NEW YORK – Following the failure to legislatively clarify who gets to regulate laboratory-developed tests and after months of anticipation, the US Food and Drug Administration on Friday issued a proposed rule for the oversight of laboratory-developed tests that will surely meet resistance from all corners of the clinical lab and diagnostics markets.
The rule would amend FDA regulations to make explicit that LDTs are in vitro diagnostics (IVDs) and that all IVDs are medical devices and therefore overseen by the FDA under the Federal Food, Drug, and Cosmetic Act (FDCA).
Additionally, the FDA said it is changing agency policy to phase out what it described as an "enforcement discretion approach" to LDTs and to provide greater oversight of these tests, though the rule indicates the possibility of carve-outs for several categories of tests, including manual tests designed and performed in a single laboratory; tests currently marketed as LDTs; and LDTs offered by academic medical centers.
The FDA has for more than three decades maintained that LDTs are medical devices that fall under its authority according to the FDCA, an assertion it once again made in the new proposed rule. The agency has by and large refrained from exerting this supposed authority, though, adopting what it has called a policy of enforcement discretion.
In recent years, however, the FDA has argued — including in the new proposed rule — that its policy of enforcement discretion is no longer appropriate given the increasing complexity of LDTs and their ubiquity throughout the healthcare system, including for the diagnoses and management of life-threatening conditions. It has also noted that a number of vendors offer their tests as LDTs as a way of avoiding FDA regulation, even though these tests are marketed to large and diverse customer bases much like traditional IVDs.
In 2014, the agency released a pair of draft guidances in which it said it would require registration of LDTs and premarket approval of certain higher-risk LDTs. The agency received substantial pushback from the clinical lab and diagnostics industries, which questioned its authority over the tests, and two years later, following the election of President Donald Trump, the agency halted its LDT regulation plans.
More recently, much of the action around LDT regulation shifted to Congress, where lawmakers worked to craft legislation — most notably the Verifying Accurate Leading-edge IVCT Development (VALID) Act — that would have given the FDA authority over LDTs. However, in the aftermath of Congress' failed attempts to pass such legislation, the FDA announced that it would resume its own efforts to regulate LDTs.
James Boiani, an IVD, drug, and medical device life sciences attorney at Epstein, Becker & Green in Washington, D.C, said that compared to previous stabs at LDT regulation like VALID and the 2014 draft guidances, the proposed rule is "basically the strongest approach possible."
The rule "is much more black and white and simpler," he said. "Before, their strategy had been sort of preemptively nuanced with lots of exceptions and longer phase-in times and all of that."
The proposed rule calls for a five-stage, four-year phase out of the FDA's current LDT enforcement discretion policy.
In the first stage, one year after publication of a final rule, the agency would end enforcement discretion around medical device reporting requirements and correction and removal reporting requirements.
In the second stage, slated to go into effect two years after publication of a final rule, the agency would end enforcement discretion except for around quality system and premarket review requirements.
In the third stage, which would go into effect three years after publication of a final rule, enforcement discretion would end for quality system requirements.
In the fourth stage, scheduled for three and a half years after publication of a final rule but not before Oct. 1, 2027, the FDA would end enforcement discretion for premarket review requirements for high-risk LDTs.
In the fifth stage, scheduled for four years after publication of a final rule but not before April 1, 2028, the agency would end enforcement discretion for premarket review requirements for moderate- and low-risk LDTs that require premarket submission. The FDA said in the proposed rule that it anticipates that based on their risk profiles, roughly 50 percent of LDTs would not require premarket review.
While the FDA has maintained that increased oversight of LDTs is necessary to ensure test performance and patient safety, many in the lab industry have argued that regulation of LDTs will limit test development and innovation and harm patient access to testing, particularly in the case of tests addressing small patient populations or rare conditions for which FDA-regulated IVDs don't exist.
The newly proposed rule does include a potential carve-out for what the FDA terms "1976-Type LDTs," which it defines as tests that feature "use of manual techniques (without automation) performed by laboratory personnel with specialized expertise; use of components legally marketed for clinical use; and design, manufacture, and use within a single CLIA-certified laboratory that meets the requirements under CLIA for high complexity testing."
In the case of such tests, the agency said it "has made a preliminary determination that the risks are sufficiently mitigated such that FDA’s general enforcement discretion approach for LDTs should continue to apply."
It gave as an example of such a test an immunohistochemistry assay that used "no automated preparation or interpretation."
The agency also proposed maintaining enforcement discretion for human leukocyte antigen (HLA) tests "designed, manufactured, and used in a single laboratory certified under CLIA that meets the requirements to perform high-complexity histocompatibility testing when used in connection with organ, stem cell, and tissue transplantation to perform HLA allele typing, for HLA antibody screening and monitoring, or for conducting real and 'virtual' HLA crossmatch tests."
Additionally, it proposed maintaining its policy of enforcement discretion for tests used solely for law enforcement forensics and for public health surveillance.
