Assessing Industry Impact of FDA’s LDT Final Rule

As laboratory developed tests (LDTs) have become more advanced and complex, their safety and effectiveness have also generated increased FDA scrutiny. This spring, agency officials took the bold step of identifying LDTs as regulated medical devices, planting the seeds that discretionary treatment and lack of expectations when meeting pre-market or post-market regulatory requirements that has been granted for years, is coming to an end.

In a final rule that was issued April 29, FDA announced that an amendment to its regulations now stipulates that in vitro diagnostics (IVDs) are considered devices under the Federal Food, Drug, and Cosmetic Act (FDCA), including instances in which the manufacturer of an IVD is a laboratory. The decision brings the production of LDTs, which are IVDs designed, made, and used in a single lab, into new territory and away from the standards of the Clinical Laboratory Improvement Amendments (CLIA) of 1988 overseen by the Centers for Medicare and Medicaid Services (CMS). Along with this amendment, FDA has issued a policy to phase out its general enforcement approach for LDTs over the course of four years.

While the ruling has essentially been long in the making given that the FDA established its enforcement discretion policy for LDTs back in 1976, the new rule is causing quite the stir throughout the diagnostic industry, up to and including the recent announcement by the American Clinical Laboratory Association that it has filed a lawsuit against FDA that challenges the final rule. While IVD manufacturers are seemingly on board with the new rules with the assumption that increased oversight will lead to better quality and lower risks, the potential for there to be a downturn in LDT development as labs adjust to these new FDA requirements exists, says Michele L. Buenafe, a partner at Morgan Lewis, a multinational law firm that provides strategic counseling to IVD manufacturers and clinical laboratories. With the final rule set to become effective July 5, MD+DI spoke with Buenafe to get her insights into what led to the FDA’s decision and the potential impact on industry moving forward.

Why are LDTs no longer being considered lower risk?
Buenafe: FDA has expressly stated that it believes the increased complexity of the LDTs offered today versus the LDTs offered in 1976 have resulted in increased risks. For example, the FDA notes that modern LDTs “increasingly rely on high-tech instrumentation and software, are performed in large volumes, and are used more frequently to help guide critical healthcare decisions.”

Why do you believe LDTs have previously avoided this type of oversight?

Buenafe: When FDA first established its enforcement discretion policy in 1976, LDTs were less complex and less widely used. Since then, the FDA has made attempts to walk back this policy due to the agency’s concerns related to the increased complexity of LDTs and the use of LDTs for higher-risk diagnostic and treatment decisions. For example, in 2014 FDA issued a draft guidance — Framework for Regulatory Oversight of Laboratory Developed Tests.  These prior attempts by FDA were met with fierce resistance from the clinical laboratory community and other stakeholders that use and rely on LDT testing.

To what extent do you think the COVID-19 pandemic contributed to the final rule being made at this time?
Buenafe: I suspect, but do not know definitively, that this was in the works even before the COVID-19 pandemic. Note that FDA generally does not exercise enforcement discretion for LDTs intended for use in public health emergencies, such as the COVID-19 pandemic. This is a long-standing FDA policy that predated the COVID-19 pandemic. For example, the FDA previously required premarket authorization for LDTs used for Zika testing and issued enforcement letters to labs marketing LDTs intended for Zika testing without prior FDA authorization. Thus, the FDA’s handling of LDTs for COVID-19 was similar to how it handled LDTs for other prior public health emergencies, such as Zika.

What would you say are the most significant adjustments that laboratories marketing LDTs will have to make regarding the recent ruling?

Buenafe: The most significant adjustment for these clinical labs will be to figure out whether, and to what extent, the FDA’s medical device regulatory requirements apply to their LDTs, including any new or modified LDTs. In the preamble to the final rule, the FDA established several new, limited-enforcement discretion policies for specific types of LDTs. Although the FDA likely intended for these new, limited-enforcement discretion policies to lessen the blow for clinical labs, each of these new policies has several requirements and limitations. Thus, the evaluation of whether a particular LDT can qualify for enforcement discretion is now much more complex and may present difficulties for clinical labs, particularly those that have many different types of LDTs.

Do you think we will see fewer tests overall developed moving forward because of this final rule? Why or why not?

Buenafe: There is likely to be a downturn in LDT development as labs adjust to these new FDA requirements. Some labs may choose not to develop new LDTs, as they may not have the resources to meet FDA requirements, particularly premarket review requirements, that will apply to LDTs marketed after the final rule publication date. Note that, as described in the preamble to the final rule, the FDA established a new, limited-enforcement discretion policy for LDTs that “were first marketed prior to the date of issuance of the rule and that are not modified, or that are modified in certain limited ways.” These pre-existing LDTs will not be required to comply with the FDA’s premarket review or quality system regulation requirements, but other regulatory requirements will apply. For example, medical device reporting, complaint handling, registration, and listing.  

With the 4-year phase period upcoming, do you believe there is a risk for tests to be rushed out during this time and therefore potentially unreliable?

Buenafe: I don’t think there is a significant risk of this, as all LDTs rolled out after the final rule issued will still become subject to the relevant FDA regulatory requirements in accordance with the FDA’s four-year phased approach, unless the LDT qualifies for one of the limited-enforcement discretion policies described in the preamble to the final rule. Thus, there’s nothing to gain by rushing out a new LDT now, after the final rule publication date.

How would you suggest that IVD manufacturers and clinical laboratories take initial next steps from here? 

Buenafe: Note that only clinical labs making and/or using LDTs are impacted by the final LDT rule, and not traditional IVD manufacturers. The first step for a clinical lab with LDTs will be to determine whether any of its LDTs may be subject to one of the many new, limited-enforcement discretion policies for specific types of LDTs described in the preamble to the final rule. This could be a rather complex analysis depending on the number and type of LDTs offered by a specific lab.