How FDA’s Laboratory Developed Test rule could delay some drug approvals

The FDA recently finalized a regulation that will serve to change the way that Laboratory-Developed Tests (LDTs) are regulated in the U.S. But while much has been written about the rule’s impact on the laboratory sector, it will also likely have significant impacts on drug development, and in particular the development of personalized medicines reliant upon companion diagnostics. The change would also come as the agency is looking to restructure the regulatory pathways for companion diagnostics – leading to new opportunities and challenges for drug developers.

Background: A quick refresher on the FDA’s new rule on laboratory developed tests (LDTs)

In the U.S., in vitro diagnostics (IVDs) are regulated as medical devices, including a subset of IVDs referred to as Laboratory Developed Tests (LDTs). Traditionally, LDTs are tests developed and used within a single high-complexity laboratory, as defined and credentialed by the Centers for Medicare and Medicaid Services (CMS) under the Clinical Laboratory Improvement Amendments (CLIA) regulations. LDTs, had been considered low-volume and low-risk, and primarily regulated by CMS – not the FDA.
However, the FDA has long maintained that LDTs, like IVDs, are actually medical devices subject to its regulatory authority, but for which it has practiced “enforcement discretion.” In practical terms, this means that while FDA believes it could regulate these devices, it has chosen not to. As a result, LDTs – whether used in clinical practice or in clinical trials – have become a fully separate segment of the IVD market and not subject to the same regulations as FDA-evaluated IVDs. [See a full AgencyIQ explainer of the history of this policy issue here.]
The changing landscape for LDTs: Over the past decade, the FDA has become aware that its enforcement discretion policy for LDTs is being applied to products far beyond its originally intended scope; this policy unintentionally created two pathways for IVDs. One path is through device regulations (as an authorized IVD) and one now allows large, national complex laboratory networks to run proprietary tests without regulatory approval or clearance from the FDA. Previous efforts to exercise more regulatory authority stalled out.
In early May, FDA finalized a rule that will formally bring LDTs under the device regulations and phase out its enforcement discretion approach, beginning May 6, 2024. The mechanism for this change is simple. The FDA has added a single phrase to its existing regulatory definition of an IVD: “including when the manufacturer of the IVD is a laboratory.” However, the implementation of this change is far more complex and will occur in multiple stages. [See AgencyIQ’s full analysis on the LDT final rule here.]
Last week, AgencyIQ analyzed the potential impacts of this final rule for clinical research, and the ways in which the enforcement of the investigational device regulations over LDTs may affect the operation of clinical trials. [ Read AgencyIQ’s analysis here.]

This week, we’ll look at implications of the rule for therapeutic products that require companion diagnostics (CDx)

According to FDA guidance, a companion diagnostic (CDx) is an: “in vitro diagnostic device that provides information that is essential for the safe and effective use of a corresponding therapeutic product. The use of an IVD companion diagnostic device with a therapeutic product is stipulated in the instructions for use in the labeling of both the diagnostic device and the corresponding therapeutic, including the labeling of any generic equivalents of the therapeutic product.” A CDx can be an entirely new kind of IVD, a new version of an existing product, or an existing product that has been previously authorized for a different indication.
The current system allows some therapeutics that require a CDx – primarily drugs intended for use in more targeted patient populations, including precision medicine – to be approved even when the corresponding CDx isn’t ready for authorization.
However, the LDT rule may limit that option going forward, meaning that some precision medicine drugs could see delays in both development and approval. In CDx development, evidence generation for both the drug and the test would occur concomitantly. However, having research processes meet regulatory expectations has long been a challenge for developers.
The FDA is also planning to re-do the regulatory pathways for CDx products over the next four years as part of its “reclassification” initiative. These plans present some uncertainty about near-term next steps; however, the planned reset also offers a unique opportunity for drug sponsors to have some say in the regulatory system for CDx going forward.

A little more about companion diagnostics (CDx) and when and where they’re needed

In effect, CDx are tests that are necessary to support the use of a specific therapeutic product. Unlike a combination product, in which a drug and a device can be approved as a single entity under one submission, a CDx requires authorization as a standalone medical device. This authorization is obtained separately from the approval of its corresponding therapeutic product. There are currently 170 FDA cleared or approved CDx products in the U.S., as well as a few tests that have been approved as CDx for a specific group of oncology products. Examples of CDx are tests for certain genetic mutations that are companions to targeted chemotherapy, or diagnostics meant for use with monoclonal antibodies that are effective against cancer cells with specific mutations.
When might a CDx be needed? In 2014, when FDA finalized its initial guidance on CDx, it noted that as treatments are becoming more targeted, the need for CDx would increase as well. “These new technologies are making it increasingly possible to individualize, or personalize, medical therapy by identifying patients who are most likely to respond, or who are at varying degrees of risk for a particular side effect,” the agency explained. According to the agency’s guidance, CDx are considered “essential” for the safe use of a therapeutic in situations in which they: (1) identify patients who are most likely to benefit from that treatment or (2) might be at increased risk; (3) are needed to monitor response for the purposes of adjusting treatment; or (4) when a therapeutic’s safety and efficacy has only been evaluated in a specific population, which can be identified by the diagnostic test.