The FDA also indicated that it might consider enforcement discretion for other categories of tests, including low and moderate LDTs currently on the market and LDTs offered by academic medical centers, asking in the proposed rule that stakeholders making public comments provide information on the public health rationales for such carve-outs and how they might be implemented.
Academic medical centers and organizations like the Association for Diagnostics & Laboratory Medicine (formerly the American Association for Clinical Chemistry) have been among the most vocal opponents of increased LDT oversight. Some within that community have suggested that regulators should draw a distinction between LDTs developed in clinical labs to meet specific physician and patient needs versus LDTs developed by entities aiming to mass market them in a manner similar to traditional IVDs.
The FDA also requested that commenters address the question of whether the agency should maintain enforcement discretion for LDTs that have undergone evaluation by certain third-party reviewers such at the New York State Department of Health.
Boiani said, however, that he doesn't see these provisions as indications of flexibility on the agency's part.
"I didn't parse that as [FDA] saying it is going to offer flexibility or allow for a lot of exemptions," he said.
Jeffrey Shapiro, a partner at King & Spalding, said he believed the talk of continued enforcement discretion reflected the fact that the FDA does not actually have the resources to oversee all lab-developed testing. He cited the backlogs the agency experienced during the COVID-19 pandemic as it struggled to handle large numbers of SARS-CoV-2 test submissions.
"They really don't have the funding to do what they claim they have the authority to do, which is regulate all the tests," he said. "I think it is more just a reality check."
The agency included in the proposed rule estimates of its financial impacts, though the wide range of these estimates suggests that they are highly speculative. Assuming a 7 percent discount rate, it projects 20-year annualized financial benefits of between $2.8 billion and $86.0 billion (due to healthcare costs avoided by not using problematic LDTs), costs ranging from $2.4 billion to $18.6 billion (due to lab expenses related to compliance with the rule), and transfers from industry to the FDA of between $121 million and $538 million.
Legal fight looming
Whether or not the notion of potential exemptions assuages the concerns of some opponents of LDT regulation, the proposed rule will likely face legal challenges. Boiani said that in the proposed rule the FDA made one of its more thorough arguments to date that it can legally regulate LDTs, but its authority to oversee these tests remains unclear and turns on a number of legal issues.
While the FDA previously tried to regulate LDTs through guidance, in its current effort, it is using the notice-and-comment rulemaking process in which it must provide public notice of its plans, accept comments, and then address those comments when it produces its final rule. This is a longer, more involved process than a guidance-based approach, but observers have suggested that it puts the agency on more solid legal footing.
Nonetheless, questions remain.
Susan Van Meter, president of the American Clinical Laboratory Association, said the organization has "long held the view that FDA does not have the authority to regulate LDTs under its medical device authority," though she said ACLA has not made any decisions about possible legal actions.
A 2020 internal memo from Robert Charrow, then general counsel at the US Department of Health and Human Services, lays out several main challenges such an effort might face. The memo argued that while, assuming it proceeded via rulemaking, the FDA would likely prevail in the argument over whether LDTs are medical devices, in order to regulate LDTs under the FDCA the agency would still need to demonstrate that these tests meet the definition of interstate commerce, that they are in commercial distribution, and that the laboratories performing them are legal "persons."
The memo noted that while the FDA could likely demonstrate that LDTs fell under interstate commerce, it was less clear that LDTs met the commercial distribution requirement. It added that for certain types of labs — state public health labs and academic medical centers at state universities — the legal persons standard would be impossible to meet as these are considered part of the state and "presumed by definition not to be a 'person,'" meaning the FDA could not regulate LDTs developed at these facilities.
Another potential challenge has arisen since the FDA's last stab at FDA regulation. Last year, the Supreme Court issued a decision that limited the Environmental Protection Agency's ability to cap power plant emissions due to a lack of explicit congressional authority to do so. Some have suggested this ruling could impact the activities of various federal regulatory bodies, including the FDA.
Shapiro said he sees the proposed rule as the FDA playing "sort … of chicken with Congress."
"They are saying to Congress, if you can't pass a statute, we're going to move forward," he said. "I think this is sort of a step in the negotiation process where they are trying to extract either a statute or funding [for LDT regulation] from Congress. And maybe it won't be everything they want, but it will be part of what they want."
Allyson Mullen, a director at law firm Hyman, Phelps, & McNamara, likewise said the FDA is likely trying to force Congress' hand.
"If this doesn't work due to a legal challenge, then FDA can say, 'Well, we tried rulemaking and that didn't work either,'" she said. "'Congress, if you're happy with the status quo, then the status quo reigns if you're not willing to do anything.'"
Van Meter suggested ACLA would be happy to see the proposed rule push Congress to again take up the question of LDT regulation.
"As we have said to the FDA and the administration, we will commit to working with them back on the Hill, where we think the discussion should be taking place," she said. "We can see a role for the FDA, but only under a diagnostics-specific framework that is developed in a bipartisan fashion with Congress."