12/06/2024, 10:10 Despite Broad Carve-Outs, FDA Final Rule on LDTs Draws Critical Response From Lab Industry

e From Lab Industry | 360Dx

Despite Broad Carve-Outs, FDA Final Rule on LDTs Draws

Critical Response From Lab Industry
Apr 30, 2024 | Adam Bonislawski

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NEW YORK – The US Food and Drug Administration's final rule released on Monday to regulate
laboratory-developed tests (LDTs), while making it clear that such tests are in vitro diagnostics
subject to oversight by the agency, also will allow it to exercise enforcement discretion across a
broad range of tests, making it potentially less impactful than many in the lab industry may have
feared.

Despite this, the initial industry response to the rule was largely critical, with many raising
longstanding concerns that it will raise costs, impact lab innovation and flexibility, and harm patient
care.

As part of the final rule, the FDA makes it clear that it believes its authority to regulate LDTs are
provided for under the Federal Food, Drug, and Cosmetic Act (FD&C Act). It is a stand that the FDA
has maintained for more than three decades but which it has declined to exercise, instead adopting
what it has called a policy of enforcement discretion.

More recently, however, the agency argued that its policy of enforcement discretion was no longer
appropriate given the increasing complexity of LDTs and their ubiquity throughout the healthcare
system, including for the diagnoses and management of life-threatening conditions. It also noted
that a number of vendors had begun offering their tests as LDTs as a way of avoiding FDA
regulation, even though these tests were marketed to large and diverse customer bases much like
traditional IVDs.

“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," FDA Commissioner
Robert Califf said in a statement following release of the final rule. "The final rule announced today
aims to provide crucial oversight of these tests to help ensure that important healthcare decisions
are made based on test results that patients and healthcare providers can trust."

The FDA's efforts to claim oversight of LDTs has been controversial with much of the clinical lab
industry opposed to the rule. Opponents have raised concerns that FDA oversight will hamper lab
innovation and flexibility, limiting test development, and, ultimately, harming patient care.
Opponents have also questioned whether the FDA has legal authority to regulate LDTs, and legal
challenges to the final rule are widely expected.

The final rule, however, includes a number of carve-outs and exemptions that were contemplated in
the proposed rule. Perhaps most significantly, the agency said it will continue to exercise
enforcement discretion for LDTs on the market prior to the issuance of the final rule and will not
generally enforce premarket review and quality systems requirements. This could help address
concerns both about the expense and work required for labs to submit existing LDTs — which
according to some estimates number in the hundreds of thousands of tests — for approval, as well
as concerns about the FDA's ability to handle such an influx of submissions. Labs will still be
required to follow certain record-keeping procedures for these tests as laid out by Part 820, Subpart

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M of the Code of Federal Regulations Title 21, which covers items like device master and history
records, and complaint recording and evaluation.

The FDA will also exercise enforcement discretion for LDTs that have been approved by New York
state's Clinical Laboratory Evaluation Program (CLEP), generally exempting these tests from
premarket approval. This is significant because many LDTs offered on a national basis have CLEP
approval, which is required for any LDT offered for use on specimens collected in the state.

Enforcement discretion for CLEP-approved tests could also prove a boon for large national labs,
which account for a large proportion of such tests. As of September of last year, more than 10,000
LDTs had received CLEP approval, including more than 2,000 tests from Quest Diagnostics and its
subsidiaries, more than 1,100 tests from Mayo Clinic Laboratories, roughly 800 tests from
Laboratory Corporation of America, and roughly 600 tests from ARUP.

In a note to investors published following the release of the final rule, Evercore ISI analyst Elizabeth
Anderson said that the FDA's decision to exercise enforcement discretion for CLEP-approved tests
"will minimize ongoing approval costs for" Labcorp and Quest and could "ultimately drive more
share to the public clinical labs." Observers have previously suggested that FDA oversight of LDTs
could help push more testing to large national labs.

The FDA also said it will continue to exercise enforcement discretion for LDTs offered "by a
laboratory integrated within a healthcare system to meet an unmet need of patients receiving care
within the same healthcare system," generally exempting these tests from premarket review and
quality systems requirements. This provision appears intended to address concerns that once under
FDA oversight, laboratories would not be able to quickly develop new tests to address patient
needs not already addressed by existing assays.

This has been a particular area of concern with regard to areas like pediatrics and rare diseases
where the patient population for certain conditions may be too small to warrant development of
traditional IVDs. Labs will be required to comply with Part 820, Subpart M record keeping for these
tests, however.

Additionally, the FDA said it will exercise enforcement discretion for LDTs used within the Veterans
Health Administration and US Department of Defense.

