Four Strategic Questions About the Future of Diagnostics in the Wake of FDA’s Final Rule on Laboratory Developed Tests

Having received more than 6,500 comments on the proposed rule released in October 2023, the U.S. Food and Drug Administration (FDA) has now finalized an effort to extend medical device requirements to laboratory developed tests (LDTs).¹ In short, the final rule on this topic adds a single sentence to FDA regulations governing in vitro diagnostic products (IVDs), which will now state that all IVDs are devices, “including when the manufacturer ... is a laboratory.”²

The preamble to the final rule is massive (over 500 pages in its prepublication form) and includes a complex discussion of the ways in which FDA expects laboratories to come into compliance with the device requirements. This includes discussion of many specific types of LDTs that, according to FDA, are already expected to be in compliance, others expected to come into compliance in stages over the next four years, and still others that will remain subject to “enforcement discretion,” meaning that they will not generally be expected to come into compliance under FDA’s current policy.

Some key strategic questions that stakeholders will need to consider about the final rule:

Will FDA’s Final Rule Be Successfully Challenged in Court?

Litigation to challenge the final rule seems inevitable as many comments submitted in response to the proposed rule expressed significant opposition.

Key concerns raised by commenters included reduced potential for innovation in the LDT space once LDTs become subject to premarket review requirements; reduced access to LDTs for vulnerable populations, such as patients with rare diseases; substantial resource and time burdens associated with compliance by industry, including for small laboratories; lack of capacity at FDA to manage effectively a large influx of premarket submissions; and lack of legal authority for FDA to regulate LDTs.

The most likely theories for a challenge revolve around the last concern — assertions that the Federal Food, Drug, and Cosmetic Act (FDCA) does not grant FDA the authority to regulate in this area. To date, FDA has been able to avoid judicial review of its claim that LDTs are devices within the meaning of the FDCA.³ But there are several potential objections to FDA’s view.

Commenters have argued, for example, that the definition of “device” at 21 U.S.C. § 321(h)(1) applies only to “an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article” — a collection of nouns that cannot be read to encompass the testing services offered by laboratories.⁴

Commenters have also pointed out that FDA’s own device registration regulation exempts clinical laboratories because they merely “render a service … with a device” and are not themselves device manufacturers,⁵ and FDA has not amended that rule.

Finally, commenters have argued that Congress has twice delegated express authority to regulate clinical laboratory services to the Centers for Medicare & Medicaid Services through the Clinical Laboratory Improvement Act of 1967 and the Clinical Laboratory Improvement Amendments of 1988.⁶ While legislation has been proposed to grant concurrent jurisdiction over clinical labs to FDA many times over the last two decades, none has passed.

Especially in light of the rise of the “major questions” doctrine and the potential forthcoming demise of Chevron deference,⁷ these and similar arguments could seriously imperil this final rule.

How will device requirements apply to any specific LDT, assuming the final rule goes into effect?

There are several major questions now facing laboratories seeking to determine what requirements they should comply with, how, and how soon.

One initial set of questions relates to whether any particular LDT is now expected to be in compliance with the device requirements at all. As noted above, the final rule includes a complex discussion of various specific types of LDTs, which differ in terms of current and future expectations for compliance. These generally include:

• LDTs expected to be in compliance already, including tests offered by labs not certified to perform high-complexity testing and tests that are marketed directly to consumers
• LDTs that will remain subject to a general policy of enforcement discretion for the time being, including “1976-type LDTs,” which are defined as tests having certain characteristics common among LDTs offered when the FDCA was amended to create the current system for regulation of devices
• all other LDTs, which will generally become subject to the device requirements in stages over the course of the next four years (in brief, this would include certain reporting requirements after one year; registration, listing, and certain other requirements after two years; quality system requirements after three years; premarket review requirements for high-risk LDTs after 3.5 years; and premarket review requirements for lower-risk LDTs after four years)

A second set of questions relates to applicability of the premarket review requirements for LDTs in the final category above. For example, the preamble states generally that these requirements will not be enforced against “currently marketed” LDTs that were first marketed prior to the issuance of the final rule. Although this appears to largely permit most existing LDTs to be marketed without any premarket review, it does so only as long as an LDT is not modified in any significant way. If a modification is made, premarket review is then expected. The preamble also asserts that FDA intends to closely scrutinize the labeling of these existing tests and take action where claims are not adequately substantiated.

