Facing headwinds, FDA moves ahead on diagnostics policy implementation but faces Congressional, legal, and judicial questions

Editor’s note: This analysis was updated on July 18, 2024 to reflect the House Appropriations bill’s advancement through committee.

Intro: The FDA’s rule on diagnostics and what it means for developers

• A quick intro about how FDA regulates In vitro diagnostics (IVDs) and Laboratory Developed Tests (LDTs): In the U.S., diagnostic products are regulated as medical devices. IVDs are defined at 21 CFR 809.3(a), which specifies that IVDs are “those 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 that they are medical devices. LDTs are a subset of IVDs that have historically been under “enforcement discretion” from the FDA where the agency has maintained that they are IVDs and therefore subject to the medical device regulations. However, it has not required compliance with the device regulations for these products under the understanding that these products are low-volume, low-risk, and used only in clinical laboratories that are certified by the Centers for Medicare and Medicaid Services (CMS) for “high-complexity” testing under the Clinical Laboratory Improvement Amendments (CLIA) regulations.
• On April 29, 2024, FDA released a final rule revising this enforcement discretion approach, largely reversing course on the historical enforcement discretion. The rule amends 21 CFR 809.3(a) (i.e., the IVD definition cited above) to specifically state that IVDs include products “when the manufacturer of the IVD is a laboratory” – and that, therefore, these products are medical devices. Under that new final rule, LDTs will generally be treated as IVDs and be subject to the medical device regulations going forward, with a five-stage phase-in of regulatory requirements over four years. While there are some exceptions in the forms of new enforcement discretion policies and particular matters of scope, the general intent of the rule is that LDTs, which FDA is calling “IVDs currently offered as LDTs,” will face increased regulatory scrutiny in coming years. [Read AgencyIQ’s full analysis of the LDT final rule here.]
• While the rule itself is generally straightforward, it has significant implications for the life sciences industry even beyond the clinical laboratory industry (or those with clinical laboratory business units). As AgencyIQ has previously discussed, the rule focuses primarily on LDTs that are being offered by clinical laboratories as alternatives to legally marketed IVDs. However, it does not explicitly address how it might affect products like companion diagnostics (CDx, or IVDs intended to ensure safe use of specific therapeutics) or the regulatory landscape of non-licensed tests used in the course of clinical trials by drug developers.
• This leaves a significant number of questions for regulated industry, particularly drug developers, about what they can expect as the LDT rule is implemented over the next few years, including the investigational device regulations as part of Stage 2 of the phase-out of the enforcement discretion. While this is top of mind for industry, the FDA has not provided much additional information, beyond some statements in the rule itself clarifying that the device regulations have always technically applied in these situations – even if the agency wasn’t actively enforcing them. The agency also noted that, in the case of CDx, it had carved out additional regulatory flexibility in guidance that specifically allowed LDTs to be used in lieu of CDx.
• The American Clinical Laboratory Association (ACLA) has already filed a lawsuit against the FDA, asking the U.S. District Court for the Eastern District of Texas to block the rule. As POLITICO reported, they key issue cited in the lawsuit is that “Congress never granted FDA the statutory authority or financial resources to regulate the professional testing services that laboratories provide,” according to ACLA President SUSAN VAN METER.

