Outcome of LDT Regulation Controversy Defies Forecasting

Few, if any, device regulatory issues are as controversial or as important as FDA's proposal to regulate Laboratory-Developed Tests (LDTs). If FDA LDT regulation does occur, it would represent the largest change in the regulation of diagnostic tests since Congress enacted the Clinical Laboratory Improvement Amendments (CLIA) in 1988. It would also represent the largest expansion in FDA regulation over a class of products since Congress gave FDA the authority to regulate tobacco products. Given the growing number and clinical importance of laboratory tests, the impact would be profound indeed.

Underscoring the complexity of the issue, the LDT debate implicates all three branches of the federal government. First, the Executive Branch, through FDA, the Department of Health and Human Services (HHS), and the Office of Management and Budget (OMB) will need to review and endorse any LDT proposal before it takes effect. Second, if a final LDT guidance is adopted, litigation appears inevitable. The American Clinical Laboratory Association (ACLA) has already announced the hiring of two prominent litigators and filed comments strenuously objecting to FDA regulation. Third, Congress may weigh in.

History Behind LDT Debate
The current loud debates represent the culmination of a process that quietly began 23 years ago. In 1992, FDA issued a draft compliance policy guide relating to the regulation of "Research Use Only" products. FDA inserted one inconspicuous sentence that stated, in an almost off-handed manner, that FDA had the authority to regulate LDTs (known as "home brews" back then).

That assertion of power prompted a citizen petition—filed by the author—challenging FDA's authority to regulate LDTs. Five years later, FDA made it clear that the petition would be denied when the preamble to the Analyte Specific Reagent (ASR) regulation emphatically reaffirmed FDA's power to regulate LDTs. The next year FDA formally rejected the citizen petition.

While asserting in the 1997 ASR preamble that it had the power to regulate LDTs, FDA disclaimed any present intention to invoke that power. However, as the role of laboratories has evolved, so have FDA's views. FDA now proposes active regulation of virtually all LDTs.

For many years after publication of the ASR regulation, FDA, in fact, did not seek to regulate LDTs. The rise of more complex, multi-marker tests in which scores were generated through an algorithm, prompted a change in approach. On September 7, 2006, and again on July 26, 2007, FDA unveiled a proposal to regulate a cumbersomely named new class of tests: In Vitro Diagnostic Multivariate Index Analyses (IVDMIAs). The proposal drew considerable criticism on a variety of grounds, including that it was technology-based, not risk-based. Commenters also noted the difficulty in telling whether a test qualified for IVDMIA status. In the face of this opposition, FDA backed off its IVDMIA proposal.

FDA instead said it was considering a vastly expanded proposal: the regulation of all LDTs. FDA announced that it was contemplating regulating all LDTs on a risk-based approach. In June 2010, FDA held a public meeting to get feedback on this new strategy.

At the urging of laboratories concerned by the prospect of FDA regulation, Congress enacted a provision in 2012 that required FDA to give Congress 60 days notice before issuing a draft guidance or regulation covering LDTs. Adhering to that requirement, on July 31, 2014, FDA gave Congress notice of its intent to issue two draft guidance documents establishing a regulatory framework for LDTs.

During that 60-day period, the House Committee on Energy & Commerce Subcommittee on Health held a public hearing on the proposal, but Congress took no other action. On October 3, 2014, FDA duly issued the Framework for comment to the public, with only a handful of minor changes.

Implications of Current Proposed Framework
The proposed Framework would transform the regulation of LDTs by largely applying the device regulatory regime to them. Currently, LDTs are regulated at the federal level under CLIA. Laboratories also are subject to state regulation, most notably by New York State, as well as by professional organizations, such as the College of American Pathologists. While these regulatory requirements are extensive, FDA's device regulations would impose many new obligations.

In announcing the Framework, FDA explained why it believed the current regulatory regime was inadequate. FDA cited, among other factors, the change in the laboratory industry, particularly a shift from tests conducted locally to LDTs run on samples collected throughout the country. FDA asserted that CLIA did not provide adequate assurance of clinical validity. FDA also alleged that there had been quality problems with some LDTs. However, FDA has provided only a handful of examples to support this rationale. Another reason given was that there was an "uneven playing field" between LDTs and FDA-regulated diagnostic products.

While some of these arguments can be sharply contested, one other factor cannot be disputed: that LDTs play a much more important role in health care today than they did years ago. Yet the argument cuts both ways, for there is considerable apprehension that FDA regulation would handicap a dynamic, innovative industry that is constantly introducing tests that would otherwise be unavailable if the device regulatory regime applied to them.

If adopted, the Framework would result in the regulation of virtually all LDTs. FDA would no longer exercise "enforcement discretion"; rather, LDTs would be regulated essentially the same as distributed in vitro diagnostics (IVDs).

The level and timing of the regulation of an LDT would largely be a function of risk. Under the Framework, all LDTs, with the exception of those for forensic use and certain LDTs for transplantation, would be subject to basic device requirements such as adverse event reporting. In addition, many LDTs would be subject to FDA premarket review. LDTs subject to premarket review would be divided into two categories: high risk and moderate risk. The high-risk category would itself be subdivided into highest-risk LDTs, such as companion diagnostics. The laboratory would need to submit a premarket approval application (PMA) for these LDTs within one year of finalization of the Framework. Other high-risk devices would get a longer reprieve: Some PMAs could be deferred for up to five years. For moderate-risk tests, the deadline for submitting 510(k) notices would extend out as far as nine years. The Framework is short on specifics on exactly how tests will be assigned their deadlines for PMA or 510(k) submission.

