Yesterday, the Food & Drug Administration (“FDA” or “the Agency”) issued a highly anticipated – and highly controversial – final rule, which rolls out a four-year, five-stage plan that will phase out the Agency’s previous policy of enforcement discretion for Laboratory-Developed Tests (“LDTs”). The final rule was issued at an astonishing speed compared to FDA’s usual rulemaking timeline,[1] coming not even six months after FDA issued the proposed rule.

The speed with which FDA turned out the final rule, as well as the rule’s whopping 528-page length and FDA’s issuance of three accompanying guidance documents, indicate that LDT regulation is a top priority for the Agency.[2] FDA has also stated as much, citing patient safety (i.e., protecting public health by ensuring that diagnostics are safe and effective for patient use) as the major impetus for the rule.[3] On the other side of the coin, industry participants have been openly critical of the rule, citing concerns that it will stifle access to and innovation of potentially life-saving diagnostics.[4]

I. Background on LDT Regulation

As discussed in greater detail in our previous post on the proposed rule, the history of LDT regulation has been long and meandering. FDA has historically exercised so-called “enforcement discretion” for LDTs, meaning that the Agency has chosen not to enforce its regulatory requirements, even though the regulatory requirements technically do apply (since LDTs are a subset of in vitro diagnostic (“IVD”) devices). However, over the past decade, as clinical laboratories and diagnostic testing have become more sophisticated – and, thus, higher risk – FDA has expressed its intent to begin regulating LDTs. Both FDA and industry participants have expressed a clear preference that FDA regulate LDTs according to a Congressionally-developed statutory framework, rather than acting on its own through guidance or notice-and-comment rulemaking.[5] However, after Congress’ failure to pass the Verifying Leading Edge IVCT Development (“VALID”) Act – which would have given FDA the express authority to regulate LDTs – in 2022, FDA has taken its own administrative action to protect patient safety in response to increasingly sophisticated, and increasingly underperforming, LDTs.

II. The Final Rule

The final rule makes two pivotal changes. First, it amends the regulatory definition of “IVD Products” to include LDTs. And second, it phases out FDA’s previous policy of enforcement discretion for LDTs by implementing a four-year, five-step regulation rollout.

a. Key Provisions

  1. Redefining “IVD”: The first notable piece the final rule—which will come as no surprise to those following along to date—is a simple but massive amendment to the regulatory definition of IVD, which adds the following clause to the second sentence of the regulatory definition: “These products are devices as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (the act), and may also be biological products subject to section 351 of the Public Health Service Act, including when the manufacturer of these products is a laboratory” (emphasis added). FDA has long held the position that all IVDs (including LDTs) are devices under the FDCA but the new rule codifies this interpretation in the form of a more permanent regulation.
  2. Phasing Out Enforcement Discretion for LDTs: Second, the new rule implements a phased approach to ending FDA’s policy of enforcement discretion for LDTs. The phased approach establishes timelines for LDT sponsors to comply with different categories of FDA device regulations, and the clock starts on the final rule’s publication date – May 6, 2024, the date to which all five phases are anchored. The phases are as follows:
    • Stage 1: LDTs are subject to Medical Device Reporting (“MDR”),[6] as well as adverse event reporting,[7] one year after the final rule’s publication date (i.e., May 6, 2025);
    • Stage 2: LDTs are subject to registration/listing,[8] labeling,[9] and investigational use[10] requirements two years after the final rule’s publication date (i.e., May 6, 2026);
    • Stage 3: LDTS are subject to Quality System regulations[11] three years after the final rule’s publication date (i.e., May 6, 2027);
    • Stage 4: High-risk LDTS are subject to premarket review[12] three-and-a-half years after the final rule’s publication date (i.e., Nov. 6, 2027), unless a premarket submission has been received by the beginning of this stage in which case FDA intends to continue to exercise enforcement discretion for the pendency of its review;
    • Stage 5: Mid- and low-risk LDTs are subject to premarket review[13] four years after the final rule’s publication date (i.e., May 6, 2028), unless a premarket submission has been received by the beginning of this stage in which case FDA intends to continue to exercise enforcement discretion for the pendency of its review.

b. Important Exceptions

In response to the slew of comments received in response to the proposed rule (over 6,500 during the two-month comment period), many of which raised concerns that the sudden regulation of LDTs would limit access to and innovation of critical diagnostics, FDA, in its final rule, has identified eight types of LDTs (which fall into the five categories outlined below) for which it will continue to exercise some degree of enforcement discretion.

i. Currently-Marketed LDTs

Most notably, FDA will grandfather in currently-marketed LDTs (i.e., LDTs that were first marketed prior to the issuance of the final rule) with respect to certain, but not all, regulatory requirements. Under the final rule, FDA will not require currently-marketed LDTs to obtain premarket notification (i.e., comply with Stages 4 and/or 5 of the phaseout policy) or comply with the Quality System regulations, except for certain recordkeeping and inspection requirements (i.e., comply with the majority of Stage 3). However, manufacturers of currently-marketed LDTs will still be required to comply with the correction/removal and adverse event reporting requirements under Stage 1, registration, listing, labeling, and investigational use requirements under Stage 2, and recordkeeping and inspection requirements under Stage 3.

