A Question 30 Years in the Making: Would a Final LDT Rule Withstand Judicial Scrutiny?

November 2, 2023By Allyson B. Mullen & Gail H. Javitt & Michael D. Shumsky & Philip Won & Adrienne R. Lenz, Principal Medical Device Regulation Expert & Steven J. Gonzalez & Jeffrey N. Gibbs

For more than three decades, FDA has claimed that the Federal Food, Drug, and Cosmetic Act (FD&C Act) gives the agency legal authority to regulate laboratory developed tests (LDTs) as medical devices (see our prior post here).  In this post, we summarize the purported basis for this claim as described in the proposed rule (PR) and assess the strength of potential legal challenges should a final rule be issued (see our prior posts on the proposed rule here and here).

Regulating LDTs: A Long and Winding Road

In what might sound to some like protesting too much, the PR invokes FDA’s longstanding assertion that IVDs “manufactured” by laboratories are medical devices and that clinical laboratories that develop tests are acting as manufacturers.  Indeed, FDA’s claim of jurisdiction is not new, nor is this the first time FDA has tried to regulate LDTs, directly, or indirectly. We recount a few milestones along the road here:

1997ASR Rule restricts sale, distribution of analyte specific reagents; FDA asserts authority over LDTs but articulates enforcement discretion policy
1998FDA denies Citizen Petition submitted in 1992 on behalf of several clinical laboratories challenging agency authority over “home brew” tests
2006FDA issues draft guidance (indefinitely delayed) outlining a different enforcement approach for in vitro diagnostic multivariate index assays
2010, 2015FDA holds public meetings on LDT oversight  (see our prior post here)
2014FDA denies three Citizen Petitions relating to FDA’s LDT authority
2014FDA issues draft guidances on the framework for regulatory oversight of LDTs and adverse event reporting (2014) (see our prior post here)
2016FDA announces that draft guidances will not be finalized
2017FDA publishes discussion paper synthesizing feedback provided to the Agency (2017) (see our prior post here).
2019 – 2021FDA requires LDTs for COVID-19 to obtain emergency use authorization (see prior post here); HHS issues statement rescinding guidance and blocking FDA from regulating LDTs; HHS subsequently retracts statement (see our prior post here)

FDA’s Legal Basis for Regulating LDTs

Despite the Agency’s putative concerns with LDTs, it is far from clear that the Agency has legal authority to regulate these products. In fact, stakeholders have repeatedly challenged FDA’s assertions of authority in Citizen Petitions, public comments, and other forums.  FDA-supported legislative efforts to amend the FD&C Act to give FDA new regulatory authority over LDTs have failed to gain traction over successive sessions of Congress.

Anticipating such objections, the PR spends considerable ink rebutting potential arguments that the Agency lacks the legal authority to regulate LDTs.  Close followers of the LDT saga in recent years may notice that these rebuttals attempt to address several of the issues raised in a June 22, 2020 memo from the HHS General Counsel to the FDA Commissioner that questioned FDA’s authority to regulate LDTs and supported HHS’s (since rescinded) announcement that FDA would no longer require premarket review for LDTs absent notice-and-comment rulemaking.

FDA sets forth three main arguments in support of its jurisdiction:

  1. IVD test systems are devices;
  2. Test systems manufactured by laboratories are devices; and
  3. FDA’s jurisdiction over IVDs manufactured by laboratories is not altered by the FD&C Act’s provisions related to “interstate commerce” and “commercial distribution.”

The PR first sets out to establish that it has authority to regulate in vitro diagnostic “test systems” as devices, and not just the system’s individual components, such as reagents, instruments, specimen collection devices, and software.  FDA supports its argument with what it calls a straightforward reading of section 201(h)(1) of the FD&C Act, as well as references to “test systems” in FDA regulation and legislative history dating back to the 1970s.

The PR goes on to state that the FD&C Act definition of a device does not turn on where or by whom a test system is “manufactured.”  FDA recognizes that the FD&C Act exempts licensed healthcare practitioners from certain device regulations if they manufacture devices solely for use in the course of their professional practice.  However, FDA states that this exemption does not apply to corporate or hospital laboratories that employ licensed practitioners, and the agency says FD&C Act otherwise contains no exception or limitation for devices manufactured by laboratories.

The PR states that LDTs are not the “practice of medicine,” with which FDA generally may not interfere.  Instead, FDA states that LDTs are the devices that are prescribed or administered as part of the practice of medicine, and FDA regulates the manufacture of devices such as LDTs.

Addressing the arguably preemptive effect of CLIA, the PR argues that CLIA neither expressly nor impliedly repealed FDA’s authority over IVDs manufactured by laboratories.  Rather, FDA describes CLIA as a complementary regulatory framework with an independent purpose and that does not address a wide range of activities regulated under the FD&C Act, such as clinical validation and design activities.