To minimize disruption, the proposed Framework authorizes grandfathering for high-risk tests: existing high-risk tests could remain on the market as long as an application is submitted in a timely manner. FDA officials have stated that they would offer a similar grandfathering approach for moderate-risk LDTs, although this is not explicitly stated in the Framework draft guidance. Thus, if rumors were to spread of the impending release of a final guidance, it would not be surprising if many laboratories accelerated the release of their LDTs.

Yet even this seemingly straightforward technical element—grandfathering of marketed LDTs—illustrates the gaps in the draft Framework. What conduct would constitute marketing? Advertising the test? Running at least one sample? An even more significant foreseeable question is how static must the test be that is grandfathered. Could the laboratory change its pre-analytic steps? Could it modify the test to add a mutation? Replace an analyzer? (Some LDTs that have been reviewed by FDA specify not only the type of equipment but the serial number.)

Another aspect of the LDT Framework—which has received far more attention than grandfathering— is neither technical nor seemingly straightforward: tests for rare diseases. There is agreement that imposing the full rigor of device regulation on LDTs for rare conditions would have an unduly adverse effect on access. Therefore, FDA has proposed a much reduced regulatory regime for these assays if they qualify for an exception.

FDA's proposal, however, essentially vitiated the exception. FDA applied a cut-off of 4,000 tests. This is unworkable; for example, some tests in neonates will have a prevalence of less than 1 in 10,000. FDA has indicated that the 4,000 tests limit does need to be raised. The question, then, is what is the appropriate level? FDA has heard a diversity of views, both in written comments and at a January 8-9, 2015 public meeting. While it is uncertain where FDA will draw the line, it is certain that some commenters will be unhappy with whatever FDA chooses. And the question of where to draw the line for rare diseases is just one of the many controversial issues that has arisen.

New Developments and Next Steps
Subsequent to the closing of the comment period, FDA and the Centers for Medicare & Medicaid Services (CMS)—the part of HHS responsible for implementing CLIA—announced a Joint Task Force. One of the primary goals was to address "stakeholder confusion about the roles of the two agencies." The task force's objectives include improving inter-agency collaboration, identifying similar regulatory requirements under FDA's and CLIA's regulations, and outreach. The impact of this initiative remains to be seen. While greater FDA-CMS collaboration may be helpful, it is unlikely to assuage fundamental concerns over LDT regulation by FDA.

Ultimately, discontent among stakeholders would almost surely be the fate of any final LDT Framework FDA releases. Given the sharply divergent perspectives, ranging from LDTs are dangerous and stifle IVD development to LDTs are essential and must be unregulated, dissatisfaction with a final Framework is inevitable.

Releasing a final document will not be simple. FDA received over 200 written comments to its proposal. It also heard many competing perspectives at its January meeting, as well as additional comments from groups that have met with FDA. These comments provide an array of ideas, suggestions, views, and criticisms. Presumably, if FDA does move forward, it will elect to make at least some major substantive changes to address the comments. Yet FDA may feel somewhat constrained: dramatic modifications could result in a chorus of complaints that there was no opportunity to comment on the revisions.

FDA's revised draft final Framework would then need to be reviewed by HHS. HHS is bound to be heavily lobbied by various interest groups. OMB review would be next. Again, the lobbying would likely be intense. And the clock is ticking. If a final guidance is not released by the end of the Obama administration, a new president will be pressed to put the LDT Framework on hold.

However, even if the final Framework runs this gauntlet and beats the clock—an outcome FDA has pushed for—FDA may not have the final word. ACLA has made no secret that it would be prepared to sue. While FDA believes it would be on solid legal ground, there are vulnerabilities. First, it is not certain that LDTs are even "devices" within the meaning of the law. Second, it is far from clear that Congress authorized FDA to regulate LDTs. In enacting CLIA, Congress made no mention of FDA's authority over labs. (FDA's explanation is basically that FDA's authority was so well known in 1988 that no mention was needed.)

Third, FDA would be upending the regulatory regime for LDTs through guidance documents, rather than by issuing a regulation. FDA's decision to bypass rulemaking opens the agency up to a strong charge that it has violated the Administrative Procedure Act (APA). FDA's primary response appears to be that because it had the authority to regulate LDTs, issuing a regulation was not necessary. How this litigation would play out is far from clear. In my view, FDA's successful defense is not assured, particularly on the APA argument.

Potential Alternatives to FDA Framework
Conceivably, though, neither FDA not the courts will have the final word. Congress could enact legislation which would supersede any FDA proposal. Congress is currently working on legislation that would substantially revamp FDA regulation in a myriad of ways. The House Energy & Commerce Committee has released a discussion draft which covers IVD regulation. If adopted, it would substantially revise FDA's regulation of IVDs, including LDTs. Under the proposal, LDTs would be regulated by FDA, albeit at a lower level than what FDA has proposed. IVD regulation would generally be reduced from its current level. Whether this legislation will be enacted and, if so, in what form, remains entirely unclear. The 21st Century Cures legislation adopted by the House did not address LDTs. In the meantime, a group of labs and IVD companies called the Diagnostic Test Working Group have tried to craft their own legislative solution.

The current unpredictability seems fitting for LDTs. For over two decades, the topic has defied forecasting. It is possible that in the relatively near future, a new regulatory regime will be established, either by congressional legislation, or by FDA administrative action that survives the internal review process and judicial review. Or, these efforts may come to naught, leaving the story of FDA regulation of LDTs without an ending.

Jeffrey N. Gibbs is a Director at Hyman, Phelps & McNamara, P.C., 700 Thirteenth St., NW, Suite 1200, Washington, D.C. 20005, and is available at: (202) 737-4288; jgibbs@hpm.com. Jamie Wolszon, an associate at Hyman, Phelps & McNamara, P.C., assisted on the preparation of this article.