FDA Finalizes Controversial New Rule to Regulate Laboratory-Developed Tests

New Regulations Aim to Standardize Quality and Improve Patient Trust in Diagnostic Testing

The healthcare industry is bracing  for the impact of a new FDA ruling that goes into effect on July 5, 2024, which aims to tighten regulatory oversight of in-house laboratory-developed tests (LDTs).

The ruling, announced on April 29, 2024, and finalized on May 6, classifies LDTs and in vitro diagnostic tests (IVDs) as medical devices, subjecting them to the same FDA requirements listed in the Food, Drug, and Cosmetic Act (FDAC), such as FDA premarket approval, quality regulation, and post-market surveillance.

While the FDA maintains that the policy is intended to protect patients from unsafe and inaccurate LDTs on the market, industry leaders are raising concerns about the potential negative impacts of the policy on costs and testing accessibility.

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Historical Context

According to the nonprofit Pew Charitable Trusts, approximately 3.3 billion IVDs, including LDTs, are run every year in the United States.

The FDA further estimates that there are 80,000 LDTs currently on the market, with around 8,000 introduced each year on average.

Under the Clinical Laboratory Improvement Amendments (CLIA) – a body of regulatory standards issued in 1988 – LDTs are defined as IVDs that are developed or modified in-house for use by a single laboratory as opposed to those marketed and sold commercially.¹

Most commonly, LDTs include routine tests for collecting, preparing, and examining specimens like blood, saliva, or tissue to measure or detect various substances in the body. They are often used for diagnosing, monitoring, or determining treatment for diseases and conditions.

In the past, LDTs typically have not been subject to FDA regulations, with the FDA operating a hands-off policy of discretionary enforcement towards them. 

However, pressures to increase oversight have grown over time as the reliance on LDTs has increased.

Although many IVD products are approved or cleared by the FDA before they reach the consumer, LDTs can enter the market without undergoing FDA or any other independent regulatory review. 

The FDA has said that the Centers for Medicare & Medicaid Services (CMS), a branch of the U.S. Department of Health and Human Services responsible for overseeing labs with LDTs, is limited in their ability to assess the quality, reliability, and effectiveness of such tests.

Consequently, there is also a lack of information regarding potential harm to patients resulting from the use of these tests and any inaccurate or discrepant results they yield.

Modern LDTs have progressed from a technological standpoint, and serve a broader population than ever before due to advancements in specimen transportation and laboratory practices.

Because these tests have become increasingly important for guiding critical healthcare decisions, the FDA has decided to phase out its discretionary enforcement policy and implement stricter regulations.²

FDA Policy Breakdown

The new policy will be implemented over the next four years in five phases and is expected to impact thousands of LDTs.²

In an announcement from the FDA, Commissioner Robert Calif explained that the ruling is intended to increase Americans’ confidence in lab testing.

“LDTs are being used more widely than ever before – for use in newborn screening, to help predict a person’s risk of cancer or aid in diagnosing heart disease and Alzheimer’s. The agency cannot stand by while Americans continue to rely on results of these tests without assurance that they work,” Califf stated.²

The phaseout method, according to the FDA, gives the agency more time to receive feedback from industry stakeholders and to make necessary adjustments throughout the process. It also provides more time and flexibility for laboratories to obtain FDA approval for IDTs.

• Stage 1 (May 6, 2025): Requires compliance with Medical Device Reporting (MDR) and correction and removal reporting.
• Stage 2 (May 6, 2026): Compliance with registration, listing, labeling, and investigational use requirements.
• Stage 3 (May 6, 2027): Compliance with most quality system requirements.
• Stage 4 (November 6, 2027): Premarket review requirements for high-risk LDTs.
• Stage 5 (May 6, 2028): Premarket review requirements for moderate and low-risk LDTs.³

Under the policy, certain tests from will remain excluded from oversight, such as those that are already on the market or those that address unmet needs in the medical industry. 

More specifically, the FDA will generally not enforce requirements for LDTs that were developed before 1976, HLA tests used in organ, stem cell, and tissue transplantation, tests that are used purely for law enforcement forensics, and LDTs used within the Department of Defense and Veterans Health Administration.

In addition, the FDA also plans to exclude LDTs, as approved by the New York State Department of Health.

As for the significance of the FDA’s ruling, it cannot be understated. Experts believe it will affect thousands of medical testing facilities, including hospitals and public health laboratories.

