Regulation of Laboratory Developed Tests by FDA: Time for the Agency to Cease and Desist Until Congress Enacts Legislation

October 21, 2019By Jeffrey K. Shapiro

A warning letter issued earlier this year by the Food and Drug Administration (FDA) to Inova Genomics (Inova) prompts some reflections on where things stand now with the regulation of laboratory developed tests (LDTs) under the Federal Food, Drug, and Cosmetic Act (FDCA).  An LDT, as FDA views it, is an in vitro diagnostic test that is designed, manufactured and used within a single laboratory.

In general, the Centers for Medicare and Medicaid Services (CMS) regulates clinical laboratories pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and implementing regulations (42 U.S.C. § 263a; 42 C.F.R. Part 493).  According to CMS, CLIA covers approximately 260,000 laboratory entities.  This regulation extends to LDTs.

In 1976, the Congress amended the FDCA to give the FDA significant new statutory authority to regulate medical devices.  The FDA maintains that LDTs fall under this authority.  At the same time, the FDA never actively followed through on this assertion of authority.  To this day, it is the FDA’s announced position that the FDCA’s requirements apply to all LDTs.  Therefore, these tests are subject to 510(k) clearance or premarket application (PMA) approval and a panoply of post‑market requirements, including the Quality System Regulation (QSR), Medical Device Reporting (MDR) and labeling requirements.  Yet, clinical laboratories make little effort to comply with these requirements.  If FDA’s position is accepted, then these clinical laboratories are massively violating the law every day.

This state of affairs continues because, FDA does not “generally” enforce these requirements.  In a handful of cases during a period spanning more than 30 years, FDA has singled out specific LDTs, or a specific class of LDTs, for active enforcement.  In the vast majority of cases, though, the FDA has conferred a dispensation upon clinical laboratories under the rubric of “enforcement discretion.”

This state of affairs is troubling.  FDA has repeatedly acknowledged that “LDT’s are important to the continued development of personalized medicine.”  Nonetheless, the agency’s official position is that clinical laboratories are serious and persistent lawbreakers, absolved only by the agency’s grace.

In 2018, FDA issued a public safety notice foreshadowing that pharmacogenetic testing (using a person’s genetic variants to predict their response to certain drugs) would likely be targeted.  FDA apparently contacted Inova among other companies in this space.  In correspondence, Inova told FDA that:  “Inova believes it is properly operating within the scope of FDA’s LDT exemption and thus is not subject to FDA’s premarket review or labeling requirements.”  In a 2019 warning letter, FDA replied:

FDA has not created a legal ‘carve-out’ for LDTs such that they are not required to comply with the requirements under the Act that otherwise would apply.  FDA has never established such an exemption.  As a matter of practice, FDA, however, has exercised enforcement discretion for LDTs, which means that FDA has generally not enforced the premarket review and other FDA legal requirements that do apply to LDTs.  Although FDA has generally exercised enforcement discretion for LDTs, the Agency always retains discretion to take action when appropriate, such as when it is appropriate to address significant public health concerns.

The word “appropriate” is a tell, because it requires decision‑making.  How do FDA officials decide what is “appropriate”?  The letter does not provide any criteria for this exercise of broad discretion.  The letter provides a single example — “significant public health concerns.”  This phrase is a vague and not a statutorily authorized basis for distinguishing this class of LDTs from the vast majority of LDTs against whom the statute is not enforced.

In United States v. Franck’s Lab, Inc., 816 F. Supp. 2d 1209 (M.D. Fla. 2011), FDA claimed for 70 years that bulk compounding of animal medications was subject to the FDCA, but on the ground of enforcement discretion had not brought any enforcement actions against state‑licensed pharmacies.  The Franck’s Lab case was the first and only instance in which FDA had sought to do so.  The court ruled against FDA on summary judgment.  It found, among other things, that forcing compounders to rely on the good graces of FDA’s enforcement discretion “invites arbitrary enforcement, which is antithetical to our system of criminal justice.”  Id. at 1254‑1255 (This case was vacated on appeal on joint motion of the party.  United States v. Franck’s Lab, Inc., No. 11-15350, 2012 U.S. App. LEXIS 27100 (11th Cir. Oct. 18, 2012).  It cannot be cited as precedent but can be discussed based upon its persuasive value.)  If FDA were to attempt to enforce the Inova warning letter, a number of the considerations in Franck’s Lab would apply. In particular, FDA’s purported lifting of enforcement discretion as to a single targeted type of LDT based upon unstated and/or nebulous criteria invites arbitrary enforcement here just as much as in that case.

In Franck’s Lab, the court also found that the selective lifting of enforcement discretion did not comport with the rule of lenity, which requires that, when a statute carries criminal penalties, any ambiguities be interpreted in the defendant’s favor.  As the court found in Franck’s Lab, this rule applies even in civil enforcement matters, because a statute must be interpreted consistently in both criminal and civil contexts.  That concern is present here, too.

Looking at the non‑enforcement aspect of the LDT situation, the FDA’s decision to suspend enforcement of the FDCA against the vast majority of clinical laboratories is constitutionally dubious.  Under our Constitution, it is Congress’ role to pass laws of general applicability and it is the Executive’s role to enforce the laws.  Thus, Congress possesses “[a]ll legislative powers,” and the Executive “shall take Care that the Laws be faithfully executed.”  U.S. Const. Art. I, § 1; id. Art. II, § 3.  In the case of LDTs, Congress enacted the FDCA to govern the regulation of medical devices.  The FDA has interpreted this law as applicable to LDTs.  Yet, FDA has systematically declined to enforce the very law that it insists is applicable.  In doing so, FDA is effectively denying congressional supremacy by prospectively refusing to enforce a duly enacted law.  See generally Z. Price, Enforcement Discretion and Executive Duty, 67 Vand. L. Rev. 671 (2014).

