United States: The Latest Episode Of The LDT Drama: FDA Issues Long-Awaited Proposed Rule For Laboratory Developed Tests

On October 31, FDA will be offering a webinar on its proposed rule "Medical Devices; Laboratory Developed Tests."

This webinar comes about a month after FDA issued a proposed rule revising 21 C.F.R. Part 809 (specifically, 21 C.F.R, § 809.3) to state, explicitly, that in vitro diagnostics (IVDs) are medical devices, even if they are developed and manufactured in a laboratory setting.

This category of tests is generally referred to as "laboratory developed tests" (LDTs) and FDA has historically extended enforcement discretion, accepting the availability of certain LDTs outside of the FDA device clearance and approval pathway.

Of course this has not been a straightforward situation: we have seen decades of debate among FDA and industry stakeholders about the exact boundaries of FDA's expressed enforcement discretion—where those boundaries should lie, and even interpretation (gleaned from enforcement action) of more precisely where they do, in FDA practice, actually lie.

The culmination of FDA observations

In the proposed rule, FDA notes that it has always taken the view that LDTs are medical devices and therefore under agency purview for regulatory oversight. Those who follow this area will recall that even within HHS, acceptance of FDA's position was not always unquestioned; we'll provide that regulatory drama below.

After a long and highly complex regulatory history, and much virtual ink spent on the topic—including the 26 pages of the latest proposed rule–FDA's current proposed approach to effecting the change is interesting in its core simplicity and efficiency with words, with the key language simply stating:

(21 C.F.R. § 809.3, emphasis added.) The use of this single sentence in the regulation, to flex authority drawn from the underlying statutes, illustrates the breath of latitude available to FDA to take action in areas that it believes implicate its mandate.

The impetus behind the proposed rule, according to FDA, was what the Agency learned from reviewing applications for COVID-19 tests as well as a range of other IVDs that have traditionally been offered as LDTs, and which the Agency assessed as comparable to tests that are developed and manufactured outside of laboratory settings.

In FDA's view these tests have become increasingly sophisticated and utilize complex technologies that no longer make them distinct from IVDs manufactured at a large scale. FDA also argues that LDTs "are often used interchangeably by healthcare providers and patients with tests made by other manufacturers," and that "test systems are often 'launched as LDTs' with no assurance that they meet requirements under the [Federal Food, Drug, and Cosmetic Act (FD&C)] Act and its implementing regulations."

With this proposed rule, FDA explains that it does not seek to duplicate the oversight provided by the Centers for Medicare and Medicaid Services (CMS) under the Clinical Laboratory Improvement Amendments (CLIA) but rather finds the established regulatory scheme under CLIA to be complementary to the agency's proposed regulatory oversight.

A long history of varied perspectives

FDA has, for decades, taken the position that LDTs are medical devices under the FD&C Act and may be subject to FDA oversight at any time, even though FDA has, from its perspective, elected to apply a risk-based enforcement discretion policy to LDTs.

In parallel, a contingent of developers and marketers of LDTs have consistently asserted over the years that FDA lacks the authority to regulate LDTs at all. Such stakeholders have often asserted that the expertise of laboratorians and the requirements under CLIA already provide adequate oversight of LDTs.

Companies who have followed the more traditional marketing authorization pathway with FDA have historically questioned whether the enforcement discretion framework provided adequate assurance of a "level playing field" across tests that in practice might be viewed as alternate options for HCPs.

Since 2014, there have been consistent ongoing discussions and advocacy efforts from stakeholders across the life sciences industry, with FDA and Congress, about potential enhanced regulation of LDTs.

Attempts at legislation

In March 2017, a draft bill on the regulation of LDTs, the Diagnostic Accuracy and Innovation Act (DAIA) was released for discussion. In December 2018, the sponsors of DAIA released a new version of the legislation called the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act).

The VALID Act proposed a risk-based approach to regulate LDTs and would have created a new in vitro clinical test category, which would have included LDTs, and would have introduced a new regulatory framework under FDA oversight. Legislative proposals similar to the VALID Act have since been introduced.

