On May 14, 2024, FDA hosted a webinar to provide an overview of its final rule “Medical Devices; Laboratory Developed Tests” as well as FDA’s phaseout of its general enforcement discretion approach to laboratory developed tests (LDTs).   

The October 2023 proposed rule sought to phase out enforcement discretion for LDTs more broadly. However, FDA seems to have considered some of the concerns commenters raised about access to LDTs and the cost of compliance. The final rule retains varying degrees of enforcement discretion for specific types of LDTs.

Amended Definition of Device

In the final rule, FDA amended the definition of “device” under the Federal Food, Drug and Cosmetic Act (FDCA) to In Vitro Diagnostics (IVDs) offered as LDTs stating: “. . . These products are devices as defined in section 201(h)(1) of [FDCA] 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).

This amendment to the statutory definition of device has broad implications for FDA’s new oversight authority of LDTs, especially with respect to the following:

  • Premarket review enables FDA to evaluate the scientific information supporting the analytical validity, clinical validity, and safety of high- and moderate risk IVDs. Notably, the final rule’s discretion policy exempts New York State Clinical Laboratory Evaluation Program (CLEP)-approved devices from premarket review.
  • Medical Device Reporting (MDR) requirements enable FDA to track information across IVD types, now including LDTs.
  • Registration and listing requirements allow FDA to identify deficient manufacturing processes and receive up-to-date information on the IVDs on the market.
  • FDA-cleared labeling allows for more streamlined agency review of promotional claims and more consistency in doctor and patient selection decisions.
  • Laboratory compliance with current good manufacturing practice requirements and the Quality System Regulation require manufacturers to establish procedures for the consistent, quality manufacturing of devices.
  • Compliance with other FDA requirements help ensure that human subject protections and investigational device exemption (“IDE”) requirements are implemented.

Phasing Out General Enforcement Discretion

In the final rule, FDA outlines its plans to end general enforcement discretion for LDTs by implementing the following phaseout policy after publication of the rule on May 6, 2024.

Time After Publication of Final Phaseout PolicyPolicy Change
Within one year  General enforcement discretion will end with respect to medical device reporting (MDR) requirements as well as for correction and removal reporting requirements  
Within two years  General registration and listing, labeling and investigational use requirements will apply  
Within three years  General enforcement discretion with respect to requirements for quality systems under 21 CFR 820 will end  
Within three and a half years (and not before October 1, 2027)  General enforcement discretion will end for premarket review requirements for high-risk IVDs
Within four years (and not before April 1, 2028)  General enforcement discretion will end for moderate and low risk IVDs requiring premarket applications

Enforcement Discretion Remains but Under Limited Circumstances

While FDA’s phaseout policy remains largely unchanged from the policy in the proposed rule, FDA will continue to exercise enforcement for discrete categories of LDTs that are unlikely to pose significant risks due to the LDT design or the circumstances in which testing using LDTs is conducted.

Broad FDA Exemption

One of the LDTs that are exempt from all device regulations includes what FDA calls “1976-Type LDTs” (i.e., tests that resemble devices marketed prior to the Medical Device Amendments of 1976). Such tests typically only require manual techniques performed by laboratory personnel and are used within a single Clinical Laboratory Improvement Amendments (CLIA)-certified laboratory.

Other types of LDTs that can benefit from FDA’s enforcement discretion include Human Leukocyte Antigen (HLA) tests that are designed, manufactured, and used within a CLIA-certified laboratory, tests intended solely for law enforcement purposes, and LDTs manufactured and performed within the Department of Defense and the Veterans Health Administration.

Exemption from Premarket Review and Quality System Requirements

Additionally, FDA’s policy grants discretionary exemption to two broad categories from premarket review and several quality system requirements.