The FDA’s implementing guidance documents so far

• In May 2024, the FDA issued two draft guidance documents on LDT rule implementation, focused on emergency response. The guidance documents cover two separate but related topics: The first focuses on enforcement policies without an emergency use authorization (EUA) declaration, whether in advance of a formal declaration being made, or when an emerging threat is geographically contained and does not rise to the level of a full national emergency situation. The second focuses on the FDA’s enforcement discretion policy after an EUA declaration has been made.
• A quick background on the role of LDTs in emergency response: Because the FDA did not historically require that LDTs be submitted for pre-market review, clinical laboratories that develop LDTs could potentially provide more agile response than IVDs regulated as diagnostics. However, in the past, when an EUA declaration came into effect, the FDA has generally required even LDTs to be submitted for agency review. This policy wasn’t historically formally defined, and instead was generally based in precedent, although the lack of clear guidance established in advance led to significant confusion during the last pandemic (for example, see this October 2020 AgencyIQ analysis on the issue).
• Under the LDT rule, a new formally defined approach would be needed. The final rule clearly laid out FDA’s current policy, which is that “FDA’s general enforcement discretion approach generally has not applied to LDTs” when there is an EUA declaration and the EUA pathway is opened. However, given the updates to and eventual elimination of the “general enforcement discretion approach” that will be implemented under the final rule, the agency’s new draft guidance documents propose an established system for emergency response, both in advance of and after an EUA declaration. [Read AgencyIQ’s full analysis of these new emergency system draft guidance documents here.]
• The two draft guidance documents have a scope limited to emergencies, but since they’re in draft form, they do provide an opportunity for input. Issued as a final rule, the LDT rule did not include a comment period, although the FDA did receive significant feedback on the proposed version of the rule. The new draft emergency system guidance documents are the first documents issued after the final rule action that offer a comment period – and therefore, insight into how different entities are thinking about the implementation of the LDT rule.
• Comments show a variety of concerns about the new emergency system as proposed by FDA. However, several stakeholders – from medical device trade association AdvaMed’s diagnostics wing (AdvaMedDx) to ACLA – have questions about the proposed policies. To recap: The two draft guidance documents describe what will happen in the time between an emerging emergency and an EUA declaration, and then what happens after an EUA declaration. In the first scenario (i.e., when there is no EUA declaration but an emergency situation is emerging), the agency would implement a new enforcement discretion for what it’s calling “immediate response” tests. This enforcement discretion would only be open to certain public health high-complexity laboratories (as credentialed by CMS under CLIA) that have regulatory precedent with similar tests, and to labs partnered with or residing within the CDC. In the second scenario, where an EUA declaration has been put in place, the FDA explains that it still intends to be flexible on what its response will be during the emergency, saying that the agency will issue individual, emergency-related guidance documents that define what additional flexibilities (like enforcement discretion) might be necessary at different points during the given emergency.
• In its comments, ACLA continues to maintain that the FDA does not have authority over LDTs; as noted above, ACLA filed the lawsuit against the FDA’s rule. “As an initial matter, ACLA maintains that FDA lacks authority to regulate laboratory developed testing services (LDTs) under its medical device authorities,” their comments begin, but they go on to question how the emergency-related enforcement discretion policies would interact with the enforcement discretion offerings in the final rule. In particular, they argue that the rule’s policies “already… introduced confusion for laboratories” and the concept of what an “immediate response” test would look like. ACLA also questioned how the enforcement discretion policies in the final rule would apply to those tests that are already operating under the enforcement discretion offered in the rule, a situation where the group calls for clarification.
• Both ACLA and AdvaMedDx signalled some confusion about who would be eligible for “immediate response” test enforcement discretion, with ACLA questioning what types of public health laboratories or those “under an agreement” would count – including commercial laboratories. On the other end, AdvaMedDx urged FDA to include test manufacturers, not just laboratories, in “immediate response.” As they noted, the basic concept of the final rule is that “modern regulation of diagnostic tests should be based on the risk of the individual test and not on the entity developing the test,” and that the new draft guidance that sets up regulatory policy only for certain developers goes against that ethos. “In this case, it is arbitrary to propose a policy establishing special rules for single-site laboratory manufacturers, particularly given the track record that other IVD manufacturers have demonstrated in being able to quickly develop and validate tests to meet emerging public health threats,” they concluded.
• The dockets for each draft guidance document includes around a dozen other comments, some submitted in tandem for both guidance documents (see these from the American Society for Microbiology and the Association of Public Health Laboratories). The general themes of these comments, largely from laboratory (rather than IVD) stakeholders is that more information is needed, especially given that in-depth communication of complex issues is challenging during an emergency. With recent, extensive experience navigating emergency situations from both the Covid-19 emergency and the mpox outbreak, laboratory stakeholders pointed out these complexities and flagged issues with the way that the FDA’s final rule would play out in an emergency. In addition to ACLA’s note about the interplay between the final rule’s enforcement discretion and that in the draft guidance, stakeholders raised other questions about what the expected regulatory precedent would be for “immediate response” tests.
• In short: The laboratory industry thinks there’s a lot to be done to shore up emergency response policy – which was likely necessary based on the Covid-19 experience, even without the LDT final rule.

The agency is also facing some questions from lawmakers

• First, some Congressional appropriators have asked the agency to hit pause. On July 10, the House Appropriations Committee approved the first round measure for federal fiscal year 2025 that would fund the FDA. As a reminder, FDA is funded not through the Labor-HHS appropriations bill, but rather through a separate appropriations bill that covers agriculture, rural development, and the FDA. The version of that bill that cleared the appropriations committee includes in its Committee Report a note to FDA specifically on the subject of the LDT rule, with legislators “direct[ing] the FDA to suspend its efforts to implement the rule and continue working with Congress to modernize the regulatory approach for LDTs.”
• Notably, working with Congress was always the agency’s first choice. FDA leadership confirmed this position at multiple speaking events in advance of the LDT rule, but indicated that they couldn’t wait for a legislative solution – and thus moved ahead with a regulatory approach. Still, the legislative outlook for the diagnostics reform bill known as the Verifying Leading-edge In Vitro Clinical Tests (IVCT) Development, or VALID Act, remains less-than-optimistic, as the bill still does not have a Republican co-sponsor in the Senate following the departure of Senator RICHARD BURR (R-NC).
• What’s next? The Ag-FDA measure cleared the appropriations committee, but isn’t actually law – and it’s possible that the note to FDA will not be included in whatever final version of the funding bill that Congress enacts. Still, this demonstrates that the LDT rule is on the mind of legislators as they continue their regular work going into this election year (more on that below).