Industry Leaders Raise Concerns Over New Policy

The policy has been received coldly from healthcare industry leaders, with critics raising concerns about potential consequences like reduced access to tests, increased financial burden, unnecessary paperwork, and government overreach.

Experts and researchers at the Yale School of Medicine (YSM), for instance, cautioned against the FDA's proposal, arguing that it could impede patient access to critical diagnostics, particularly for rare diseases and during public health emergencies like pandemics. 

“The new rules could be significantly detrimental to the patient care that we provide, especially at large academic institutions like Yale New Haven Hospital,” said YSM associate professor of laboratory medicine and pathology Alexa Siddon, MD.

Yale officials further claimed that their LDTs have shown fewer problems than many FDA-cleared commercial tests.

“With of all these safety measures, we’ve actually seen more problems with the FDA-cleared commercial tests than we have with our laboratory-developed tests,” says Marie-Louise Landry, MD, professor of laboratory medicine and infectious diseases. "In addition, if there is a problem identified with an LDT, we have the ability to correct it promptly, whereas it can take years for a manufacturer to take corrective action and to obtain FDA approval."

Critics also highlighted the essential role of LDTs in filling gaps where commercial tests are unavailable or impractical, such as during COVID-19 and swine flu outbreaks when rapid deployment of tests is critical. 

They further argued that FDA regulation could stifle innovation, especially for niche diseases. 

According to the researchers, academic medical centers often tailor LDTs depending on specific needs.

For example, Yale’s virology laboratory has developed more than 30 LDTs for detecting different viruses. Under the new ruling, these tests would need to undergo an expensive and time-consuming approval process. 

“Lab-developed tests provide a very important service for these patients,” Landry said. “With these high costs, we will not be able to provide these services and will lose the expertise and infrastructure to run them.”

Genetic disease testing could also be significantly impacted by the move.

Dr. Hui Zhang, PhD., M.D., an associate professor of genetics and co-director of YSM’s DNA Diagnostic lab, spoke about his concerns about genetic testing. 

“Putting LDT implementation under the FDA regulation will particularly impact the availability of innovations benefiting smaller patient populations that wouldn’t readily attract commercial interest. FDA regulation of LDTs will adversely impact the care of patients with rare genetic conditions,” Zhang stated.

In response to the ruling, the American Hospital Association (AHA) denounced the move as “misguided.”

In a letter to Ranking Member M.D. Bill Cassidy, the AHA, opposed the FDA’s classification of tests as devices and warned about the negative impact to patient testing.

“These tests are not devices — they are diagnostic tools developed and used for essential patient care. Regulating LDTs under the FDA’s device regulatory framework could cause patients to lose access to many critical tests and stifle innovative advances in hospital and health system laboratory medicine,” the AHA wrote.

The new rules may also cause significant challenges for children's hospitals across the country, which rely heavily on LDTs to diagnose and treat various diseases.⁴

For children's hospitals, the policy could mean they will not be able to offer new tests to patients outside their own hospital networks. 

Hospital leaders and pathologists also worry about a slow down to existing tests, making it harder to keep up with advances in medicine, and limiting their ability to provide specialized care to children. 

Tests crucial for diagnosing childhood cancers or rare genetic conditions, for example, might not be developed or updated because of the new regulatory hurdles. This could ultimately affect the quality of care children receive across the country.

"Suddenly, those kids don't get access to one of the only paediatric next-gen sequencing panels designed just for kids' cancer," Alexander Judkins, a pathologist at the Children’s Hospital Los Angeles, told 360dx.com

Finally, the costs for compliance are expected to be monumental for many hospitals and medical centers.

Stanford Health, to register its 600 LDTs, would have to list and label performance characteristics, gather data on, and report adverse events for each test to obtain FDA approval.

The upshot, experts fear, is that less children will have access to specialized tests.

"I worry a little bit about our send-outs and our ability to be able to provide testing consistently throughout the next few years as the rule becomes implemented," said Elizabeth Weinzeirl, Chief of Pathology and Laboratory Medicine at Children’s Healthcare of Atlanta.

In response, the FDA assured that the regulations are designed to assure the safety of the IVDs offered as LDTs. The agency also responded to fears of increased financial burden, stating that the new enforcement discretion policies will reduce the cost of compliance.

