In a last minute push before an anticipated government shutdown, FDA put down its marker for moving forward toward regulation of lab developed tests (“LDTs”). Unlike past proposals from FDA and Capitol Hill, FDA has taken a simple approach: laboratories that make LDTs for clinical use are manufacturing in vitro diagnostic medical devices (“IVDs”) for commercial distribution, and as such must eventually comply with FDA’s already-established IVD requirements. The FDA zeitgeist boils down to this: It doesn’t matter if the lab is large or small, for profit or not-for-profit, etc., because ultimately the impact of the tests is the same, irrespective of origin, and as such FDA needs assurances of safety and effectiveness commensurate with the potential risk a test result poses to a patient.

Much of FDA’s proposal is intended to establish the basis to move forward with regulation by reciting incidences of past problems with certain LDTs, and economic burdens the lack of FDA review might pose (to the agency’s mind, due to increased risks of inaccuracy), with a good measure of case law and other authorities to support jurisdiction. FDA’s proposal has the flavor of a legal brief that FDA almost certainly anticipates the agency will need to file at some point as it proceeds toward regulation. FDA’s proposal also spends time refuting the oft-cited concern that FDA regulation will stifle innovation and puts forward that regulation may, in actuality, spur innovation of tests that advance the public health.

In terms of rollout, FDA proposed a 4-year phase in after the final rule, with the following elements:

• Stage 1: End FDA’s general enforcement discretion approach with respect to medical device reporting (“MDR”) requirements (capturing injuries and malfunctions with tests) and correction and removal reporting requirements 1 year after FDA publishes a final phaseout policy, which FDA intends to issue in the preamble of the final rule.
• Stage 2: End FDA’s general enforcement discretion approach with respect to requirements other than MDR, correction and removal reporting, quality system (“QS”), and premarket review requirements 2 years after FDA publishes a final phaseout policy. This would include the enforcement of registration and listing, labeling, investigational use requirements.
• Stage 3: End FDA’s general enforcement discretion approach with respect to QS requirements 3 years after FDA publishes a final phaseout policy.
• Stage 4: End FDA’s general enforcement discretion approach with respect to premarket review requirements for high-risk IVDs 3½ years after FDA publishes a final phaseout policy, but not before October 1, 2027.
• Stage 5: End FDA’s general enforcement discretion approach with respect to premarket review requirements for moderate risk and low risk IVDs (that require premarket submissions) 4 years after FDA publishes a final phaseout policy, but not before April 1, 2028.

In terms of impact and where things could go from here, as well as potential headwinds and tailwinds investors should be considering, what we wrote in our June Insight remains true. Any parties interested in the LDT space should pay close attention to ongoing developments (which we’ll be chronicling and analyzing here) and should consider commenting on the proposed rule (currently 60 days from publication of the proposal, though we expect that might be extended). 

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