How the Latest LDT Ruling Impacts Diagnostics

On March 31 of this year, a federal district court struck down the FDA’s final rule that would have brought Laboratory Developed Tests (LDTs) under FDA regulation as medical devices. The court ruled that the FDA had exceeded its authority, concluding that the LDTs are “professional medical services,” not devices as defined under the Federal Food, Drug, and Cosmetic (FD&C) Act.

The new FDA leadership under the Trump Administration has declined to appeal the ruling. This effectively means a return to the prior regulatory framework under Clinical Laboratory Improvement Amendments 1988 (CLIA ‘88) that focused on certifying at the lab level but not individual tests created within the lab.  Regulation also occurs at the state level, but most states have a permissive approach to test creation for labs that have undergone certification. The primary exception is New York State, which requires pre-market approval, risk-based review, and ongoing monitoring for each specific LDT. Other states rely on the CLIA framework, which approves labs but does not review and certify individual tests from these labs.

Potential Winners and Losers of the Ruling

Regulation decisions impact the market and ecosystem for all types of products and services. The general pattern in most industries is that expanded regulatory obligations create advantages for large incumbent firms with scale, resources, and experience. Deregulation, on the other hand, often creates more favorable conditions for smaller, newer entrepreneurs who can bring innovative products to market more quickly.

In this sense, the ruling is a boon to startups and niche labs who will be able to execute with more agility. However, it is a mixed bag for major diagnostic firms, since they may now have less of a competitive moat for their FDA-cleared or approved IVD test kits against rival upstarts that offer LDTs in CLIA-certified labs.

This could make a difference in emerging fields like liquid biopsies for early cancer detection. Start-up firms like PrognomiQ are creating AI-powered blood sample analysis that can be designed, adopted, and iterated much more quickly by CLIA-certified labs than conventional IVD manufacturers accustomed to going through FDA clearance or approval. This allows them to test hypotheses, iterate more rapidly, and gain traction in niche markets more quickly than with FDA-cleared or approved products.

Another example is genetic testing for rare diseases offered by firms like Myriad Genetics that operate at a small, nimble scale. A genetic assay for a novel hereditary cancer syndrome or metabolic disorder can be launched in days or weeks as an LDT versus potentially years for a traditional IVD kit.

Liquid biopsies are one area impacted by the ruling.

What to Expect

Labs and companies were previously preparing for a range of activities that would be required if their LDTs were forced to adapt to FDA requirements for implementing a Quality Management System (QMS), pre-market approval, post-market monitoring, among additional requirements. However, the ruling doesn’t change the basics. LDTs still should adhere to the highest possible standards in terms of safety, quality and performance. LDTs are never intended to be a shortcut that justifies any potential compromise in safety, accuracy, or efficacy. Instead, they should be part of a long-term commercialization strategy to serve the unmet needs of clinicians, payers, and patients. Here are some of the essential activities that are part of LDT development:

• Implement strong Quality Management System procedures for complaints, adverse events, and corrective actions.

• Follow harmonized standards with well-documented analytical and clinical validation studies.

• Develop plans to ensure data integrity and traceability for performance evaluation studies.

• Implement a risk-based approach to identify, assess, and mitigate potential safety and performance hazards.

• Engage proactively with clinical, quality, and regulatory affairs experts early in the product development phase to develop analytical and clinical study plans and a regulatory road map for obtaining market access for your product portfolio.

Contingency Plans

The five years since the COVID-19 period have seen rapid, abrupt changes in medical technology and government policy. It is critical to maintain contingency plans for various scenarios, including potential revival of renewed FDA rule-making or new Health and Human Services (HHS) legislation. Real-world events, such as the Theranos scandal, significantly influenced public sentiment and policy shifts towards more regulation in the past. There’s no reason this couldn’t happen again.

In a prior article, we outlined key areas essential to scenario planning. These include the following:

Create/Update Your Regulatory Strategy:

• Ensure there is an accountable owner for scenario planning.

• Closely monitor the FDA's proposed rule and any future developments in LDT regulation.

• Attend workshops and webinars hosted by the FDA and industry associations to stay updated on regulatory requirements and timelines.

• Consider potential second-order effects from regulatory agencies outside the United States.

Conduct a Gap Analysis:

• Consider using Quality Management Systems, e.g., ISO Standard 13485:2016 certification, strengthen your processes and demonstrate compliance.

• Establishing effective risk management processes for design and development, analytical and clinical performance evaluations, manufacturing, and post-market activities. 

• Assess your current LDT development, validation, and manufacturing processes against anticipated FDA requirements.

• Analyze how your tests would be classified within the device pre-market authorization framework; e.g., 510(k), , de novo, Pre-Market Approval (PMA).

• Identify areas where your practices might need to be modified or updated to comply with new regulations.

The ruling potential enables faster life cycles for personalized diagnostics by reducing overhead associated with a commercial IVD authorization.

Invest in data collection and documentation:

• Implement robust systems for collecting and documenting data related to LDT development, validation, and performance.

• Ensure proper record-keeping of design specifications, test results, manufacturing procedures, and quality control measures.

• This documentation will be crucial for demonstrating safety and effectiveness to the FDA during the review process.

Build your Team's Expertise:

• Train your staff on the new regulatory requirements and ensure they understand their roles and responsibilities in compliance.

• Consider hiring individuals with regulatory expertise or partnering with consultants to guide you through the process.

• Leverage existing partnerships and collaborations with other organizations to share resources and expertise.

The LDT ruling creates a strategic opportunity for innovators to bring solutions to market with less overhead and more opportunities for quick, agile feedback loops. It can also change the cost-benefit equation for highly personalized therapies and rare diseases. However, product developers in the diagnostic space still have to adhere to the highest quality standards and be prepared for a potential future of increased regulation that might arrive as a result of another policy shift or preparation for next steps in a strategy for commercialization and global expansion.

Are you examining how the LDT ruling impacts your product portfolio and business plans? The Landrich Group has over 25 years of experience helping diagnostic firms plan clinical research and regulatory affairs. Contact us for an assessment and scenario planning in this dynamic market.