Even though manufacturers of currently-marketed LDTs will need to plan for compliance with certain regulatory requirements, this limited enforcement discretion policy is still likely to bring a sigh of relief to the industry at large, since Quality System compliance and premarket review come with a significant price tag for manufacturers. As stated by FDA, this limited enforcement discretion policy is designed to minimize disruption in the market by making by making the cumbersome premarket review and Quality System requirements applicable only to future LDTs and/or LDTs that are currently in development, but not to LDTs that are currently marketed to patients and on which patients might currently rely. And this enforcement discretion policy applies to modifications of currently-marketed LDTs as well, so long as those modifications do not (i) change the indications for use of the IVD; (ii) alter the operating principle of the IVD (e.g., changes in critical reaction components); (iii) include significantly different technology in the IVD (e.g., addition of artificial intelligence or machine learning to the test algorithm, a change from targeted sequencing to whole genome sequencing, a change from immunoassay to mass spectrometry, or a change from manual to automated procedures); or (iv) adversely change the performance or safety specifications of the IVD.[14] While this effective exemption may be a win for laboratories that currently market LDTs, those laboratories should keep in mind that, because this is only a policy of enforcement discretion, FDA could change its position on this point in the future more easily than if the exemption were established, for example, through a regulatory amendment pursuant to notice-and-comment rulemaking.

ii. LDTs Designed for Rare, Unmet, or Specific Needs

Under the rule, FDA will exercise this same scope of enforcement discretion (i.e., with respect only to the premarket review and most of the Quality System requirements) for two narrow categories of LDTs designed to test rare conditions and/or fulfill unmet needs. These categories are (i) non-molecular antisera LDTs for rare red blood cell (“RBC”) antigens where such tests are manufactured and performed in blood establishments, including transfusion services and immunohematology laboratories and where there is no alternative available to meet the patient’s need for a compatible blood transfusion; and (ii) LDTs manufactured and performed by a laboratory integrated within a healthcare system to meet an unmet need of patients receiving care within the same healthcare system. With respect to the latter, FDA considers a need to be “unmet” if (i) there is no FDA-authorized version of the test, (ii) there is an FDA-authorized test, but either it is not indicated for use for the particular patient or the patient has unique needs, or (iii) there is an FDA-authorized test but it is not available.

Additionally, FDA will continue to exercise full enforcement discretion for LDTs that are human leukocyte antigen (“HLA”) tests intended to facilitate transplantation, meaning that, subject to certain conditions, these LDTs will not be subject to any of the stages of FDA’s phaseout policy.

iii. LDTs Reviewed by Other Government Agencies

Finally, FDA will exercise varying levels of enforcement discretion for certain LDTs developed and/or reviewed by partnering government agencies. First, FDA will also continue to exercise full enforcement discretion for LDTs manufactured and performed within the Veterans Health Administration (“VHA”) or the Department of Defense (“DoD”). On the other end of the enforcement discretion spectrum, FDA will apply its most limited scope of enforcement discretion to LDTs approved by New York State’s Clinical Laboratory Evaluation Program (“CLEP”) in that it will not require these LDTs to undergo premarket review. However, LDTs approved by New York CLEP will be required to comply with the full scope of Stages 1-3 of the phaseout policy.

iv. Pre-1976 LDTs

Like transplant-facilitating HLA LDTs and LDTs manufactured and used by VHA or DoD, FDA will continue to exercise full enforcement discretion for a small sector of simple LDTs known as “1976-Type LDTs.” These tests embody characteristics of the very earliest LDTs (i.e., the impetus for FDA’s enforcement discretion approach for LDTs generally), which, according to FDA, pose a low risk to patient safety and, thus, require less regulatory oversight than modern-day LDTs. To qualify for continued enforcement discretion as a 1976-Type LDT, a test must have all of the following characteristics: (1) use of manual techniques (without automation) performed by laboratory personnel with specialized expertise; (2) use of components legally marketed for clinical use; and (3) design, manufacture, and use within a single CLIA-certified laboratory that meets the requirements under CLIA for high complexity testing.

v. Forensic Use LDTs

Finally, FDA will continue to exercise full enforcement discretion for LDTs intended for forensic (i.e., law enforcement) use because, as explained in the final rule, these tests are subject to safeguards associated with the judicial process and, therefore, do not require duplicative regulatory oversight from FDA to ensure safety and/or efficacy

III. Predictions and Implications

In creating this final rule, FDA was faced with the near-impossible task of balancing three key interests – patient safety, patient access, and diagnostic innovation.

