As Wilson Sonsini previously reported,1 the U.S. Food and Drug Administration (FDA) had been preparing the industry to comply with the 2024 LDT Final Rule, which phases out the FDA’s enforcement discretion policy for laboratory developed tests (LDTs) and phases in device requirements starting in May 2025. But legal challenges against the LDT Final Rule have prevailed. On March 31, 2025, the U.S. District Court for the Eastern District of Texas vacated the LDT Final Rule, declaring that LDTs are not devices regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (FD&C Act). Rather, the court determined that LDTs are professional services regulated by the Centers for Medicare and Medicaid Services (CMS) under the Clinical Laboratory Improvement Amendments of 1988 (CLIA).
The court found that the FDA does not have the statutory authority to regulate LDTs (and the CLIA laboratories that developed them), although test kits, or tangible goods, can be regulated by the FDA. In light of this decision, LDT developers who provide or commercialize services may pause their plans to comply with the medical device requirements, including requirements under the quality system regulation and premarket review. By contrast, the court’s decision does not impact medical device regulations that already apply to in vitro diagnostic (IVD) products, including test kits, that are manufactured and marketed as finished products.
The court’s decision arose out of cross-motions for summary judgment filed by the American Clinical Laboratory Association (ACLA), the Association for Molecular Pathology (AMP), HealthTrackRx, and Michael Laposata, M.D. (collectively, the plaintiffs) against the FDA. The plaintiffs contended the LDT Final Rule must be vacated under the Administrative Procedure Act (APA) because it exceeded the FDA’s statutory authority and was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.2 The FDA, by contrast, maintained that the LDT Final Rule was “well within its authority” under the FD&C Act and did not violate the APA.3
The court ruled in favor of the plaintiffs, concluding the LDT Final Rule exceeds the FDA’s statutory authority.4 In support of its holding, the court invoked its independent judgment—as prescribed by Loper Bright—to determine whether the FDA acted within its statutory authority when issuing the LDT Final Rule. It relied primarily on the text of the FD&C Act, which it concluded “makes clear that the ‘devices’ within its purview do not include professional medical services.”5
According to the opinion, the FDA’s “creative attempt to expand its jurisdiction under the [FD&C Act],” per the court, failed for two reasons.6 First, only Congress has the authority to expand or alter the definition of “device” under the FD&C Act.7 Second, the FDA’s framing of LDTs as devices “improperly collapse[d]” the distinction between “a discrete set of tangible articles packaged as a product for commercial distribution,” like a COVID-19 test kit, and “physical tools that laboratory professionals use in transient relationships to each other to deliver a service.”8 Contrary to the FDA’s position, the use of equipment to perform clinical testing services “does not render the services these laboratories perform themselves ‘medical devices.’”9 Taken to its logical conclusion, the court noted, the FDA’s view “implicates limitless FDA oversight of all surgical procedures and physical examinations that use ‘devices.’”10 For example, a radiologist providing an X-ray analysis in reliance on an X-ray machine, which is a medical device, would be subject to regulation under the FD&C Act even though the radiologist is in fact rendering a service.11 The court declined to give the term “devices” such an “expansive meaning with far-reaching consequences.”12
Further buttressing its conclusion, the court turned to “the structure of the [FD&C Act], the broader statutory framework that includes CLIA, and the history of these laws.”13 The court pointed to several provisions of the FD&C Act and the FDA’s regulations that would not make sense if the term “device” included professional services.14 Additionally, the court noted that nothing in the FD&C Act’s legislative history suggests the statute was intended to reach professional services.15 Finally, the court emphasized it would be “peculiar” to conclude that the FD&C Act reaches into the professional field of clinical LDT services when “Congress has established a separate, comprehensive, specialized regulatory framework” for the regulation of that field (i.e., CLIA).16
In closing, the court noted that the FDA’s assertion that the agency has been exercising enforcement discretion since 1976 relies on an assumption that “a breathtaking amount of criminal activity has been occurring in the clinical laboratory field for many years.”17 The “fallout” from the FDA’s interpretation of the FD&C Act “underscores [its] implausibility[.]”18
The court concluded the “FDA’s asserted jurisdiction over laboratory-developed test services as ‘devices’ under the [FD&C Act] defies bedrock principles of statutory interpretation, common sense, and longstanding industry practice.”19 It thus granted the plaintiffs’ motion for summary judgment, vacated the final rule, and remanded to the FDA for further consideration.20
While this decision provides more clarity between the services model and the distributed product business model in the diagnostic space, the full impact of this decision on the industry remains to be seen. The FDA could appeal the court decision or pressure Congress to pass legislation to provide the FDA with the authority to regulate LDTs as medical devices. Given the reduction in force initiative implemented by Health and Human Services Secretary Robert F. Kennedy Jr., the mass layoffs at the FDA, and agency reorganization, it is unclear whether the FDA, under Commissioner Martin Makary, who was sworn in on April 1, 2025, will appeal this decision or have the resources to do so.
Congress could also introduce new legislation that provides a new framework for regulating IVDs and LDTs, such as the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act), which received bipartisan support and has been proposed by Congress multiple times since 2020, most recently in 2023, but failed to pass Congress each time. To date, Congress has not reintroduced the VALID Act or any similar legislation in the current term.
From a business perspective, the implications of the court’s ruling for laboratories and diagnostic manufacturers should be positive. Assuming the court’s ruling stands, it removes potentially costly and burdensome operational requirements that impacted companies would have had to meet. More clear delineation between the CLIA and the FDA regulatory frameworks, which has been in place for several decades, is expected to provide the industry with greater stability, which is particularly important in light of the current fundraising environment and increased volatility in the equity markets.
[1] Wilson Sonsini Alert, FDA Signals to Industry to Prepare for Compliance with the LDT Final Rule Despite Looming Legal Challenge (July 2, 2024), https://www.wsgr.com/en/insights/fda-signals-to-industry-to-prepare-for-compliance-with-the-ldt-final-rule-despite-looming-legal-challenge.html.
[2] Mem. Op. & Order, 2, American Clinical Laboratory Association v. U.S. Food and Drug Administration, No. 4:24-CV-479-SDJ (E.D. Tex. Mar. 31, 2025).
[3] Id. at 2–3.
[4] Id. at 3.
[5] Id. at 29.
[6] Id. at 33–34.
[7] Id. at 34.
[8] Id.
[9] Id. at 32–33.
[10] Id. at 35.
[11] Id.
[12] Id. at 35–36.
[13] Id. at 28.
[14] Id. at 40–41.
[15] Id. at 42.
[16] Id. at 43.
[17] Id. at 45.
[18] Id. at 47 (quoting Van Buren v. United States, 593 U.S. 374, 394 (2021)).
[19] Id. at 48.
[20] Order at 51.
