In Support of the New HHS Policy Barring FDA from Premarket Review of LDTs

August 31, 2020By Jeffrey K. Shapiro

On August 19, the Department of Health and Human Services (HHS) announced that FDA shall no longer conduct premarket review of laboratory developed tests (LDTs) under the Federal Food, Drug, and Cosmetic Act and implementing regulations (FDCA).  The crux of the statement is this:  “the department has determined that the Food and Drug Administration . . . will not require premarket review of laboratory developed tests . . . absent notice‑and‑comment rulemaking, as opposed to through guidance documents, compliance manuals, website statements, or other informal issuances.”  Others at our firm have summarized the policy here.

To put the new HHS policy in context, the Centers for Medicare and Medicaid Services (CMS) regulates clinical laboratories under the Clinical Laboratory Improvement Amendments of 1988 and implementing regulations (CLIA).  CLIA requires laboratories to hire scientifically qualified personnel and to follow rigorous testing, analytical validation and record-keeping procedures.  These laboratories must obtain various CLIA certificates from CMS, depending on the complexity of the testing the laboratory performs.  According to CMS, CLIA applies to approximately 260,000 laboratory entities.  Under CLIA, these laboratories are regulated in the development and performance of in‑house developed assays, i.e., LDTs, as well as when they employ test kits manufactured outside the laboratory.

FDA claims concurrent authority to regulate LDTs as medical devices under the FDCA.  The dirty little secret is that, during the past 40 years, FDA has only singled out a handful of LDTs for active regulation.  (This post explains why this selective enforcement is unlawful.)  The rest are left alone based upon “enforcement discretion.”  In this respect, therefore, the HHS policy change is not as dramatic as it might appear.  For almost all clinical laboratories, it will be largely business as usual.

At the same time, the new HHS policy actually may have two potentially beneficial effects.  First, clinical laboratories will no longer have the sword of Damocles dangling over their LDTs, i.e., the threat that FDA may select their assays for regulation.  This type of legal uncertainty can have a chilling effect on innovation.  If the new policy remains firm, look for even greater technological progress in this space.

Second, the new policy will allow FDA to better direct its resources against Corona Virus Disease 2019 (COVID‑19).  Even though few LDTs are regulated by FDA, the agency chose to regulate LDTs for the diagnosis of COVID‑19.  This post describes how FDA’s choice to do so led to critical delays in clinical testing in the early days of the pandemic when speed was paramount.  See also this Yale Law Journal article.

Equally unfortunate, an inordinate share of FDA’s scarce resources have been directed toward these LDTs.  Just count the number of EUAs that FDA has issued for COVID‑19 LDTs in these past few months.  The laboratories offering these LDTs are already regulated under CLIA and well‑versed in validating assays.  FDA should have focused instead on manufacturers of test kits sold to laboratories and healthcare facilities.  These manufacturers are explicitly subject to FDA regulation.  The clinical laboratories are not.  Every EUA issued to a laboratory has diverted time and energy that FDA could have spent more productively.

Now, thanks to the new HHS policy, FDA can better deploy its resources.  An example might be rapid asymptomatic screening that would allow safer congregation in places of work, worship, and schooling.  For obvious reasons, these rapid tests will generally not be offered by clinical laboratories.  If it turns out that this type of testing is a priority, FDA can now devote more resources to moving these tests through EUA review as quickly as possible.

The new HHS policy requires FDA to follow notice and comment rulemaking before resuming premarket review of LDTs.  But, given the dubiousness of FDA’s legal authority over LDTs, and the complexity of harmonizing FDCA and CLIA requirements, an explicit act of Congress should be a prerequisite.  Indeed, FDA expressly stated two years ago that it would no longer seek to expand regulation of LDTs beyond the status quo but would await congressional action.  In a healthy republic, it is the legislature, not the regulatory agencies, that define the boundaries and nature of regulatory action.  FDA and CMS have each been entrusted with important regulatory schemes.  It is Congress, not FDA, that should define how these schemes should interact, if at all, with respect to clinical laboratory testing.

An important issue not addressed in the HHS announcement is how to define LDTs that are no longer subject to FDA’s premarket review.  FDA’s LDT web page defines an LDT as follows:  “A laboratory developed test (LDT) is a type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory. . . .  The FDA does not consider diagnostic devices to be LDTs if they are designed or manufactured completely, or partly, outside of the laboratory that offers and uses them.”

