FDA Finalizes Rule to Phase Out Enforcement Discretion of Laboratory-Developed Tests

This overview was originally published in Manatt on Health, Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments. For more information on how to subscribe to Manatt on Health, please reach out to Barret Jefferds.

The Big Picture

On April 29, the U.S. Food and Drug Administration (FDA) released a final rule that will gradually phase out FDA’s long-standing policy of enforcement discretion for laboratory-developed tests (LDTs), subjecting them to the same enforcement approach as other in vitro diagnostic (IVD) products. FDA had previously issued the proposed rule in September of last year.¹ Despite this definitive step toward asserting jurisdiction over these tests, the path forward for the final rule is certain to be rocky, with litigation likely to ensue and possible action by Congress to move long-pending legislation to establish a separate regulatory regime for IVDs.

The rule’s effective date is July 5, 2024, but the FDA has set forward a “phaseout policy,” as described below.

Background

Under FDA’s regulations, IVDs are defined as “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, and intended for use in the collection, preparation, and examination of specimens taken from the human body.” For nearly 50 years, FDA has considered LDTs—a subset of IVDs that are designed, manufactured, and used within a single laboratory—to be medical devices under the Federal Food, Drug, and Cosmetic (FD&C) Act. However, given that LDTs were generally considered to be lower risk, and used in small volumes for small patient populations, FDA had exercised enforcement discretion over most LDTs, opting not to enforce many of the requirements of the FD&C Act, including premarket review. In the press release accompanying the final rule, FDA notes:

Although historically the FDA has generally exercised enforcement discretion for most LDTs, … the risks associated with most modern LDTs are much greater than the risks associated with LDTs used when the FDA’s enforcement discretion approach was adopted many decades ago. At that time, many LDTs were lower risk, small volume and used for specialized needs of a local patient population. Now, many LDTs are used more widely, for a larger and more diverse population, with large laboratories accepting specimens from across the country. LDTs also increasingly rely on high-tech instrumentation and software, are performed in large volumes and are used more frequently to help guide critical health care decisions.

Final Rule

Under the final rule, FDA is amending the definition of IVD² to make explicit that IVDs are devices under the FD&C Act, “including when the manufacturer of the IVD is a laboratory.” This new definition would make clear that an IVD is a device regardless of where or by whom it is manufactured, and thus squarely under FDA’s jurisdiction. However, the final rule sets forth a “phaseout policy” under which FDA will gradually phase out its historical enforcement discretion approach over a period of four years, but maintain or institute enforcement discretion policies for specified categories of IVDs.

The phases of the policy in the final rule are as follows:

The final rule also describes the IVDs that will be subject to enforcement discretion in specified ways. Based on comments FDA received on the proposed rule, FDA included new enforcement discretion policies under which FDA will not enforce the premarket review and QS requirements (but will enforce other requirements) for the following types of tests:

• LDTs approved, or conditionally approved, by the New York State Clinical Laboratory Evaluation Program (FDA estimates that a significant portion of new submissions for IVDs—12.1 percent, or a range of 6.1 percent to 24 percent—would fall into this category);
• LDTs manufactured and performed by a laboratory integrated within a health care system to meet an unmet need of patients receiving care within the same health care system;
• LDTs first marketed prior to issuance of the final rule and that are not modified (or are modified in specified ways); and
• Non-molecular antisera LDTs for rare red blood cell antigens where such tests are manufactured and performed in blood establishments, including transfusion services and immunohematology laboratories and where there is no alternative available to meet the patient’s need for a compatible blood transfusion.