In the text of the final rule, FDA spends over sixty pages justifying the need for increased regulation of LDTs, which, according to the Agency, boils down to one key concern – patient safety. More specifically, FDA points to data exposing a slew of inaccurate LDTs that were marketed to patients during COVID-19, some for serious conditions such as cancer. To state the obvious, and as concluded by FDA, when patients rely on faulty testing and either fail to receive treatment for a serious condition or receive potentially toxic treatments for a condition they do not have, patient safety is jeopardized. Based on this rationale, as well as the desire to “level the playing field” between laboratory and non-laboratory IVD manufacturers, the proposed rule did receive a number of supportive comments from industry participants.

However, of the 6,500 comments received “from a variety of entities including medical device associations, members of the medical device and pharmaceutical industries, medical and healthcare professional associations, hospitals and academic medical centers (“AMCs”), accreditation organizations, other advocacy organizations, government agencies, and individuals,” far more were penned in opposition to FDA’s plan to regulate LDTs. As discussed above, critics claim that the rule presents two main threats – a threat to dangerously limit patient access to potentially life-saving diagnostics and a threat to stifle innovation among developers of LDTs, especially those LDTs intended for rare diseases with small patient populations.

The final rule’s policy of continued, albeit limited, enforcement discretion for LDTs marketed prior to issuance of the final rule was drafted largely in response to industry concerns that subjecting currently-marketed LDTs to regulation would result in a detrimental loss of access to many diagnostics on which patients currently rely, and the limited enforcement discretion may be enough to appease critics on this particular point. However, critics may find the final rule less generous in terms of fostering diagnostic innovation. Although FDA provides several reasons why the final rule does, in fact, foster innovation (including “leveling the playing field” to foster innovation by non-laboratory manufacturers, saving manufacturers of currently-marketed LDTs from having to divert resources from innovation of future LDTs to costs associated with premarket review and Quality System compliance, and incentivizing the development of LDTs for unmet needs), the reality is that most of FDA’s enforcement discretion exceptions impact a relatively small portion of marketed LDTs, and the majority of future LDTs will be subject to expensive and time-consuming regulatory requirements, which will no doubt hinder at least some of the laboratories currently on the cutting edge of diagnostic innovation, especially those developing diagnostics for rare diseases that are often subject to a critical lack of funding.

Ultimately, it stands to be seen whether the final rule adequately addresses the droves of opposing comments issued in response to the proposed rule. That said, based on the hardline stances taken by many industry participants in the past few months, many of whom have argued that FDA doesn’t even have the authority to regulate LDTs, we may see a legal challenge (or several) to the final rule later this year (which could be made even more likely if the Supreme Court overturns the Chevron Doctrine in Loper v. Raimondo).[15] While industry participants should prepare for compliance with the five stages of FDA’s phaseout policy, they should also keep a close eye on the courts, where the future of LDT regulation may hang in the balance.

FOOTNOTES

[1] For example, consider FDA’s “intended use” regulations, which were proposed in 2015 but were not made effective until 2021. See 86 Fed. Reg. 41385.

[2] See Draft Guidance, Enforcement Policy for Certain In Vitro Diagnostic Devices for Immediate Public Health Response in the Absence of a Declaration under Section 564, U.S. Food & Drug Admin. (Apr. 29, 2024); Draft Guidance, Consideration of Enforcement Policies for Tests During a Section 564 Declared Emergency, U.S. Food & Drug Admin. (Apr. 29, 2024); Laboratory Developed Tests: Frequently Asked Questions, U.S. Food & Drug Admin. (Apr. 29, 2024).

[3] See, e.g., Press Release, Laboratory Developed Tests, U.S. Food & Drug Admin. (Apr. 29, 2024).

[4] See, e.g., Summary Testimony of Susan Van Meter, President, American Clinical Laboratory Association before the Health Subcommittee of the House Energy & Commerce Committee, United States House of Representatives (Mar. 21, 2024).

[5] See Discussion Paper on Laboratory Developed Tests (LDTs), U.S. Food & Drug Administration (Jan. 13, 2017); Testimony from representatives of the American Clinical Laboratory Association, AdvaMedDx, the College of American Pathologists, Friends of Cancer Research, and the Academic Coalition for Effective LDTs, before the Health Subcommittee of the House Energy & Commerce Committee, United States House of Representatives (Mar. 21, 2024), each of which expressed a strong preference for the VALID Act or similar legislation over FDA’s proposed rule.

[6] See 21 CFR Part 803.

[7] See 21 CFR Part 806.

[8] See 21 CFR Part 807.

[9] See 21 CFR Parts 801 and 809, Subpart B.

[10] See 21 CFR Part 812.

[11] See Current Good Manufacturing Practices (“CGMP”) rules at 21 CFR Part 820.

[12] See the Pre-Market Application (“PMA”) process at 21 CFR Part 814.

[13] See the 510(k) process at 21 CFR Part 807, Subpart E, and/or the de novo request process at 21 CFR Part 860, Subpart D.

[14] See, e.g., Laboratory Developed Tests: Frequently Asked Questions, U.S. Food & Drug Admin. (Apr. 29, 2024).

[15] See our previous article here, which discusses the potential impact of Loper v. Raimondo on FDA’s LDT rule.