Should HHS allow FDA to apply this definition under the new policy?  A concern here is that FDA may attempt to evade or weaken the new HHS policy by continuing to apply the portion of the definition positing that a test is not an LDT if any part of it is “designed” outside a clinical laboratory.  This requirement — that an LDT must have developed by a laboratory with autarkical self‑sufficiency — was invented by FDA.  It is ipse dixit with no statutory or regulatory basis.  It allows FDA unfettered latitude to decide how much “foreign aid” in the development of a test will lead to FDA’s premarket review.

The new HHS policy now bars FDA from regulating LDTs based upon “guidance documents, compliance manuals, website statements, or other informal issuances.”  (The list does not mention enforcement correspondence such as untitled letters and warning letters, which FDA has deployed in the LDT space on occasion.  Nonetheless, these letters lack the force of law and therefore fall under the rubric of “other informal issuances.”)  In fact, FDA has only ever deployed informal issuances when regulating LDTs; there has never been a rulemaking.  Because FDA’s definition of an LDT was promulgated only in these informal issuances, the agency should be barred from applying it.

Instead, HHS should simply preclude FDA from premarket review of any test offered by a clinical laboratory as the latter is defined by CLIA.  This facility‑based approach would at least be grounded in an existing statute.  Under CLIA, a clinical laboratory is defined as:

a facility for the biological, microbiological, serological, chemical, immuno‑hematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings.

If a test is offered by this type of facility, it is subject to CLIA requirements.  In such cases, HHS should preclude FDA from layering premarket review on top of the CLIA requirements.

FDA might counter that the design activities, if performed outside the laboratory, mean that the laboratory has not actually developed the assay.  Hence, the assay is not be a “laboratory developed test.”  Rather, it is an in vitro diagnostic subject to FDA’s premarket review.  The reply to FDA is that this analytical framework would lose the forest for the trees.  The core legal dispute is that FDA claims that all tests performed in a clinical laboratory are subject to the FDCA.  The agency bases this claim on the definition of an in vitro diagnostic, which on its face encompasses tests performed in a clinical laboratory.  The contrary position is that CLIA is a more specific statute that was enacted after the FDCA to comprehensively regulate clinical laboratory testing.  Therefore, CLIA preempts the FDCA with regard to tests offered by clinical laboratories.

The point of the new HHS policy is not to resolve the dispute but to instruct FDA to stand down for now.  Yet, if FDA continues to apply its longstanding definition of LDTs, it will not be required to stand down completely.  Rather, it will continue to pick and choose among LDTs offered by clinical laboratories, regulating some of them as “not true LDTs” as determined by FDA based upon subjective criteria not grounded in law.

A facility‑based approach would more fully carry out the new HHS policy of precluding FDA from premarket review of LDTs.  At the same time, it would clearly permit FDA to continue regulating traditional test kits manufactured outside clinical laboratories (and typically shipped to laboratories for use).  It is uncontroversial that these kits are medical devices under section 201(h) of the FDCA and properly regulated by FDA.  If HHS were to apply this suggested approach, every test would be regulated either under CLIA or the FDCA.  With no test going entirely unregulated, Congress would have breathing room to sort out the proper harmonization of the FDCA and CLIA.

Finally, another concern is that the new HHS policy says that FDA will abstain only from “premarket review.”  In the past, when FDA has chosen to regulate an LDT, it has said that all requirements of the FDCA apply.  (For example, see this warning letter from 2019.)  That would ordinarily include a panoply of post‑market requirements, such as the Quality System Regulation (QSR), Medical Device Reporting (MDR) and labeling requirements.  May FDA impose these even if premarket review is out of bounds?

It would be illogical (and potentially ultra vires of the FDCA) for HHS to allow FDA to do so.  The new HHS policy is premised on FDA’s lack of authority to conduct premarket review of LDTs.  (Hence, the requirement for notice and comment rulemaking to support such review.)  That same concern applies to postmarket regulation.  The FDCA is a finely balanced statutory scheme in which premarket review and postmarket requirements are two sides of the same coin.  They work together to meet the FDCA’s mandate that all medical devices have “reasonable assurance of safety and effectiveness” (FDCA § 513(a)).  If FDA lacks authority to conduct premarket review, it also lacks authority to impose postmarket requirements.

To sum up:  the new HHS policy is an excellent step to more rationally apply FDA’s resources during the pandemic.  In the bigger picture, it should take no less than an act of Congress to determine the proper scope of the FDCA and CLIA as applied to clinical laboratories.  Congress may decide that CLIA preempts the FDCA inside clinical laboratories.  Or, Congress may decide that developments in testing technology and business models warrants an overlay of FDA regulation.  If so, the new statute should supply the boundaries of such regulation and harmonize CLIA with the FDCA.