Similarly, Congress considered the Verified Innovative Testing in American Laboratories Act (VITAL Act) in March 2020 and again in May 2021. In contrast with the VALID Act, the VITAL Act would have prevented FDA from regulating LDTs and would have instead assigned regulatory authority over LDTs entirely to CMS. Neither version of the VITAL Act was passed by Congress.

In 2022, the Senate Committee on Health Education Labor & Pensions included the VALID Act into its proposed version of the FDA user fee program reauthorization bill, which was considered as part of the fiscal year 2023 appropriations process. However, the VALID act text was stripped out of the final version of the Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023 (Pub. L. No. 117-180), the law which contained the final reauthorization of the user fee program.

It is possible that there will be efforts to revive legislative proposals with the elements drawn from either the previous VALID or VITAL Act proposals, but thus far the legislative efforts have not reached fruition.

Perhaps the action by Congress of stripping the VALID Act from the FDA user fee reauthorization has galvanized FDA's determination to moving forward through the proposed rule.

Why the proposed rule, and why now?

FDA previously broached the issue of LDT oversight in the 2017 Discussion Paper on Laboratory Developed Tests, proposing oversight of certain LDTs relative to the specific type of premarket review. The Agency essentially supported less oversight for devices, for example, low risk tests that would fall under the Class I device category.

In the new proposed rule, FDA provides a detailed discussion of what has changed in the past several years. Notably, FDA cites the "high variability" of LDTs for tests that are both for high-risk illnesses such as rare diseases, and also those that are also generally considered low risk. Furthermore, FDA identifies its more recent experiences with COVID-19 tests and the lack of proper validation.

There is, FDA notes, greater information about LDTs as identified through scientific literature, medical reports, review of patient complaints by FDA, and the Agency's extensive experience reviewing such tests during the COVID-19 pandemic. The extensive availability of LDTs has impacted the approach to healthcare and provided opportunities for healthcare providers and patients to have more detailed discussions about care and treatment options. To facilitate productive healthcare provider and patient interactions, FDA identifies an imperative for oversight for assurance of test validity and accuracy.

Further, FDA asserts that regulatory oversight of LDTs will fulfill its charge of protecting the public health, to provide greater assurance of the safety and effectiveness of these tests. Previously, FDA utilized warning letters and safety communications for certain LDTs to warn entities marketing tests, healthcare professionals, and consumer populations regarding FDA's concerns about public health risks due to inaccurate results or other significant public health concerns.

In summary, FDA has determined that its application of enforcement discretion is no longer the most suitable approach for LDTs.

The proposed rule and phased regulatory oversight

FDA proposes to amend the definition of in vitro diagnostic products under 21 C.F.R. § 809.3 to include LDTs and establish that the agency does not differentiate between where an IVD is manufactured or developed, because both IVDs and IVDs that are LDTs are, according to FDA, "reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of health, in order to cure, mitigate, treat, or prevent disease or its sequelae. Such products are intended for use in the collection, preparation, and examination of specimens taken from the human body."

The proposed rule also introduces phasing out general enforcement discretion and phasing in regulatory oversight over the course of a four-year period in five steps which FDA would describe in the preamble to the final rule. The agency's goal with the phased or staged approach is to gather information about LDTs that could pose potential harms to public health and safety as soon as possible. In consideration of this concern and approach, FDA proposes to end general enforcement discretion as follows:

1. Within one year after publication of final phaseout policy, ending general enforcement discretion with respect to medical device reporting (MDR) requirements as well as for correction and removal reporting requirements.
2. Within two years after publication of final phaseout policy, ending general enforcement discretion in relation to requirements beyond MDR reporting, corrections and removals, except for those requirements for quality systems and premarket review. This would include, for example, registration and listing, labeling and investigational use requirements.
3. Within three years after publication of the final phase policy, ending general enforcement discretion with respect to requirements for quality systems.
4. Within three and a half years after publication of final phaseout policy, and not before October 1, 2027, end general enforcement discretion for premarket review requirements for high-risk IVDs.
5. Within four years after publication of final phase out policy, and not before April 1, 2028, end general enforcement discretion for moderate and low risk IVDs requiring premarket applications.