How are companion diagnostics developed?

The ideal for CDx development is codevelopment, with the diagnostic developed alongside its related therapeutic product. However, this is easier said than done. In its 2014 guidance, the FDA expressed a preference for “contemporaneous” development of the CDx and its therapeutic product, “with the clinical performance and clinical significance of the IVD companion diagnostic device established using data from the clinical development program of the corresponding therapeutic product.” However, “FDA recognizes there may be cases when contemporaneous development may not be possible.”
The challenges to codevelopment are complex in practice but conceptually clear: Navigating both the medical device and drug or biologic regulatory systems and generating evidence for two marketing authorizations simultaneously for two separate, highly regulated products is a heavy lift. In 2016, the agency issued a draft guidance on CDx codevelopment, which was “intended to be a practical guide to assist therapeutic product sponsors and IVD sponsors” working on their CDx. That 48-page guidance outlines and offers some solutions for the “range of issues” sponsors can face “when launching a codevelopment program,” to include navigating requirements under the Investigational Device Exemption (IDE) regulations (the regulations surrounding clinical development and testing of a device or diagnostic product), and potential data generation and test validation methods.
A key issue: It’s not always clear that a CDx will be needed at the time of trial planning. The agency provides recommendations for structuring both the IVD studies needed for authorizing a CDx and the clinical trial design considerations for the investigational therapeutic. However, the need for these elements isn’t always clear when a clinical development program is initially designed. In some cases, the importance of a specific IVD to the safe and effective use of a drug is not identified until clinical trials are underway. This later identification causes delays in evidence generation for the CDx, which can delay a market access decision for the test from the FDA.
In general, the FDA wants to review both products at the same time, or at least alongside each other: “FDA intends to review each IVD companion diagnostic device submission within the context of, or in conjunction with, its corresponding therapeutic product, and FDA review of the IVD companion diagnostic device and the therapeutic product will be carried out collaboratively among relevant FDA offices,” explains the 2014 guidance.
So what happens now when a CDx isn’t ready at the same time as the therapeutic product? In its 2014 guidance, the FDA confirms that, if it determines a CDx to be “essential to the safe and effective use of a novel therapeutic product or indication, FDA generally will not approve the therapeutic product or new therapeutic product indication if the IVD companion diagnostic device is not approved or cleared for that indication.” However, the agency also offers an exception: When the therapeutic is “intended to treat a serious or life-threatening condition for which no satisfactory alternative treatment exists and the benefits from the use of the therapeutic product are so pronounced as to outweigh the risks from the lack of an approved or cleared IVD companion diagnostic device.” In the case of an already approved product seeking an update to its labeling, a similar exception may also apply.
In the meantime, LDTs often fill the gap. If a drug (or new indication for a drug) that would otherwise need a CDx is approved in advance of its CDx, LDTs are often used in the interim while awaiting a CDx approval. This has become an increasing problem for the FDA, particularly in the oncology space.
The approval of treatment products without the authorization of their associated CDx have become such an issue that the FDA launched a related pilot program in 2023. This program sought a workaround so that certain new oncology drugs could be approved with labeling that describes the performance specifications for LDTs being used in lieu of a CDx. This would ultimately serve to standardize the performance expectations for these LDTs. To do this, the pilot program would allow the drug developer to provide information about the version of the IVD used during the pivotal clinical trial (the clinical trial assay, or CTA), which the FDA would in turn use to “recommend minimum analytical performance characteristics for other tests.”

How might FDA’s LDT rule impact companion diagnostics?

Concerns about LDTs serving as CDx are specifically discussed in the FDA’s LDT final rule. While the agency acknowledges that there’s limited research on the overall performance of LDTs in comparison to authorized IVDs (and particularly, CDx), the agency discusses the concerning findings from the research that is available: “We have seen variability in performance among LDTs offered for a use that is the same as a CDx such that, in some cases, selection of a treatment for a given patient can be impacted by which test is used.”
The LDT rule closes down the exception laid out in the 2014 guidance, eliminating the flexibility for LDTs to serve as CDx. Per the final rule, “the phaseout of the general enforcement discretion approach generally applies to LDTs offered for a use that is the same as a CDx, including the types of LDTs discussed in the pilot program.” Under the provisions of the final rule, all LDTs (or, as the FDA is calling them, IVDs currently offered as LDTs) will need to meet the FDA’s regulatory requirements going forward, including requirements for pre-market authorization.
A change relevant for drug developers: The system that currently lets a drug get approved when it is ready for approval, but the CDx isn’t, will be eliminated.
As a reminder: Stages four and five of the five-stage LDT final rule’s implementation process address the pre-market requirements; stage two walks in the IDE requirements for LDTs. [See AgencyIQ’s analysis of the impacts of the IDE requirements on clinical trials here.]

