On September 29, 2023, the Food and Drug Administration (FDA) released its highly anticipated proposed rule, Medical Devices; Laboratory Developed Tests. This proposed rule aims to clarify the categorization of In Vitro Diagnostics (IVDs) as medical devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act), regardless of whether these IVDs are manufactured by laboratories or other entities. This proposed rule is scheduled for publication in the Federal Register on October 3, 2023, with a 60-day comment period tentatively closing on December 26, 2023.

The proposed rule aims to:

• Amend the FDA regulations by explicitly stating that IVDs are considered medical devices under the FD&C Act, regardless of whether a laboratory manufactures them.
• Phase out the FDA’s historical enforcement discretion approach for Laboratory Developed Tests (LDTs). Under this new approach, IVDs manufactured by laboratories would generally be subject to the same enforcement standards as other IVDs.
• Underscore the importance of consistent oversight and regulation, particularly given the FDA’s concerns about increased risks associated with today’s LDTs.
• Create an environment that encourages innovation in the development of IVDs with proven safety and efficacy, ultimately benefiting public health.

BACKGROUND ON EXISTING FRAMEWORK AND PURPOSE OF THE PROPOSED RULE

The FDA defines IVDs as diagnostic tools for assessing health and detecting diseases using samples from the human body. Some IVDs, like LDTs, are created by laboratories, while others are produced by conventional manufacturers. Historically, the FDA has shown leniency by not strictly enforcing regulations on LDTs, particularly when these tests were locally made, manually conducted, and designed for rare diseases. However, the landscape of LDTs has changed over time, with many now relying on advanced technology, serving broader populations, and being manufactured by nationwide laboratory corporations. The FDA is concerned such modern LDTs pose greater risks and closely resemble other IVDs that have consistently been subject to FDA regulations.

To account for this evolution in IVDs and to ensure uniform quality standards, the FDA proposes to explicitly designate IVDs as devices, even when laboratories manufacture them. Furthermore, the FDA intends to phase out its historical enforcement discretion approach for LDTs, aligning them with the same enforcement standards as other IVDs. This transition will involve adherence to regulations under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), ensuring the high-quality performance of high-complexity tests within certified laboratories.

ESTIMATED HEALTH AND REGULATORY IMPACTS

The FDA estimates that regulating IVDs offered as LDTs could provide annual health benefits ranging from $1.81 billion to $86.01 billion over 20 years. These benefits include reduced costs from IVDs cited as problematic, and potential savings from fewer lawsuits and healthcare system expenses. On the other hand, the FDA also anticipates annualized regulatory costs, including laboratory compliance and FDA expenses, ranging from $2.39 billion to $19.45 billion at varying discount rates. User fees partially offset FDA costs, reducing them to an estimated range of $103 million to $607 million.

FDA PROPOSES 4 YEAR PHASEOUT OF ENFORCEMENT DISCRETION

The FDA acknowledges that many IVDs manufactured by laboratories are currently marketed as LDTs, therefore, an abrupt change could negatively impact patients and the industry at large. To achieve a smooth transition, the FDA proposes a gradual phaseout policy spanning a 4-year period. The intent after this phaseout is that  IVDs offered as LDTs will be expected to meet applicable regulatory requirements. The FDA cautions that offering IVDs without complying with these requirements remains illegal, and the FDA retains the authority to take enforcement actions as necessary. Additionally, the FDA will continue to adopt enforcement discretion policies for specific types of IVDs in certain circumstances, such as during public health emergencies.

The proposed phaseout policy consists of five key stages:

Stage 1: After FDA issues a final phaseout policy, it will end general enforcement discretion for Medical Device Reporting (MDR) requirements and correction/removal reporting requirements one year later.

Stage 2: Two years after issuing the final phaseout policy, the FDA will end general enforcement discretion for requirements other than MDR, correction/removal reporting, Quality System (QS), and premarket review requirements.

Stage 3: Three years after the final phaseout policy, the FDA will end general enforcement discretion for QS requirements.

Stage 4: For high-risk IVDs, the FDA will end general enforcement discretion for premarket review requirements three and a half years after issuing the final phaseout policy but not before October 1, 2027.

Stage 5: For moderate and low-risk IVDs requiring premarket submissions, the FDA will end general enforcement discretion for premarket review requirements four years after issuing the final phaseout policy but not before April 1, 2028.

PHASEOUT POLICY TO ENCOMPASS IVDS OFFERED AS LDTS, RESEARCH USE ONLY, AND OTHER CATEGORIES PREVIOUSLY CONSIDERED TO BE “LOW-RISK”

The proposed phaseout policy would apply to IVDs that are certified under CLIA and meet the regulatory requirements for high complexity testing, even if these IVDs do not fit the traditional understanding of LDTs because they are not designed, manufactured, and used within a single laboratory.

This implies that Research Use Only (RUO) tests, when manufactured by laboratories, fall under the jurisdiction of the FDA and are subject to regulatory oversight. The proposed rule further emphasizes that the mere fact that healthcare practitioners may prescribe or use a device in the context of a healthcare practitioner-patient relationship does not exempt the entities manufacturing those devices from FDA regulation.

Certain categories of tests that were initially considered low risk, such as tests for rare diseases, are proposed to be subject to the phaseout policy. This includes compliance with premarket review requirements (as applicable), QS requirements, registration and listing requirements, MDR requirements, and other relevant regulations.

Categories of tests the FDA does not intend to include in this scope include:

• Tests used for blood donor screening, human cells, tissues, and cellular and tissue-based products (HCT/Ps) donor screening, blood group and Rh factor determination,
• Tests for emergencies, potential emergencies, or material threats declared under section 564 of the FD&C Act,
• Direct-to-consumer tests,
• Tests exclusively used for forensic (law enforcement) purposes, and,
• Tests exclusively used for public health surveillance.

REQUEST FOR INFORMATION ON THE PROPOSED RULE

The FDA is seeking information and public input on several aspects related to the proposed rule change regarding LDTs and the phaseout policy, including:

1. The public health rationale for maintaining the current general enforcement discretion approach or “grandfathering” certain LDTs that are currently on the market and have not changed with respect to indications for use or performance. The agency specifically requests data, evidence, and suggestions regarding the impact and feasibility of such an approach.
2. The possibility of having a longer phaseout period for IVDs offered as LDTs by laboratories with annual receipts below a certain threshold with relevant data and alternative timelines if applicable.
3. How laboratories associated with Academic Medical Centers should be treated differently, if at all, under the new policy.
4. How the FDA can leverage programs such as the New York State Department of Health Clinical Laboratory Evaluation Program or those within the Veterans Health Administration and whether these programs could justify the continuation of enforcement discretion for specific requirements and the scope of such policies if implemented.

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This Applied Policy® Summary was prepared by Meghan Basler with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact Meghan Basler at mbasler@appliedpolicy.com.