A regime where FDA and CMS have oversight

Traditionally, FDA has considered LDTs that are used for clinical purposes to be those tests that are developed and used within the same laboratory with appropriate certification under CLIA and as noted in the proposed rule, that meet "the regulatory requirements under CLIA to perform high complexity testing."

While FDA has exercised general enforcement discretion, CMS has maintained oversight of LDTs through CLIA, ensuring appropriate complexity for the types of tests that are deployed.

One of the more interesting developments occurred in the midst of the pandemic, under the Trump administration:—in August 2020 HHS announced, through a statement on its website, that FDA could not require premarket review of LDTs, unless the Agency went through notice-and-comment rulemaking.

Although this dramatic statement came in the midst of the COVID-19 pandemic and was arguably prompted by the need for COVID tests, the language offered had a much broader scope, with relevance to all LDTs.

At that time, HHS also rescinded guidance documents and policy statements around LDTs as part of prior Executive Orders 13771 and 13924 issued around reducing regulations and controlling regulatory costs.

Following the 2020 election, in early 2021, we observed behavior from FDA personnel suggesting that the tide was already turning back toward a more active enforcement approach toward LDTs. The HHS statement that had been of such interest to those following the LDT drama was eventually, quietly, pulled down without major announcement in November 2021. These developments taken together signaled realignment within HHS toward active FDA oversight.

Now, under the proposed rule, both FDA and CMS would have oversight consistent with the implementing regulations of the Federal Food, Drug and Cosmetic Act ("FDCA") and CLIA.

FDA notes in the proposed rule that some have questioned FDA's authority to regulate LDTs as medical devices or regulate LDTs altogether given CMS' role of oversight under CLIA. FDA's position is that, as in other areas of healthcare law, FDA and CMS need not be mutually exclusive. FDA would be regulating safety and effectiveness of LDTs as medical devices, including the design, development, and manufacture of LDTs, whereas CMS would maintain oversight of the "proficiency with which laboratories perform clinical testing."

In this regard, FDA views its regulatory oversight role in relation to CMS' as complementary. For example, with respect to the phaseout policy outlined in the proposed rule, CLIA-certified laboratories may be able to leverage certain aspects of their certification as it pertains to quality assurance. FDA does indicate, however, that not all CLIA compliance obligations will necessarily fulfill quality system requirements.

What LDT companies should consider next

FDA is seeking comments on the proposed rule through December 4, 2023. All interested parties should consider submitting comments to FDA in response to this proposed rule, especially stakeholders in the diagnostic and LDT landscape strategizing next steps and potential impacts to their businesses.

Reed Smith is ready to help you navigate these changes.

In addition to submitting comments to FDA, industry stakeholders are likely to benefit from strategic assessment of the potential long-term impact on their business.

For traditional laboratories, implementing an FDA-compliant quality system and anticipating the new obligations under FDA regulatory oversight can take significant financial investment, sophisticated planning, and focused development of a compliant manufacturing and quality infrastructure. While FDA proposes a four year, phased-in approach, this gives laboratories time to begin the planning process, especially considering whether to proceed with offering their tests under stricter agency regulation.

Laboratories currently offering LDTs may also benefit from considering any broader impacts to healthcare professionals, patients and other customers who currently rely on their tests for various diagnostic and treatment purposes. To the extent decisions are made to remove or stop developing certain tests, we suggest thoughtful planning to work closely with customers and other interested parties, to assist with identifying potential alternatives or other resources that are available where care continuity will be essential for certain patient populations.

This is one of several areas where we are seeing a highly active FDA this year. Reed Smith will continue to follow developments and progress of this proposed rule and its ongoing impacts in the diagnostic industry. If you have questions on this topic, please reach out to the FDA lawyers at Reed Smith LLP.

This article is presented for informational purposes only and is not intended to constitute legal advice.