What this means for drug developers and clinical trial designs:

Under the provisions of the final rule, codevelopment of CDx and therapeutics will become increasingly important. If LDTs can no longer serve as a stopgap between the approval of a therapeutic product and the authorization of its CDx, research program sponsors will need to carefully and proactively evaluate their plans and timelines. Companies will need to plan earlier in development for the possibility that they will need a CDx – or, if they know that a CDx will likely be needed, work to align the development timelines. Without the flexibility offered in the 2014 guidance, drug approvals may be delayed until the CDx is ready for authorization.
Additional guidance is greatly needed in this area. The 2016 draft guidance on codevelopment offers some recommendations, but it remains a draft document. Additionally, regulators have acknowledged that this draft guidance is general and high-level. As CHRISTOPHER LEPTAK of the FDA’s Office of New Drugs in the Center for Drug Evaluation and Research said in a 2016 webinar, “the guidance talks about the process by which a drug and diagnostic are codeveloped, but it’s not a prescription of how to design your clinical trial in any great detail.” With the FDA’s LDT final rule apparently impinging on the ability to approve a drug in advance of its CDx, codevelopment initiatives are likely to become more important, and trial sponsors will need additional FDA guidance as they prepare for the policy changes.
For now, the major theme in FDA’s messaging to developers: Plan ahead. Sponsors will still face challenges in the later stages of codevelopment programs. In reviewing codevelopment programs over time, FDA regulators have cited several problems, including situations in which “changes are made to the test during trials.” The FDA has specifically recommended that any test which will become a CDx “should be analytically validated,” “locked down before using in a clinical trial,” and generally not updated during the trial. This should be familiar to device stakeholders – in general, the version of the device being studied in a clinical trial is the version that can be submitted for market authorization based on that trial. Unfortunately, given the unknowns about a still-investigational therapeutic product, it can be extremely difficult to finalize an IVD before it’s used in a clinical trial. Some practical recommendations offered in both the guidance and by regulators talking about the guidance: 1) focusing on enrichment of the trial population, which could help support codevelopment programs, and 2) banking clinical trial specimens for further analytical validation studies or bridging studies (studies to compare different versions of the test).
Standard clinical trial design elements also present complications for CDx codevelopment. In particular, the FDA has expressed concern about “pre-screening bias,” where early screening of the trial population for eligibility will, by definition, limit the representativeness of the data generated on an investigational CDx. While participant screening “greatly enhances the ability of the study to show an effect,” it creates serious challenges for “the IVD manufacturer attempting to provide an unbiased demonstration of performance of the IVD companion diagnostic.” This is one of the scenarios where banking “specimens from all potential enrollees” from each trial site would allow for testing of all samples with the investigational CDx, helping to mitigate the problem. However, study sponsors would need to account for this as a distinct design element, prioritizing samples from the “intent-to-diagnose” (ITD) population. And still, the agency acknowledges that there are situations in which prescreening is unavoidable, particularly in oncology “where molecular profiling is common.” In these cases, sponsors are directed to “take steps” to mitigate bias, but no specific recommendations are provided.

Even when CDx authorization works as intended, there can still be unfortunate consequences

CDx indications are typically only for single drugs – meaning that each drug sponsor will need to independently seek authorization for the CDx. A CDx can, for example, be indicated to identify a specific genetic mutation that would direct patient treatment; however, there may be multiple therapeutics that address that specific mutation. In that case, the CDx will have to go through the development process, individually, with each of those products. The narrow system for approval of CDx per individual drug is “not optimal for patient care,” according to FDA, as patients might have to undergo multiple tests or procedures to have additional treatment options. It also adds to the burden of CDx authorization, requiring individual and potentially redundant work to get one CDx indicated for use with multiple therapeutics for which it can inform safe and effective use.
The FDA has tried out one option to reduce this redundancy: In 2020, the FDA finalized a guidance document which touched on this exact issue, noting that the process for CDx authorization to tie the test to one specific therapeutic makes the label more narrow than “may be scientifically appropriate.” The 2020 guidance sought to offer a pathway by which CDx could be developed and indicated for a group of oncology products targeting the same specific mutations. So far, the FDA has granted five approvals under this option, allowing these tests to be used with a variety of oncology therapeutics under a single device approval. Still, this policy is limited, and the clinical trial system is still set up to require one therapeutic product per CDx authorization.

