Small Health Care Businesses Aide Advocacy in Convincing FDA to Increase Regulatory Flexibilities in the Laboratory Developed Test Final Rule

Suppose you are admitted to a hospital for a disease where no commercially designed test would help your treating physicians diagnose your condition. Often this scenario requires using a laboratory-developed test (LDT). Many hospitals and healthcare systems develop and use LDTs.

LDTs are diagnostic tests that are not commercially distributed to other laboratories but, instead, are developed, validated, and performed in-house by individual laboratories. These routine tests range from blood counts to more complex molecular and genetic tests for cancer, heart disease, and rare and infectious diseases.

LDTs are critical in providing timely patient access to accurate and high-quality testing for many conditions where there are no commercial tests, or an existing test does not meet current clinical needs. They also provide physicians with important clinical information to diagnose and treat patients and are essential to the practice of medicine. Indeed, these tests are typically developed at the request of, and in close collaboration with, clinical caregivers.

On May 6, 2024, the US Food and Drug Administration (FDA) issued a final rule to amend its existing regulations deciding that in vitro diagnostic products (IVDs) are devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act). This included a situation where the manufacturer of the IVD is a laboratory. FDA’s stated goal was to better protect public health by helping to assure the safety and effectiveness of IVDs offered as LDTs. The rule became final on July 5, 2024.

This final rule marked the end of the FDA’s broad and long-established enforcement discretion policy for LDTs, under which most LDTs were not expected to meet the premarket or post-market regulatory requirements. The final rule made it clear that LDTs would now be considered regulated medical devices, and that the FDA would phase out its LDT enforcement discretion policy over four years. In its final regulatory flexibility analysis, the FDA noted that because most facilities that will be affected by this rule are defined as small businesses, the final rule was likely to impose a significant economic impact on a substantial number of those small businesses. The FDA estimated the costs of the final rules as follows:

Final rule estimated annualized costs rangeWith the primary estimate
$566 million to $3.56 billion at 7% discount rate$1.29 billion
$603 million to $3.79 billion at 3% discount rate$1.37 billion

Because of Advocacy’s work with groups that represent small LDT manufacturers and laboratories, the FDA made changes to the proposed rule that resulted in cost savings to covered small entities. This includes a phase-out of its blanket enforcement discretion policy for LDTs over the course of four years in five stages. At each stage, FDA expected LDTs to comply with specific regulatory requirements. Also, the FDA added a new, limited enforcement discretion policy for LDTs that “were first marketed prior to the date of issuance of the rule and that are not modified, or that are modified in certain limited ways.” These pre-existing LDTs would not be required to comply with FDA’s premarket review. Lastly, the FDA also created several other new, limited enforcement discretion policies for certain other types of LDTs. Advocacy and industry efforts to convince the FDA of the need to increase regulatory flexibilities resulted in lessening the rule’s impacts on covered small entities. This made for a better regulation.

AUTHOR:

Linwood Rayford, III
Assistant Chief Counsel

EMAIL:

linwood.rayford@sba.gov

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