The final rule also continues the longstanding enforcement discretion policies (which were also included in the proposed rule) for certain categories of low-risk tests under which FDA will not enforce any applicable requirements, including:

• “1976-type” LDTs, which have the following characteristics: (i) use manual techniques (without automation) performed by laboratory personnel with specialized expertise; (ii) use components legally marketed for clinical use; and (iii) are designed, manufactured, and used within a single Clinical Laboratory Improvement Amendments (CLIA)-certified laboratory that meets the requirements under CLIA for high complexity testing;
• Human Leukocyte Antigen (HLA) tests that are designed, manufactured, and used in 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;
• Tests intended solely for forensic (law enforcement) and public health surveillance purposes; and
• LDTs manufactured and performed within the Veterans Health Administration or the Department of Defense.

The final rule also maintains FDA’s longstanding approach of requiring certain tests, including higher risk tests, to meet applicable medical device requirements. Such tests include:

• Tests that are intended as blood donor screening or human cells, tissues, and cellular and tissue-based products donor screening tests required for infectious disease testing, or for determination of blood group and Rh factors. Such tests must be licensed, approved, or cleared by FDA for such use;
• Tests intended for emergencies, potential emergencies, or material threats declared under section 564 of the FD&C Act;
• Direct-to-consumer tests;
• IVD component manufacturing activities that occur outside of a single, CLIA-certified, laboratory.

For tests used “in an emergent situation,” FDA concurrently issued a separate enforcement policy for tests that are “(1) intended to detect or diagnose a serious or life-threatening disease or condition that may be attributed to a newly identified, previously unknown, or unusual CBRN [Chemical, Biological, Radiological, or Nuclear] agent or agents; or a known agent or agents that results in a newly identified or unusual clinical presentation of such a disease or condition; and (2) needed for immediate response to a potential case or cases of such disease or condition for which there is no adequate, authorized, and available alternative.”

Reaction on Capitol Hill

FDA issued the final rule in the wake of repeated congressional inaction on the Verifying Accurate Leading-edge IVCT Development (VALID) Act (S. 2209/H.R. 2369) which would establish a new regulatory framework for IVD tests. On March 21, the Health Subcommittee of the House Energy & Commerce (E&C) Committee held a hearing on the VALID Act and the issue more broadly. The hearing reiterated the widely held view that the preferred approach is for Congress to address the regulation of LDTs in statute, and not FDA. Upon release of the final rule, statements issued by various members of Congress, on a bipartisan, bicameral basis, generally reflected this position. E&C Chair Cathy McMorris Rodgers (R-WA) stated that “FDA should abandon the rule, as it lacks the clear statutory authority to implement it.” The lead sponsors of the House version of the VALID Act, Congresswoman Diana DeGette (D-CO) and Congressman Larry Bucshon, M.D. (R-IN) indicated that they “are disappointed that the FDA has moved ahead with a burdensome rule based on an inflexible statute that was never designed to regulate in vitro diagnostics.” They further stated: “We also recognize that FDA’s action today is because Congress hasn’t acted yet. Congress has not given FDA the tools it needs to appropriately carry out its public health mission. With innovative test makers, medical centers, and labs that are the backbone of diagnostics in the U.S. now facing this burdensome regulation, we must come together and pass our VALID Act.” Sen. Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor, and Pensions Committee, issued a statement indicating his view that Congress should “take action to clarify the regulatory structure for diagnostic tests” and his concern that the final rule “will undermine access to essential laboratory tests, increase health care costs, and ultimately harm patients.”

Next Steps

FDA will host a webinar on May 14 to provide an overview of the final rule. Questions to be addressed in the webinar may be submitted no later than May 7 by emailing CDRHWebinars@fda.hhs.gov.

The phased approach to the implementation of the final rule, along with the uncertainty surrounding litigation and action by Congress, means that the immediate real world impact will likely be delayed. However, stakeholders in this space should carefully monitor developments and begin preparations for compliance.

This overview was originally published in Manatt on Health, Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments. For more information on how to subscribe to Manatt on Health, please reach out to Barret Jefferds.

_{¹ For additional information on the proposed rule, see the Manatt on Health analysis.}

_{² 21 CFR 809.3(a)}

_{³ The rule is scheduled to be published in the Federal Register on May 6.}