e II amphetamines for the a s sistance of weight gain or loss). Gate notes that the Federal Drug Administration has approved of phentermine as an anorectic and obs er ves that the legislature has
never enacted a ban against Schedule I V drugs, such as phentermine, even though such drugs have been on the market since the 1970s. In re sponse, th

e Boar d states th at its authority

to regulate and

to control the prescription of drugs by Tennesse e phy sicians 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 on4

amphetamine-like drugs. Rather, the Rule merely establishes purposesfor which those drugs may be dispensed or prescribed by Tennessee phy sicians. In support of

its authority, the

Board relies on Tenn. Code Ann. § 53-11-301, which provide s that “the appropriate occupational or profe ssional licensing board gov erning persons who may legall y dispense controlled substances may promulgate rules and charg e reaso nable fees rela ting 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 resear ch subject by or

pursuant to the lawful order

of a pra ctit ioner , incl udin g the pr escri bing, admin ister ing, packaging, labeling , or compounding necessary

to prepare the substance for that delivery .” Tenn. Code Ann. § 39-17-40 2(7) (1991 & Supp. 1996). “Practitioner” is defined to include “[a] phy sician . . . 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 profe ssional licensing board for phy sicians. 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 phy sicians, as well

as the method of prescription. In the ca se of amphetamine and amphetaminelike drugs, the Boa

rd mainta ins that the standard of professional practice require s that they be prescribed

or dispensed by phy sicians only when the licensee has applied for and rece ived from the Board written approval for a clinica l investigation of such drugs under a satisfactory protocol. As additional support for

its author ity t o promulg ate the Rule, the B oard note s that it has the authority to “make such rules and regulations as ar e necessary

to carry out and make effective the provis ions of this c hapter.” Tenn. Code Ann. § 63-6-101(3) (1990 & Supp. 1996). Two such provisions are its po wer and duty to discipline licen sed phy si cians f or “[u]npro fessiona

l, dishonora ble or une thica l cond uct” an d for “[ d]is pensi ng, prescribing or otherwise distributing any
co ntrolled 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 c onduct outside the standards for professional practice, the B oard argues that this neces sa ri ly implies authority to enact a

rule defining conduct that fails to conform to those standards. There are no T ennesse e casesdirectly on point; consequen tly, we look to cases in other5

jurisdict ions. In Lemmon Co. v. N ew J ersey Sta te Board of

Medical Ex

aminers , 417 A.2d 568 (N. J. Super. Ct. App. Div. 1980), the court co nsidere d the vali dity of a simila

r rule e nacted b y its state board of medical examiners. Id. at 570. In Lemmon , the rule explicitly prohibite d the use

of amphetamines or amphetamine-ty pe drugs by

physicians for the tre atment of exogenous obesity. Id. To determine whethe

r the boa rd had au thority 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 h ad the au thority to refuse to grant, revoke, or suspend a medical license for dispensing controlled substances not in good faith or w ithout good cause. Id. at 572. Because the board could discipline a phy sician for such conduct even without a rule , the cour t reasoned that t

he boar d must have

the powe

r to advis e physicians in advanc e, by rule, of conduct that could subject them to discipline. Id. In addition, Lemmon addressed whether the challeng ed rule contradicted the Food and Drug Administration’s approval of the use of amphetamines in weight manag ement programs under certain condition s. Id. The cour t reasoned that f

ederal law mere ly 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. Fi na ll y, the court in Lemmon considered whether the board lacke d the authority to enact the rule be cause th

e legis lature h ad deleg ated to the Commission er of He alth the r

esponsibi l it y t o classify drugs according to schedule s. Id. The court noted that the board’s purpose in enacting the rulewas not to c lassify

controlled substanc es, but rathe r to annou

nce that it would not consider the prescription of amphe

tamines f or the tre atment of

obesi ty to bewith good cause. Id. at 573. As such, the cour

t held tha t the Commis sioner’s aut hority 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 Registr

ation for the Healing Arts , 830 S.W.2d 478 (Mo. Ct. App. 1992), the cour

t also con si dered the val idity of a rule, ena cted by a state

licensing board, which regulated the prescription of amphetamines and amphetamine-like controlled substances. Id. at 479. The Co urt ex amine d the b oard’s enabl ing st atute , not ing t hat the board h ad only the autho rity to “formula te rules and regulations to govern its actions.” Id. at 480. The court further noted, however, that the Depa rtment of Health po ssessed t

he power to “ promulgate rules and charge reasona ble fees relating to the registration and control of the manufacture, distributionand dispensing of controlled6

substances .” Id. (e mphas is supplied by original cour t). Accordingly , the court reasoned that the boarddid not have the power to regulate the pre scription of drugs because the legislature granted that authority in the first instance to the De partment 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 phy sicians, had been granted the authority to promulgate ru les regarding controlled substanc es. However, the reasoning employed relied pr

imarily on the enabling legislation for

each body . In Casey , the licensing board, unlikethe Board in this case, had only the authority to license and discipline phy sicians and to “formula te rules a nd regulations to

gover n its actions.” In this ca se, the Board is authorized under Tennessee statutes to license and discipline persons who legally

dispense controlled substances and to “promulgate rule s . . . relating to the . .