The agency said it will also continue enforcement discretion for "1976-Type LDTs," which it defines
as tests that feature the "use of manual techniques (without automation) performed by laboratory
personnel with specialized expertise; use of components legally marketed for clinical use; and
design, manufacture, and use within a single CLIA-certified laboratory that meets the requirements
under CLIA for high-complexity testing."

It will also exercise enforcement discretion for human leukocyte antigen "tests that are designed,
manufactured, and used within a single laboratory certified under CLIA that meets the requirements
to perform high-complexity histocompatibility testing when used in connection with organ, stem
cell, and tissue transplantation to perform HLA allele typing, for HLA antibody screening and
monitoring, or for conducting real and 'virtual' HLA crossmatch tests."

The rule also provides an outline for how the FDA will over a four-year period phase out its previous
policy of enforcement discretion with regard to the LDTs it now plans to regulate.

The FDA also projected an expanded role for its Third Party review program under the final rule,
noting that it estimates that half of the LDTs now "subject to 510(k) requirements will be reviewed
under the Third Party review program."

This would represent a significant expansion of the agency's Third Party review program, which has
historically drawn little interest from device developers, in part because they have been reluctant to
pay additional fees for third-party review. They have also been made skeptical by past cases in

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which the FDA demanded additional scrutiny even after devices passed muster with third-party
reviewers. The agency said it is currently "working to enhance" the program under the most recent
Medical Device User Fee Act, MDUFA V.

James Boiani, an IVD, drug, and medical device life sciences attorney at Epstein, Becker & Green in
Washington, D.C., said that in the final rule, the FDA had "definitely backed off" the more maximalist
approach it took in its proposed rule and noted that the agency appears to be "trying to be
responsive to the concerns about disruption and lack of availability of tests."

He said that while labs will incur new costs to comply with record-keeping requirements for many
tests still under enforcement discretion, it will be "a much lower cost than having a full quality
system and having to go through the FDA review process."

But while the continued areas of enforcement discretion are broader than many expected, initial
reactions from the lab industry were nonetheless negative. In a statement, American Clinical
Laboratory Association (ACLA) President Susan Van Meter said the organization "has grave
concerns about this rule as a matter of both policy and law."

"The rule will limit access to scores of critical tests, increase healthcare costs, and undermine
innovation in new diagnostics," she said. "The rule also exceeds FDA’s statutory authority, as
Congress has never granted the agency authority to regulate laboratory developed testing services
offered by laboratory professionals."

Other lab organizations including the National Independent Laboratory Association (NILA), the
American Association of Bioanalysts (AAB), the Association for Diagnostics and Laboratory
Medicine (ADLM), and the College of American Pathologists (CAP), expressed opposition to the final
rule as well as, in some cases, skepticism about the FDA's legal authority to regulate LDTs.

Kyle Fetter, chief operating officer at lab consulting and revenue cycle management firm Xifin, said
that with its final rule, the FDA appears to be tackling LDTs with a lighter touch than suggested in
the proposed rule, but the agency's intentions are "still ambiguous."

"It could be extreme depending on which direction they choose to take it," he said. "You can expect
that laboratories are going to challenge [the rule] like crazy."

In Congress, legislators on both sides of the Verifying Accurate Leading-edge IVCT Development
(VALID) Act — the most prominent vehicle in recent years for a legislative-based approach to
diagnostics reform — criticized the rule.

US Reps. Larry Bucshon, R-Ind., and Diana DeGette, D-Colo., who were among the VALID Act's
strongest supporters in the House, issued a statement noting that while they are "disappointed" that
the FDA moved ahead with the rule, they "recognize that FDA's action today is because Congress
hasn't acted yet." The two urged Congress and industry partners to resume work on VALID.

Meanwhile, Rep. Cathy McMorris Rodgers, R-Wash., who worked against passage of VALID in
2022, said in a statement that "while the final rule is a slight improvement to the proposed rule, it will
still increase costs and decrease access to diagnostics and medical tests that provide information
crucial for doctors to treat their patients effectively." She called for the agency to "abandon the
rule."

Ultimately, Boiani predicted, the question of LDT regulation will likely make its way back to
Congress.

"Even though [FDA] was responsive to [industry] comments, I think there is still probably going to be
litigation; there will certainly be pushback," he said. "And eventually Congress is going to act, either
through a new law or if not through a new law then through part of the MDUFA negotiations. We'll
see."

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Regulatory News & FDA Approvals FDA LDTs North America

ACLA CAP Quest Laboratory Corporation of America

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