Lawsuit and Looking Ahead

On May 29, less than a month after the FDA’s decision, the ACLA – a trade group that represents the lab industry – and infectious disease laboratory HealthTrackRx (a member company) filed a joint lawsuit against the regulatory body.⁵

Filed in the US District Court for the Eastern District of Texas, ACLA's lawsuit contests the legality of the FDA’s final ruling on LDTs, arguing that there is no legislative basis for the FDA’s decision.

In the complaint, the ACLA requested that the court issue a declaratory judgment stating that the FDA cannot regulate LDTs under FDCA. Additionally, the ACLA has requested that the court void the ruling and prevent the FDA from enforcing it.

“We are disappointed that FDA has continued down this path,” said President of the American Clinical Laboratory Association (ACLA) Susan Van Meter said in response to the FDA’s decision. “The rule will limit access to scores of critical tests, increase health care costs, and undermine innovation in new diagnostics.”

Lawyers noted that the case comes amidst an ongoing tug-of-war between the FDA and laboratories over LDTs. It is likely that Congress will have to settle the issue.

“FDA’s final rule on LDTs does not change the nature of the decades-long battle over whether FDA has jurisdiction over LDTs,” said Lisa Dwyer, an attorney at law firm King & Spalding. “It just shifts the battlefield from FDA to the courts. Regardless of who wins in the courts, it’s likely that the battle will ultimately shift back to Congress.”

Responding to the criticism (and the nearly 7,000 comments received after the decision), the FDA issued a statement justifying the decision, arguing that today's LDTs have more risks than when their initial policy was instituted.

Jeff Shuren, director of the FDA’s Center for Devices and Radiological Health, mentioned examples where LDTs might have given flawed results for cancer, COVID-19, or rare diseases, possibly harming patients.⁶

“Most LDTs receive limited oversight from the FDA. This puts patients at risk,” said Shuren. “The FDA is aware of numerous examples of potentially inaccurate, unsafe, ineffective or poor-quality [in vitro diagnostics] offered as LDTs that caused or may have caused patient harm.” 

In the wake of the new regulations, major companies like LabCorp and Quest Diagnostics may also have to deal with extra paperwork and rules when they want to develop or sell new tests.

Currently, LTDs make up 5% of LabCorp’s diagnostic testing volume and 10% of Quest Diagnostics’.⁷

Adam Schechter, CEO of LabCorp, expressed his concerns in a statement during an earnings call after the ruling dropped.⁶

“What I worry about is speed to market of LDTs,” Schechter said. “The real question to me is going to be how fast the FDA will be able to review the new LDTs and get them into the marketplace.”

The legal fight could decide how strict lab tests must be and what the FDA has power over in the future.

“This is a very, very material rule that has a dramatic impact on the laboratory industry in healthcare,” said Jeff Gibbs, a former associate general counsel for enforcement at the FDA. “There’s no way to sugarcoat it. That’s what it does. It transforms the lab industry.”

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Key Takeaways:

• A new FDA ruling, effective July 5, 2024, will regulate laboratory-developed tests (LDTs) under the same standards as other medical devices, aiming to improve quality and patient trust.
• The regulation will be implemented in five stages over four years, with different compliance requirements starting from 2025 through 2028, including reporting, quality system compliance, and premarket review for high-risk LDTs.
• LDTs already on the market and those meeting specific medical needs will generally be excluded from the new regulations. The FDA will also exclude tests approved by New York State Department of Health and certain other LDTs.
• The FDA argues that the stricter regulations are necessary due to increased risks associated with modern LDTs and aims to protect patients from potentially inaccurate or unsafe tests.
• Industry leaders and experts expressed concerns about increased costs, reduced access to essential tests, and the potential stifling of innovation, particularly in specialized and rare disease diagnostics.
• LDTs, historically subject to minimal FDA oversight under the Clinical Laboratory Improvement Amendments (CLIA), are now seen as requiring more stringent regulation due to advancements in technology and increased usage.
• The new regulations could significantly affect medical testing facilities, including hospitals and public health labs, potentially leading to delays in test availability and increased administrative burdens.
• The FDA maintains that increased regulation will boost patient confidence and ensure the safety and efficacy of diagnostic tests.
• The American Clinical Laboratory Association (ACLA) and HealthTrackRx have filed a lawsuit against the FDA, claiming the agency lacks the legal authority to regulate LDTs under the Federal Food, Drug, and Cosmetic Act.
• The legal and regulatory battle over LDTs is expected to continue, with significant implications for the laboratory industry and the future role of the FDA in overseeing diagnostic tests.