The PR takes on two specific statutory grounds raised by the June 22, 2020 HHS memo—the requirements for “interstate commercial” and “commercial distribution”—and argues that they are not impediments to FDA jurisdiction over LDTs.  Responding to the challenge that LDTs do not travel in interstate commerce because they are designed, manufactured, and used in a single laboratory, FDA points out that most of the “prohibited acts” in the FD&C Act applicable to devices do not contain “interstate commerce” elements and even those that do, like section 301(k), have been interpreted broadly by the courts to allow FDA jurisdiction over devices that have not been introduced in interstate commerce if the components used in manufacturing the product have traveled in interstate commerce.

FDA also notes some commentators’ argument that, if laboratories design, manufacture, and use an IVD in a single laboratory and do not introduce their IVD into interstate commerce, section 510(k) does not apply to such laboratories.  FDA asserts that such an argument does not lead to the conclusion that FDA lacks jurisdiction over LDTs, but it would simply mean that section 510(k) does not apply, and therefore the consequence would be that affected laboratories would be forced into the more rigorous review pathways (e.g., Premarket Approval or De Novo pathways).

Addressing the argument that LDTs are not introduced into “commercial distribution” because no physical test system is sold or distributed off-site to anyone,  FDA points to legislative history and (one solitary) judicial opinion in 1985 that interpreted “commercial distribution” broadly to mean “on the market,” which does not require the physical transfer of an object.

Conspicuously missing is any rebuttal to one other issue raised in the June 22, 2020 HHS memo: that laboratories based out of state universities or public health departments are not “persons” as defined in key premarket review and enforcement provisions of the FD&C Act.  If these provisions are not applicable to these laboratories, FDA may not have authority to require premarket review or bring enforcement action for LDTs manufactured by these entities.  Tellingly, the PR seeks comments on whether FDA should “continue the general enforcement discretion approach with respect to any requirements, such as premarket review requirements, for tests manufactured by [academic medical center] AMC laboratories” – suggesting FDA may not have resolved jurisdictional considerations over at least some AMC laboratories.

FDA’s position is, however, only one side of the story.  Counterarguments abound, many of which were detailed in 2015 in a publication by counsel for the American Clinical Laboratory Association (here).

Specific features of the PR will foreseeably yield new bases for challenge.  For example, FDA’s regulations have exempted from certain regulatory requirements (e.g., registration and listing and 510(k) premarket notification) healthcare practitioners who are “licensed by law to prescribe or administer a device” and who “manufacture[] that device … solely for use in the course of … professional practice.” But the PR now dramatically curtails that well-established exception: It claims that “corporate and hospital laboratories” are not eligible for this exemption because they employ, but are not themselves, licensed practitioners. In support for this position, FDA states that hospitals that reprocess single-use devices have been viewed as manufacturers and points to its own webpage for support.  This comparison is misplaced.  Unlike hospital reprocessing facilities, many clinical laboratories are overseen by laboratory directors who themselves are medical doctors.   Thus, the person ultimately responsible for laboratory operations (including development, validation, and performance of an LDT) will often be a licensed practitioner.  The PR, however, would exclude these laboratory directors, and the laboratories they oversee, from the longstanding licensed practitioner exemption, simply because they are employed by incorporated entities and/or hospital system (which, of course, can act only through their personnel.).

If finalized, the PR may also be subject to broader challenges.  In recent years, the Supreme Court repeatedly has invoked the “major questions” doctrine to invalidate agency efforts to regulate matters of substantial economic or political significance where Congress has not clearly vested the agency with authority to do so.  This increasingly robust line of cases can be traced back to the Supreme Court’s rejection of FDA’s last attempt to exert regulatory authority over an industry long considered to be outside its jurisdiction—its ill-fated effort to regulate tobacco products in the 1990’s despite Congress’s repeated rejection of legislation that would have empowered the Agency to do precisely that (See Brown & Williamson v. FDA). FDA’s attempt to exert jurisdiction over LDT’s certainly seems to fall within this line of cases.  The Agency itself has estimated that the PR could impose more than $100 billion dollars in one-time costs and up to $14 billion in annual recurring costs—demonstrating its substantial economic significance. Furthermore, as in the tobacco cases, Congress has not enacted legislation granting FDA express authority over LDTs, despite numerous opportunities to do so.

In response to past FDA efforts to regulate LDTs, some stakeholders publicly signaled their intent to sue the Agency.  No doubt the PR has sparked similar considerations, and we certainly expect an array of stakeholders to file suit and seek to stay the rule’s implementation if it is finalized.   Indeed, recent jurisdictional developments suggest that a wide of array of stakeholders could have standing to challenge the Agency’s attempt to restrict access to commonly used LDTs, including individual laboratories, hospitals, physicians and healthcare providers who routinely use these tests, and patients who depend on them. Even so, the entry of a stay pending final judgment may not be sufficient to immunize parties who rely on LDTs from the PR’s consequences. Given the time required to come into compliance with these burdensome new rules and the inherent risk that a court might uphold FDA’s new rules, many LDT users may be forced to begin preparing for regulation when a final rule is issued.

Bottom line – in the proposed rule, FDA asserts that it has clear regulatory authority over LDTs, but that’s not the full picture.  Only a court can adjudicate whether FDA’s authority under the FD&C Act extends to LDTs, and such adjudication cannot begin until a final rule is published.