In light of this, laboratories and their business partners will need to carefully assess the status of each specific LDT they offer to determine what requirements they should plan to comply with, by when, and how. They will also need to become intimately familiar with, and begin applying, existing FDA requirements and policies that govern modifications to devices and promotional labeling of devices.⁸

What will the diagnostics industry do while litigation plays out?

Under the current rule, many labs developing new LDTs or planning modifications to existing LDTs would need to conduct new studies to support premarket submissions for their new or modified tests. One big question is whether they will conduct the studies now or wait until any potential litigation is resolved. Those choosing to move forward may be motivated by fear that litigation may not be successful and that the current implementation dates will remain untouched.

Another big question is whether certain labs may choose to do the new studies regardless of whether they anticipate the final rule’s going into effect. For example, firms might anticipate the resurrection of the VALID Act of 2023, which would have given FDA explicit statutory authority to regulate LDTs, or the introduction of similar legislation that may impose higher burdens for marketing.⁹

In any event, firms will have a lot to think about in terms of the optimal strategy to pursue, which may vary from laboratory to laboratory. The various considerations include, among under other things, the time and money associated with the new studies and other aspects of compliance with device requirements as well as any ways in which the expense may be offset.

Where would money for new studies come from?

New studies to support premarket submissions may be costly. There are many stakeholders and variables with respect to whether and how each might bear the burden of paying for the studies. These include

1. laboratories themselves, which might need to fundraise to do these studies on their own and/or collaborate with others (Many laboratories are already constrained in terms of available financial and personnel resources. The new rule will likely further constrain their existing limited resources.)
2. traditional in vitro diagnostic manufacturers, which might choose to rely more on collaboration with labs or acquisition of their technologies, moving toward a model like what has been traditional in the pharmaceutical industry, in which firms acquire promising later-stage product candidates from smaller firms responsible for early-stage innovation
3. pharmaceutical manufacturers, which increasingly rely on diagnostics to support use of their products, including FDA-authorized companion diagnostics and complementary diagnostics used to identify relevant patients, optimize treatment, or otherwise support product use; to ensure a robust pipeline and successful commercialization of these tests, the pharmaceutical industry may need to invest further in the diagnostics space to ensure there is a sufficient innovation and availability to meet their needs

In sum, regardless of the outcome of any challenges to the final rule, all stakeholders in the diagnostics industry will need to carefully assess the potential effect on their business given their resources, current compliance programs, and current and possible future partnerships.

¹ Medical Devices; Laboratory Developed Tests, 89 Fed. Reg. 37,286 (May 6, 2024) (to be codified at 21 C.F.R. pt. 809), available at https://www.govinfo.gov/content/pkg/FR-2024-05-06/pdf/2024-08935.pdf.

² 21 CFR 809.3(a).

³ Cf. United States v. Undetermined No. of Unlabeled Cases, 21 F.3d 1026, 1029 (10th Cir. 1994) (“[W]e need not address whether the FDA has authority under the [FDCA] to regulate the HIV-testing protocol on saliva and urine samples nor whether the Clinical Laboratories Improvement Act, 42 U.S.C. § 263a, supersedes the [FDCA] in this regard”).

⁴ See United States v. An Article of Drug … Bacto-Unidisk, 394 U.S. 784, 800 (1969) (noting that the definition applies to “items characterized more by their purely mechanical nature”).

⁵ 21 C.F.R. 807.65(i); see 42 Fed. Reg. at 42520, 42521 (Aug. 23, 1977) (“The Commissioner recognizes that clinical laboratories … generally provide a service resulting from the use of a device”).

⁶ See Pub. L. 90-174, 81 Stat. 536 (1967); Pub. L. 100-578, 102 Stat. 2903 (1988).

⁷ See FDA Proposes Regulation of Laboratory Developed Tests and Sets Up Collision Course with Major Questions Doctrine (Sept. 29, 2023); Is the End Really Nigh? An Assessment of Oral Argument in the Chevron Deference Cases, and Projections of Possible Impacts Across the Regulatory Space (Jan. 17, 2024).

⁸ See, e.g., 21 CFR 807.81(a)(3), 814.39; Guidance for Industry and FDA Staff: Deciding When to Submit a 510(k) for a Change to an Existing Device (Oct. 2017); Guidance for Industry: Medical Product Communications That Are Consistent With the FDA-Required Labeling — Questions and Answers (June 2018).

⁹ See VALID Act of 2023, H.R. 2369, 118th Cong. (2023).