Another complexity: The recent Supreme Court ruling

• What happened in the Supreme Court? A quick recap: In June 2024, the U.S. Supreme Court overturned a longstanding policy that directed courts to defer to agency interpretations of their legal frameworks in the absence of clear Congressional direction on the given issue. This policy was often called “Chevron deference” or the “Chevron doctrine” after the 1984 case that created the precedent. But in late June 2024, the U.S. Supreme Court determined in two merged cases (Loper Bright and Relentless) that going forward, courts should give the regulatory agencies that issue regulations limited deference in how the agencies’ statutory mandates and their associated regulations are interpreted when these policies are challenged in court. [See AgencyIQ’s analysis of the recent decision here.]
• This has significant implications – and direct ones for the LDT rule. As noted above, the FDA’s LDT rule is already the subject of legal challenge. Following the recent Supreme Court decision, the court tasked with hearing the case no longer has Supreme Court precedent guiding it generally to defer to the FDA’s interpretation of the policy and its intricacies. While the FDA has long maintained that LDTs are a type of IVD, and therefore medical device, therefore falling within their scope of legal authorities, this question of authority is the main crux of some of the laboratory industry’s issue with the rule. That industry holds that LDTs do not meet the definition of medical devices, and that FDA’s rule would effectively regulate the practice of medicine, an act outside of the agency’s statutory scope of authority.
• Sen. BILL CASSIDY (R-La.) sent a letter to FDA in late June, asking questions that specifically referenced the LDT rule. Cassidy, a physician who is currently Ranking Member of the Senate Committee on Health, Education, Labor and Pensions (HELP), wrote that he generally agrees with ACLA’s interpretation of the statute, saying that “FDA has unilaterally asserted jurisdiction over laboratory developed tests (LDTs) without Congress granting FDA that authority. Indeed, Congress has made clear across multiple statutes that LDTs are not medical devices subject to FDA regulation.” Cassidy also pointed to a recent example of FDA’s loss in court in the Catalyst decision and the agency’s subsequent re-assertion of its own interpretation. Although he noted that while he agrees with FDA’s interpretation of its statutory authority (against which the court ruled), “FDA may not simply pick and choose the laws it would like to follow,” he added.
• Cassidy requested a response, in writing, by July 19, to a bevy of questions about what FDA’s plan is in light of the Supreme Court ruling. This includes how the FDA will “change its current practices,” work more closely with legislators, and, specifically, how the new legal change under Loper Bright will impact “FDA’s actions related to LDT regulation.”

Analysis and what’s next

• For now, the agency is moving right along with implementing the LDT rule, having both issued the emergency guidances discussed above and hosted a series of webinars about the rule. These webinars are targeted at the clinical laboratory industry (rather than the traditional life sciences industries impacted by the rule), providing more of an introduction to the concept of medical device regulation than answering important outstanding questions for life sciences developers. These include how to account for LDTs used in clinical trials of drug products and what to do about LDTs that are currently functioning as companion diagnostics (CDx), or for which sponsors are expecting some flexibility in the authorization of their therapeutics.
• For example, during its July 16 webinar on the classification of IVDs, the FDA focused on the basics of medical device classification for IVDs. The agency chose this agenda, rather than diving into the plan for the agency’s re-classification initiative, which it announced in advance of the final rule. This plan indicates that the agency intends to move “most” IVDs currently regulated as “high risk” products into a lower risk category. Instead, the webinar included a run through of the different application types, special and general controls, and how to use the regulatory databases to identify product codes or regulatory citations (see the slides from the webinar here). While there are significant outstanding questions about the reclassification initiative, which will fundamentally adjust the way many IVDs – including companion diagnostics (CDx) – are regulated, the FDA has not provided any additional information about this project since its announcement. The next webinar is scheduled for August 22, and will focus again on regulatory basics such as Medical Device Reporting (MDR), correction and removal reporting, and quality system complaint requirements.
• There’s significant work to do in actually implementing the LDT rule, including not just clarifying emergency response policies, but also additional clarifications on what the policy means for clinical trials, the kick off (and intended completion of) the re-classification initiative, and ideally new guidance on CDx development and authorization. Notably, there’s also the FDA’s transition to its new medical device quality system to undertake in the next year and a half, as well as the still-outstanding transition away from emergency authorities for Covid-19 tests and other devices. In sum, there’s a lot of work to be done and a lot of moving pieces that will need to align to bring these policy changes to reality. Although how the details of how the projected changes will come to pass are still unknown, significant disruptions to the agency’s planned work on these issues could have ripple effects for both the agency and affected industry.
• The lawsuit, Loper Bright, any potential Congressional pushback in funding bills or other directive, and the Presidential election are all key potential disruptors in the path ahead for the FDA to implement the rule, and for industry’s ability to prepare for next steps. For now, the uncertainty generated by these factors is unlikely to be resolved in the near-term.

To contact the author of this item, please email Laura DiAngelo ( ldiangelo@agencyiq.com).
To contact the editor of this item, please email Kari Oakes ( koakes@agencyiq.com).

Key Documents and Dates

• Dockets: Enforcement policy for immediate response; Enforcement policies under an EUA declaration
• AgencyIQ Analysis: In the aftermath of the repeal of Chevron, FDA faces a Congressional ‘brain drain’