The first category includes LDTs for “unmet needs.” FDA created this category out of concern that LDT manufacturers who might otherwise qualify for a Humanitarian Device Exemption (HDE), or a Breakthrough Device designation would stop manufacturing LDTs altogether due to increased compliance costs. Notably, this policy is limited to LDTs for patients who are receiving care within the healthcare system within which the laboratory offering the LDT is integrated; it explicitly excludes patients treated at a hospital with different corporate ownership.

LDT manufacturers who believe they can benefit from FDA’s “unmet need” discretion should consider the benefits and drawbacks of seeking FDA clearance with an HDE versus risking a change in FDA’s unmet need policy in the future.

The second exempt category is what FDA refers to as “currently marketed IVDs offered as LDTs” or LDTs that were first marketed prior to this final rule as long as they are not modified (or they are minimally modified as described in FDA’s policy).

While “unmet need” LDTs and “currently marketed IVDs offered as LDTs” do not need to undergo premarket review, they must still submit labeling to FDA. LDT manufacturers who have not yet developed a sophisticated medical review infrastructure might experience elevated risks when submitting labeling that includes unvalidated claims about safety or effectiveness (i.e., comparative claims about different LDTs without head-to-head clinical trial validation).

In addition to careful monitoring of labeling claims, with this carve-out of the quality system exemption, records requirements do apply (in accordance with 21 CFR 820.186). Further, manufacturers in these “exempt” categories will need to carefully monitor any changes that are made to tests in consideration of the potential for the need of future premarket submissions.

What’s Next / What Reed Smith is Tracking

Cost of Compliance

Adhering to FDA new regulatory and compliance obligations under the final rule will be a new and costly endeavor for many LDT manufacturers. While manufacturers of low and moderate-risk tests might find that 510k submissions and de novo classification requests are more manageable, manufacturers of riskier and more complex products could be subject to massive premarket review costs.  In fact, according to FDA’s regulatory impact analysis of the rule, investigational use applications are expected to cost between $2.6 million and $10.3 million and a Premarket Application (PMA) is expected to cost about $4.4 million.

Similarly, LDTs that only require general and/or special controls might not need as robust a quality system as highly complex tests. The impact analysis estimates that quality systems could cost manufacturers anywhere between $400,000 to $4 million to comply with the quality system requirements during the third step in the rule’s phaseout policy.

However, reporting requirements (e.g., MDRs, corrections and removals) introduce a new layer of compliance that will likely require engagement of consulting and legal expertise at increased cost. Reporting requirements might require a data management system overhaul and increased FDA scrutiny over LDTs that cannot explain deficiencies in its adverse event reporting system.

Even for LDTs subject to certain exemptions, labeling requirements might cause increased compliance costs related to labeling and marketing modifications. For example, manufacturers with little experience in FDA-approved advertising and promotion might need to invest in additional testing to validate existing marketing claims. They might also incur costs developing an internal marketing oversight program to either ensure testing changes remain consistent with the label or assess whether any such changes may be subject to premarket review. By FDA’s estimate, premarket labeling review will cost between $540,000 and $14.7 million. Like MDR, labeling will likely be a very expensive aspect of compliance, even for low and moderate-risk devices.

Further, a new group of organizations with varied experience interfacing with FDA will need to navigate the intricacies of being a regulated entity under the FDCA and understanding what it means to be subject to ongoing FDA oversight, in addition to ongoing interactions with the Centers for Medicare & Medicaid Services (CMS).

Additional FDA Guidance

At the May 14 webinar, FDA announced that the Center for Devices and Radiological Health will host a series of webinars to clarify different aspects of its phaseout policy. FDA will host the next webinar on June 5 to give more clarity on its two guidance documents: “Enforcement Policy for Certain In Vitro Diagnostic Devices for Immediate Public Health Response in the Absence of a Declaration Under Section 564” (applicable to LDTs) and “Consideration of Enforcement Policies for Tests During a Section 564 Declared Emergency” (applicable to IVDs). FDA also intends on hosting webinars throughout the summer on various topics such as IVD Classification, MDRs, and quality system requirements.

