Special Report: FDA publishes final rule on LDTs

Volume 9, Issue 18 | May 2, 2024

This week, the FDA released its long-awaited final rule on the regulation of laboratory-developed tests (LDTs). 

Along with the rule, the agency published drafts of two guidance documents covering its enforcement policy for LDTs that are created “for immediate response to an emergent situation, such as an outbreak of an infectious disease.” One document covers enforcement when a public-health emergency hasn’t yet been declared; the other covers enforcement once the nation is in an official public-health emergency. 

The agency will hold a public webinar to review the final LDT rule on May 14. A webinar covering the two guidance documents will be held on June 5.

Here are the most significant aspects of the final rule as we see it.

Exemptions (aka Grandfathering)

The FDA will continue to “exercise enforcement discretion” over six categories of tests. (“Exercising enforcement discretion” is FDA-speak for “we won’t enforce the rule in these cases.”)

1. LDTs already on the market as of May 6, 2024, the date the final rule will be officially published

2. LDTs with full or conditional approval from the New York State Clinical Lab Evaluation Program (NYS – CLEP)

3. LDTs manufactured and performed by a lab within a health system where there is an unmet medical need and no FDA-approved tests for a patient in that health-care system (exemption for academic medical centers)

4. 1976-type LDTs that use manual techniques (example: immunohistochemistry testing)

5. Forensic (law enforcement) testing

6. LDTs manufactured or performed by the Veterans Health Administration or Department of Defense

Exception to the Exemptions

When any of the above tests is “materially updated,” it will need to go through the new FDA process. The four conditions for a material update were outlined:

• Change in indication

• Significantly different technology (e.g. addition of AI or change from targeted sequencing to whole genome sequencing)

• Alter the operating principle (e.g. change in critical reaction components)

• Adversely change the performance or safety specifications

Even tests that are otherwise exempted will still need to comply with the requirements in Stage 1 and 2 below. 

Implementation Schedule

Implementation will happen in five stages over the course of four years. Any LDT launched and marketed after the publication of the final rule on May 6, 2024 can stay on the market as long as the lab that makes it meets the requirements listed below.

• Stage 1: Beginning on May 6, 2025, FDA expects compliance with medical device reporting (MDR) requirements, correction and removal reporting requirements, and quality system (QS) requirements regarding complaint files.

• Stage 2: Beginning on May 6, 2026, FDA expects compliance with requirements not covered during other stages of the phaseout policy, including registration and listing requirements, labeling requirements, and investigational use requirements.

• Stage 3: Beginning on May 6, 2027, FDA expects compliance with the rest of the QS requirements (compliance with requirements regarding complaint files is part of Stage 1).

• Stage 4: Beginning on November 6, 2027, FDA expects compliance with premarket review requirements for high-risk in vitro devices (IVDs) offered as LDTs, unless a premarket submission is received by the beginning of this stage. In that case, FDA intends to continue to exercise enforcement discretion while the test is under review.

• Stage 5: Beginning on May 6, 2028, FDA expects compliance with premarket review requirements for moderate-risk and low-risk IVDs offered as LDTs. 

What the agency has done here is to divide its approval process into separate parts for this transition and put them on a longer-than-usual timeline. Once May 6, 2028 hits, new LDTs will be fully subject to this new rule, including the premarket review requirements, reporting and quality systems. 

Labeling and Adverse Event Reporting 

The new rule would require adverse event reporting for diagnostic tests, which is new for virtually all labs. In addition, the agency will be looking closely at label claims of superior performance.

Costs and Industry Impact

The FDA estimates the average cost of compliance with Stages 1 and 2 at $9,500 per test. Cost to comply with Stages 3 to 5 (premarket review) is $3 million per test.  (Commentary: Hard to know the specific assumptions on this cost analysis, but the numbers seem quite low.) 

Commentary

Our take on the rule

When the FDA released the original draft of this rule we were supportive, but with several major caveats. The exemption of LDTs currently on the market resolves one of our main concerns: The agency won’t have to push all 80K+ currently available LDTs through a new approval process over the next four years. 

We are still broadly supportive, but several issues remain after the transition period:

• The FDA must be appropriately staffed in order to keep up with the work this rule adds to the agency’s plate, both in numbers and in expertise. Staffers must understand the nuances of diagnostic technology and lab operations.  

• Turnaround time for the approval process must be rapid. This is clearly related to staffing but cannot be taken for granted. Speedy review and approval is necessary for maintaining the pace of innovation in the industry. It’s also critical for industry acceptance of the process and lab respect for it. 

• The approval process must be predictable. That’s critical for the venture capital industry’s continued investment in diagnostic testing companies.

• Fees must be reasonable in next User-Fee negotiations.

In writing this rule, the agency focused on the necessary stages of development and the timeline. The components of the approval process itself weren’t significantly addressed. As we see it, that process needs some adjustment, too. 

• Adverse-event reporting and Quality Systems requirement needs to be specific and tailored to diagnostic test - not just a copy of traditional device requirements. (e.g. definitions, process, timelines, repercussions).

• Diagnostic testing and screening / surveillance testing should have different approval requirements.  (Unlikely to happen now.)

What level of pushback can we expect?  

As they crafted this final rule, the agency appears to have listened to the concerns of the laboratory community. Will the rule get broad support? 

Responses from the two major industry associations were mixed. While the American Clinical Laboratory Association stated that they have “grave concerns about this rule as a matter of both policy and law,” AdvaMed said that “This rule represents significant progress in ensuring that diagnostic tests, regardless of where they were developed, meet FDA’s rigorous standards for safety and effectiveness.” AdvaMed also encouraged Congress “to pass the bipartisan VALID Act, which would establish a modernized, diagnostics-specific regulatory framework for all diagnostics tests.”  

It’s hard for us to handicap what happens next. We agree that this version is more lab-friendly than initially expected, especially for existing large and medium-sized labs. 

Two more items on our wish list 

We know that the FDA has said that this initiative is all about test safety and effectiveness. We respect that but have to acknowledge that the rule will place an additional burden on an industry in which average profit margins are already low. 

Our expectation (at least our hope) is that putting LDTs through the FDA process will earn these tests respect from all payers, public and private. One of the most common refrains from payers in the past has been, “This test is not FDA-approved, so how do we know that it is useful and accurate?” Labs’ compliance with this new rule must break down that excuse and help payers understand, respect, and value the role of testing in clinical care.   

Lastly, we are still frustrated that the FDA persists in calling “tests” “devices.” Maybe it’s because diagnostics are regulated by the Center for Devices, and the agency feels the nomenclature needs to be consistent. If that’s the reason, it speaks to our continued wish for the establishment of a separate FDA Center for Diagnostics. Yes, we know that ship won’t sail - but we can dream.