Another wrench: Regulatory expectations for CDx are set to change in the next few years

Adjacent to the LDT rule, and likely in anticipation of the pushback, FDA announced a new project in January 2024 that will reclassify many IVDs. Under the medical device regulations, Class III (high risk) medical devices are subject to the highest level of regulatory scrutiny, including premarket review through the Pre-Market Approval (PMA) pathway. Class II products, which are those that present a moderate risk, go through a different pre-market pathway: either the 510(k) pre-market notification process or the De Novo pathway for first-of-a-kind moderate risk products. In January, FDA’s Center for Devices and Radiological Health (CDRH) announced that it will seek to reclassify – in effect, move from Class III to Class II – “most” IVDs that are currently Class III.
Let’s unpack this a bit: The significant majority of all CDx are currently regulated as Class III products, which means they’re subject to the PMA pathway and the post-market regulations for high-risk products. By reclassifying, and specifically downclassifying, CDx products into Class II, the FDA would make it easier over the long term for new CDx to get authorized. After this reclassification, the FDA will likely be open to receiving market applications for new CDx products through the Class II pathways. This means first a De Novo request, in which the sponsor effectively pitches the FDA on a lower classification and the controls necessary to ensure its performance; if that request is granted, sponsors can get new versions “cleared” through the 510(k) pathway rather than the PMA pathway.
Moving an entire category of regulated products into a different category is an extremely heavy lift for the FDA. The reclassification process is technically three steps, involving: (1) a proposed order; (2) convening the Medical Device Advisory Committee; and (3) a final order. According to the final rule, the FDA intends to complete the reclassification initiative by the time the pre-market review requirements from the LDT final rule are phased in (i.e., Stage 4), leaving only a few years to undertake this project. While the exact number of Class III IVDs that will be reclassified remains to be seen, the coming years will see a substantial number of advisory committee meetings and an ambitious cadence of reclassification orders out of CDRH’s diagnostics office (OHT7), which is currently without a permanent Director.
It also means that the regulatory standards for CDx are changing. As cited above, the FDA maintained in the final LDT rule that sponsors should already be well-versed in the expectations for CDx, given that they have technically been in place for the duration of the policy debate. However, that argument from the FDA came simultaneously with the announcement that the agency would be fundamentally re-structuring what the review and authorization pathways look like for CDx – which is likely to lead to quite a bit of uncertainty for drug and CDx developers in the nearer-term.
Moving CDx to Class II products will likely ease development troubles in the longer-term. It’s often easier, less expensive, and quicker to get a Class II product through FDA review than a Class III, at least under the 510(k) process. In fact, when providing feedback on the 2016 draft codevelopment guidance, both Illumina and the American Association for Cancer Research (AACR) signaled support for allowing more CDx through as Class II devices. However, with the regulatory landscape actively in flux, this opens significant questions for what drug sponsors should do (and plan for) going forward. A clinical trial supporting a PMA for a CDx will require different considerations than one supporting a De Novo request (or a 510(k)). To top things off, there is currently no regulatory precedent for what the regulation of CDx as Class II will look like – and, effectively, no map to follow.
The reclassification process also presents a unique opportunity for new stakeholders to get involved in what CDx regulation looks like going forward. Under the reclassification process, the agency will propose potential “special controls” (i.e., regulatory requirements) for each type of CDx that is currently on the books and regulated as a Class III. This includes two opportunities for drug developers or other interested stakeholders to get involved; first, on the proposed orders themselves, and second at the convened advisory committee meeting. This means that drug developers will have a new opportunity to present their cases on what works well, or demonstrably doesn’t, in the CDx development process and what regulatory systems might be a better fit.
For example, the “special controls” discussed in those orders and at the advisory committee meetings, as well as put forward in new De Novo requests, inform what the Class II pathways look like for CDx. Special controls incorporated into the new regulatory system by FDA inform what testing is needed, labeling expectations, performance standards, and other product-specific guidelines. This means that sponsors will have a new way to see, and get involved in, FDA’s thinking on the particular risks and mitigations specific to CDx in the coming years. While those reclassification processes haven’t yet started, this will likely be informative for sponsors working on their own research programs, potentially providing industry and other stakeholders an interesting opportunity to shape how special controls for CDx will look in the future, so long as they engage with the reclassification proposals and at the advisory committee meetings.
Still, sponsors are now facing many unknowns. To help bridge this gap, the FDA will need to develop significant additional guidance which sponsors can use to better inform their own product development plans, their trial designs in a changing environment, and their navigation of the changing regulatory expectations for novel therapeutics that need a CDx.

To contact the author of this item, please email Laura DiAngelo ( ldiangelo@agencyiq.com).To contact the editors of this item, please email Alexander Gaffney ( agaffney@agencyiq.com), Kari Oakes ( koakes@agencyiq.com), and Chelsey McIntyre ( cmcintyre@agencyiq.com).