During the May 14 webinar, the hosts recognized the need for more guidance relating to validation testing for LDTs that serve smaller patient populations (which would alleviate the concerns of manufacturers of LDTs for rare diseases). The agency also seemed open to including public health laboratories that manufacture immediate response tests for state and local governments in its enforcement discretion policy.

Finally, FDA clarified that PMAs and 510k submissions received before the LDT rule was finalized would still be eligible for exemptions applicable to “currently marketed IVDs offered as LDTs” under the new discretion policy.

Potential Litigation

Ever since the draft rule emerged, it was understood that even if finalized the rule may not go into effect until any potential litigation is resolved. There are several theories for potential litigation related to the final rule, including for example, the arguments that:

  • FDA is regulating the practice of medicine through regulating LDTs in violation of the FDCA;
  • LDTs are not a device and therefore cannot be included in the definition of device under Section 201(h) of the FDCA;
  • FDA failed to fully assess and consider the costs and burdens of this new rule as required under the Administrative Procedure Act;
  • CMS already provides necessary and sufficient oversight of LDTs, and the high complexity laboratories in which they are developed, under CLIA;
  • Under the major questions doctrine, Congress did not delegate its legislative authority to FDA to carry out rulemaking that is of major economic significance; and
  • The final rule violates the First Amendment.

What About Congress?

In March, Sen. Bill Cassidy (R-La.) issued a Request for Information (RFI) asking stakeholders for input on diagnostics reform. This was issued in light of FDA’s proposed rule.  Similarly, the House of Representatives’ Energy & Commerce committee held a public hearing on “Evaluating Approaches to Diagnostic Test Regulation and the Impact of the FDA’s Proposed Rule.” 

Congress’ position has not changed much over the last few years, but with FDA’s proposed rule now final, we may seem some adjustments in positions. That is, Congress is under increasing pressure to move forward with legislation.  Sen. Cassidy issued a press release condemning the new rule on the day FDA announced the rule. In the release, he said:

“The FDA does not have the authority to unilaterally increase its regulatory jurisdiction. This rule will undermine access to essential laboratory tests, increase health care costs, and ultimately harm patients. During the pandemic, we saw how too much government interference and red tape delays lifesaving care to Americans. . . . Congress needs to take action to clarify the regulatory structure for diagnostic tests.” 

There were similar messages of disapproval from other members of Congress. 

The existence of a final rule placed the legislation called the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act) at center stage in Congress.  The VALID Act proposes a risk-based approach to regulate LDTs designed to create a new in vitro clinical test category, which would include all LDTs.  The act would introduce a new regulatory framework under FDA oversight. 

As we mentioned in our prior blog post about FDA’s proposed LDT rule, the Senate Committee on Health Education Labor & Pensions included the VALID Act into the proposed version of the FDA user fee program reauthorization bill.  However, the VALID Act text was then stripped out of the final version of the Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023 (Pub. L. No. 117-180). We noted at the time that this action by Congress of stripping the VALID Act from the FDA user fee reauthorization had likely galvanized FDA’s determination to moving forward through the proposed rule.  And here we are.  Final rule is out. 

With 2024 being a presidential election year, we do not anticipate any substantive movement in Congress in response to FDA’s final rule.  Should Donald Trump win the White House in November, however, we could envision an Executive Order or some other unilateral action to interfere with FDA’s execution of its final rule.  No matter what, 2025 almost guarantees litigation over the final rule along with ongoing Congressional interest in reviving the VALID Act.

Organizations planning to develop and manufacture LDTs are now faced with a new regulatory landscape that no longer permits flexibility under a general enforcement discretion regime. Whether to continue manufacturing certain tests or development efforts will be met with critical decision making for organizations developing and offering LDTs.

We anticipate ongoing developments in relation to this final rule, which Reed Smith will continue to follow, especially the impacts to the diagnostic industry. If you have questions on this topic, please reach out to the FDA lawyers at Reed Smith LLP.