It is, of course, well accepted that the faithful execution of the laws encompasses the exercise of enforcement discretion in particular cases.  This issue has arisen in the context of challenges to the exercise of enforcement discretion under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701‑706.  In Heckler v. Chaney, 470 U.S. 821 (1985), the Supreme Court famously found that FDA’s decisions not to enforce the FDCA in particular cases are not subject to judicial review.

With regard to LDTs, however, FDA has prospectively announced general non‑enforcement.  This suspension of the FDCA is not an exercise of Heckler v. Chaney enforcement discretion.  It is more like a recent APA case involving e‑cigarettes.  In Am. Acad. of Pediatrics v. FDA, 379 F. Supp. 3d 461 (D. Md. 2019), the court found that FDA could not lawfully rely on putative enforcement discretion to create a generally applicable five‑year grace period for continued marketing of e‑cigarettes without premarket review, contrary to the FDCA.  If a five year grace period with general non‑enforcement of a premarket provision of the FDCA for e‑cigarettes cannot be justified based upon enforcement discretion, how much more it would seem that the same conclusion would apply to more than 30 years (with no end in sight) of general non‑enforcement of the entire statutory scheme.  The latter, of course, is an apt description of FDA’s enforcement policy with respect to LDTs.

No doubt clinical laboratories enjoying the benefit of FDA’s so‑called enforcement discretion will not object to being left alone (even if they do not agree that FDA is correct in its assertion of authority to potentially regulate them).  But it is the suspension of the law against the many that makes it arbitrary to enforce it against the few.  A basic protection against arbitrary government is the requirement that executive agencies faithfully apply general rules as applicable.  Under the FDCA, if an article meets the definition of a medical device, a host of requirements apply.  There is no provision in the FDCA that authorizes FDA to select a specific class of medical devices for suspension of the law; and yet, that is what FDA has done with respect to LDTs.

Likewise, there is no provision in the FDCA that authorizes FDA to unsuspend the law against just a few clinical laboratories based upon “significant public health concerns.”  FDA has conjured up this idea.  This conjuring is an act of official fiat, not authorized law enforcement.  FDA is not statutorily authorized as a roving commission to protect the public health in any way that it deems fit.  It is a powerful Executive Branch agency whose mission to protect the public health has been carefully fenced in by duly enacted law.  Yet, when it comes to LDTs, FDA has jumped the fence and is roaming free.

Another way in which the Inova warning letter is problematic relates to FDA’s 2014 draft LDT guidance and the ensuing discussion.  The draft guidance proposed to apply the FDCA much more fully to LDTs in a complex, phased‑in, risk‑based scheme.  There ensued a many‑sided dialogue that rather mimicked legislative deliberation, enlivened by threats of legal challenges under the APA.  After several years, the upshot was a failure to launch; in 2017, FDA issued a discussion paper explaining that it would not finalize the guidance.  Instead, FDA said it was stepping back from the draft guidance “to give our congressional authorizing committees the opportunity to develop a legislative solution” (p. 1).  A legislative process seems to be underway. (Normally, in a well‑functioning republic, agencies do not allow the legislature “the opportunity” to authorize the agency to enforce a law.  Rather, the legislative enacts the law and then the agency implements it.  One wonders from this turn of phrase if FDA envisions that if Congress does not enact legislation, the agency will do so in its place.  The reference to “authorizing committees” is also an odd locution.  Typically, the Congress as a body enacts legislation.)

In the discussion paper, FDA suggests that a possible approach would be to grandfather all existing LDTs and then begin applying the FDCA in a phased approach.  This suggestion testifies to the basic safety and effectiveness of LDT technology, as developed over the years under CMS regulation with minimal FDA oversight.

More to the point here, the discussion paper focuses heavily on the need for a new framework due to advances in LDT technology.  FDA says that the draft guidance was the agency’s attempt to provide one.  In the discussion paper, FDA says it is stepping back to allow Congress to provide a legislative solution.  Nothing in the discussion paper suggests that FDA will continue to enforce the current FDCA against select LDT technology during the pendency of the legislation.  The implication of the discussion paper is the opposite.

Yet, as shown by the Inova warning letter, FDA is now enforcing the unamended FDCA against pharmacogenetic tests, a prime example of novel LDT technology, without waiting for the legislation FDA has suggested is needed.  In this regard, FDA appears to have lulled the industry.  Compare Franck’s Lab, 816 F. Supp. 2d at 1252 (“the FDA promised that it would publish new guidance, then it didn’t”).  There is no reason for FDA to act in advance of Congress with regard to pharmacogenetic tests, or other LDTs, particularly those marketed on a prescription basis to medical professionals.

To date FDA’s oversight of LDTs has been the worst of all worlds.  FDA claims the authority to regulate them under the FDCA, but has suspended the statute against almost all LDTs (in violation of the Take Care clause of the constitution).  And yet, FDA has applied the law haphazardly against a few select categories of LDTs, including new technology that it concedes must be addressed in legislation that would amend the FDCA.  The selective enforcement is inherently arbitrary and capricious and may violate the APA.

How to make this right?  Two years ago, FDA publicly said it would stand down so that Congress can set the authorized terms of FDA’s role in LDT oversight.  FDA should follow through on that commitment.  All enforcement of the FDCA against LDTs should end until Congress enacts an amendment to the FDCA explicitly authorizing FDA to regulate LDTs and defining how it is to be done.