. dispensin g of co ntrolled s ubstance s within thisstate,” as well as to d iscipline physicians for “prescribing . . . any controlled substanc e . . . 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). T his enabling legisla

tion is simila

r to the e nabling le gislation fo r the Department of Health in Casey , which gave it authority

to “promulgate rules . . . re lating 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 Lemm on , the Board in this case has the authority to discipline physicians for conductnot in the course of professional practice e ven in the absence of a rule defining nonconforming c onduct. It logically follows that the Board has the authority to advise physicians in ad vance, by r

ule , of what conduct is subject to discipline. The Commissioner’s authority to classif y dr ugs ac cording

to their pr

opensitie s a nd to place them on schedules is separate and apart f rom the Boa

rd’s aut hority to define

conduct t

hat is subject to discipline. Furthermore, the FDA’s rec ognition 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.7

The reasoning in Casey also supports the Board’ s position. The Boa rd’s ena bling sta tute in the present case is nearly

identical to the enabling statute of the Department of He alth in Casey
. This statute prompted the Casey court to find that the Department of Health in that case was the agency withthe authority to enact suc h a rule. Likewise, the statutes in the present ca se grant the Board the authority to enact the Rule. Gate also contends that the Board exce eded its authority by enacting the presumption containedin the Rule because Tenn. Code Ann. § 63-6-214 requiresthe Board t o make ca se-by -case determin ations. 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’ B ureau. In that ca se, the regulation provided that the loss of one hand and one eye constituted total permane nt disability
as a matter of law for purposes of war r isk insurance. Id. at 43 9-40. By statute, howe ver, the agency was required

to make case-by -case factual determinations as to what constituted permanent disabilitie s. Id. at 440. The Court held that when an agency is required t o make factual determin ations, it can not en act a ru le con verti ng a question of fact, which requires proof, into a conclusive presumption. Id.; see also Swalbach v. State Li quor Authority , 166 N.E.2d 811 (N.Y. 1960) ( holding t

hat an ag ency

may not avoid its duty

to adjudic ate on a c ase-by -case b asis b y adopting a policy that forecloses consideration of the facts the legislature intended to be take

n into account). In this case, the Rule provides that presc ribing amphetamine-like substances without prior Board approva l 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 fac t into a conclusive p resumptio n of law; c onseque ntly , this cas e is disting

uishable from Miller . Therefore, the Board a cted within its statutory authority in enacting the Rule. Gat e als o argues that the Board’s de cision to promulgate the Rule was arbitrary and capric ious. This Court may vacate the deci sion of an

administr

ative ag ency

when it is “[a]rbitrary
or capric ious or ch aracte

rized by abuse of discreti on or cle arly

unwarranted exercise of

discretion.” Tenn. Code Ann. § 4-5-322 (h)(4) ; Tennesse e Cable , 844 S.W.2d at 163-64. Co urts must “defer to the decisions of administrative agencies when they are a cting w it hin their area of specialized knowledge, experience, and expertise.” Wayne County , 756 S.W.2d at 279 (citations omitted).8

As indicated by this narrow scope of review, “courts should be less confiden t th at this judgment is preferable to that of the agency.” Id. Conseq u ently, courts should refr ain from substituting their judgment for the agency ’s regarding the we ight of the evidence, even when there is evidenc e to suppor

t a different result. Id. ; see also Hughes v. Board of Comm’rs , 204 Tenn. 298, 305, 319 S.W.2d 481, 484 (1958). In a ddition, c ourts should “not inq uire into t he wisdom o f a rule
or determine whether a

rule embodies good or bad policy .” Tennesse e Cable , 844 S.W.2d at 168 (citations omitted). The scope of

review in Tennessee under the “ar bitrary and capricious” standard is described in Tennesse e Cable : No rm al ly, an age

ncy rulewould be arbitrary

and capricious if the agency has relied on factors which Cong

ress has not intend

ed it to consider, entirely f

ailed to consider an important aspect

of the pr oblem, of fered a n explanat

ion for itsdecision that runs counter to the evidence before the ag enc y, or i s so implausible that it could not be ascribed to a difference in view or the product of agency

expertise. Id. (citi ng Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins . Co. , 463 U.S. 2 9, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983)). There fore, if there is any

rational basis for the ag en cy’ s conclusi ons, the agency ’s decision should be upheld. Blue Ridge T ransp. Co. v

. Pentec ost , 343 S.W.2d 903, 906 (Tenn. 1961); McCallen v . City of Me

mphis , 786 S.W.2d 633, 641 (Tenn. 1990). Within these narrow confines, we address Gate’scontention that the Board’s decision was arbitrary and capricious. The record in this case indicate s that the Board enact ed the Rule in response to growing public health, safety , and welfare concerns re lating to the abuse o f ampheta mines, central nervous sy stem stimulants, and amphetamine-like cont rolle d substanc es. There is no evidence that the Board considered f actors not intended by the leg

islature. The record demonstrates that the Board formulated the Rul e base d on its review of the medical literature, studies, reports, and the Board’s own knowledg e and ex perie nce in re levant di sciplinar

y a ctions. Therefore, the Board’s pr omulgation of the Rule was not arbitrary or capricious.9

T he decision

of the tri al court

is affir med. Costs o n appea

l are taxe d to the Ap

pell ant, fo r wh ic h e xe cu ti on ma y is su e i f n ec es sa ry. HOLLY KIRBY LILLARD, J.
CONCUR:
ALAN E. HIGHERS, J.

DAVID R. FARMER, J.