FDA’s Proposed Rule for Oversight of Laboratory Developed Tests: Part I: Underpinnings of FDA’s Proposed Rule

On October 3, 2023, the U.S. Food and Drug Administration (FDA) published its widely anticipated proposed rule on the regulation of laboratory developed tests (LDTs). The proposed rule and policy are the latest in an over decade-long discourse amongst interested stakeholders – laboratories, IVD manufacturers, regulatory agencies, Congress, providers, and patients – as FDA has sought to enhance oversight over LDTs.

The proposed rule, with one succinct amendment to FDA’s regulations, aims to make explicitly clear that LDTs are regulated by the agency as medical devices, no different than in vitro diagnostic products (IVDs) that FDA actively regulates. In addition to the amendment, the rule sets forth a significant new policy proposal, which if finalized as proposed, would mark the beginning of the end of the agency’s general policy of “enforcement discretion” for the vast majority of LDTs and phase-in FDA’s premarket and post-market requirements across five-stages over the course of four years.

We will be providing in the coming days our analysis of the details of FDA’s proposed five-stage “phaseout” policy and the open questions that remain.

In this Insight, we recap the underpinnings of the proposed rule and policy, including the two lengthy discussions contained in the proposed rule on (1) the rationale for the agency’s proposed phaseout policy and (2) FDA’s legal authority for issuing the rule.

What are IVDs and LDTs?

Brief History of LDT Regulation

FDA’s intent to increase oversight of LDTs is not a new concept, and in particular over the last decade, FDA has sought to implement a more uniform approach towards regulating LDTs. Most notably –

• In 2010, FDA announced its plans to have greater oversight over LDTs and held a two day public meeting to discuss issues and stakeholder concerns surrounding LDT oversight. 
• In 2014, FDA issued two draft guidances – “Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs)” and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs)” – that proposed a new risk-based oversight framework for LDTs. The draft guidances have not been finalized.
• In 2017, taking into consideration hundreds of public comments on the 2014 Draft Guidances, FDA released a discussion paper concluding that it would not release a final guidance for regulation of LDTs and instead would look to Congress to develop a legislative solution. The discussion paper also set forth a potential risk-based approach to overseeing regulation of LDTs, considering a phased approach that would first focus on higher-risk LDTs.

In 2017, Congress released a discussion draft of the Diagnostic Accuracy and Innovation Act (“DAIA”), the first iteration of a legislative proposal to overhaul the regulatory framework for regulating all IVDs. In 2018, Congress introduced the first version of the Verifying Leading Edge IVCT Development (VALID) Act, which proposed to establish a new framework for regulation of in vitro clinical tests (IVCTs), including IVDs and LDTs. The VALID Act would again be introduced in 2020, 2021, and 2022, and after months of negotiations, nearly passed at the end of 2022 as part of the Consolidated Appropriations Act of 2023.

Ultimately, the bill was not enacted, and over the course of 2023, FDA became increasingly vocal of its intention to address LDT regulation through rulemaking as it moved the rule through the administrative review process.

Why is FDA Proposing This Change?

The proposed rule discusses, in detail, why FDA views the manner in which it has overseen LDTs over the last fifty years to no longer be a feasible approach.

FDA notes that where LDTs were once intended for use in a single laboratory and used in a small population of patients, LDTs are now being produced utilizing “high-tech or complex instrumentation and software to generate results and clinical interpretations.” There are LDTs being manufactured at increasing volumes and being used in much larger patient populations than were originally intended for LDTs back in 1976. Many healthcare providers and patients are also using LDTs interchangeably with IVDs made by other manufacturers. These changes have ultimately led FDA to conclude that most modern-day LDTs are now functionally no different than other IVDs regulated by FDA and should no longer be subject to such enforcement discretion.

Besides the ever-evolving landscape of LDT development, FDA cites several public health justifications underpinning its proposal to enhance oversight over LDTs, which we expect will be closely scrutinized as stakeholders engage to urge FDA to develop an appropriately balanced oversight approach. FDA’s public health justifications include the following –

• FDA cites growing concerns over test validation following the COVID-19 pandemic. During the pandemic, FDA received emergency use authorization (EUA) requests from many laboratories developing COVID-19 diagnostic tests. FDA noted that of the first 125 submissions, 82 had significant issues with test design or validation. In addition, many laboratories developing COVID-19 tests did not submit analytical and/or clinical validation data after their tests were already in use. In all, FDA expresses concern that test performance for this subset of tests was “far worse” than expected, including with instances of tests involving relatively well-understood techniques not performing well.

• FDA asserts that LDTs offered today significantly impact medical care, and as such, their validity has a significant impact on the public health. For example, FDA points to LDTs being utilized by physicians to inform patient drug treatment for various conditions within the cardiovascular, oncologic, neurologic, infectious, and rare disease spaces. FDA expresses concern that false positive test results could potentially prolong appropriate diagnosis and treatment, progress a disease (potentially to the point of no longer being treatable), lead to improper treatment plans and cause distress to a patient.

• FDA questions whether the public can safely rely on LDTs given performance issues discussed in recent case studies, class-action lawsuits, journal articles, news media articles, and FDA’s own experience in reviewing premarket submissions of laboratory tests. FDA has also faced multiple voluntary medical device reports, mostly from patients, regarding inaccurate prenatal screening tests; oncology tests used to predict risk of cancer recurrence, inform chemotherapy treatment and determine dosage to administer a therapeutic; and infectious disease genetic tests, among others.

• FDA also asserts that increased oversight could improve health inequities. For example, there may be a higher rate of inaccuracies with respect to genetic test results reported among racial and ethnic minorities since these tests have not necessarily been validated for all patient populations affected by a disease.

FDA’s Legal Basis for the Proposed Rule

Over the years, a number of challenges have been raised over FDA’s authority to regulate LDTs. In the proposed rule, FDA sets forth its legal reasoning for the agency’s position that IVDs, including test systems developed by laboratories, are “devices” under the FD&C Act. FDA further sets forth its reasoning for why FDA’s jurisdiction over LDTs is not altered by the provisions of the FD&C Act related to interstate commerce and commercial distribution.

We expect that if FDA moves forward and finalizes the proposed rule, its legal authority will be challenge in court. Companies and associations that are considering potential challenges to the rule will need to provide comments during the rulemaking process in order to be eligible plaintiffs.

What’s Next?

If the proposed rule and policy are finalized as proposed, the vast majority of developers of LDTs will be expected to soon after generally meet the same regulatory requirements that apply to IVD manufacturers today. As FDA recognizes in the proposed rule, implementation of the proposed rule and policy, even with the phased approach as proposed, may result in some LDTs coming off the market. Specifically, FDA states –

“FDA anticipates that this phaseout policy should ultimately enable IVDs offered as LDTs that are supported by sound science to remain on the market. FDA also recognizes that some IVDs may need to come off the market, because, for example, the IVD cannot meet applicable requirements under the FD&C Act and its implementing regulations, or the laboratory chooses not to invest resources to meet those requirements. To the extent that withdrawal from the market of these IVDs implicates any reliance interests, FDA has made a preliminary determination that the public-health benefits associated with the reasonable assurance of safety and effectiveness of IVDs offered as LDTs outweigh any such interests.”

The proposed rule has proven to be a top priority for the agency in the last year, and it is anticipated that FDA will similarly prioritize finalization of the rule following receipt of public comments. Comments on the proposed rule (and policy) are due by December 4, 2023.

We will be providing our further analysis of the details of the proposed phaseout policy in the coming days. If you have any questions regarding the proposed rule, please contact the authors or a member of the Goodwin Life Sciences Regulatory and Compliance team.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.