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Feature Articles : Sep 15, 2010 (Vol. 30, No. 16)

Regulating Laboratory-Developed Tests

Task Will Require Deft Hand from FDA to Retain Innovation and Patient Access
  • Jeffrey N. Gibbs

The U.S. diagnostic market has long been divided into two major regulatory branches. In vitro diagnostic (IVD) kits that are sold by manufacturers to laboratories are regulated by the FDA. Tests developed by a laboratory and offered as a diagnostic service by that laboratory are regulated at the federal level by the Centers for Medicare and Medicaid Services under the Clinical Laboratory Improvement Amendments (CLIA).

This regulatory dichotomy appears to be ending. In the past few months, FDA officials have repeatedly stated that they intend for the agency to regulate at least some subset of laboratory-developed tests (LDTs) as medical devices. FDA regulation of LDTs—if it occurs—could have a significant impact on the diagnostic industry, pharmaceutical companies, the healthcare system, and patients. Indeed, even before regulation of laboratories begins, the prospect of FDA exercising jurisdiction will affect decisions by laboratories and investors.

From 1976, when FDA received authority to regulate devices, until 1992, FDA expressed no interest in regulating LDTs. In 1992, the agency said for the first time that it had the authority to regulate LDTs as devices. Five years later, FDA reiterated that it had the legal power to regulate LDTs, but was choosing to “exercise enforcement discretion,” and would leave LDTs alone. The hands-off approach largely remained in effect until the middle of the last decade. Then, FDA intermittently sought to regulate certain individual tests. In 2006 FDA proposed a broader approach, stating that it intended to regulate a narrow subset of LDTs, which it called in vitro diagnostic multivariate index assays (IVDMIAs).

FDA's Public Meeting

FDA has now abandoned the IVDMIA proposal in favor of a more ambitious objective: regulating LDTs under the medical-device provisions of federal law. In July, FDA held a two-day public meeting to explore various issues relating to LDT regulation.

In announcing the meeting, FDA explained that enforcement discretion was no longer appropriate for several reasons. FDA cited, among other factors, the greater complexity of tests, and the rise of LDTs offered on a national level. Another factor in FDA’s greater regulatory scrutiny is the growth of genetic tests promoted directly to consumers. FDA officials have called LDTs a “loophole,” used by laboratories to circumvent the FDA process.

The public meeting attracted significant public interest. Because requests to attend exceeded the 400-plus seating capacity in the original venue, FDA moved the meeting to an auditorium that could hold over 700 people. Many more people watched via a webcast.

This high degree of interest is not surprising given the significant role LDTs play in the U.S. healthcare system. For example, over 1,800 genetic tests are estimated to be available, but only a handful have been reviewed by FDA. LDTs are playing an increasingly important role in personalized medicine, including companion diagnostics for pharmaceuticals. These tests also are used to identify emerging diseases and to diagnose rare and orphan diseases for which there are no IVDs.

The development of LDTs has become a large and growing business. Many start-up companies have been formed to offer LDTs; well-established laboratories have also invested heavily in offering innovative tests as LDTs. New LDTs are continually being introduced.

As LDTs have proliferated, IVD manufacturers have become increasingly troubled by a perceived uneven playing field. While LDTs are exempt from FDA regulation (but not exempt from other types of regulation, including CLIA, state scrutiny, and oversight by professional organizations), assay manufacturers need to go through the FDA review process and comply with FDA’s ongoing regulatory requirements. Other observers have questioned whether LDTs have been adequately tested and clinically validated.

There are many different companies and organizations that are affected by LDT regulation. Nevertheless, during the FDA two-day meeting, speakers from various perspectives generally agreed that FDA should regulate some LDTs in some manner. There was no consensus, though, regarding the nature and parameters of that process. FDA’s extension of device regulations to LDTs presents many questions. Resolving these will not be easy.

One legal issue is whether FDA can regulate LDTs simply through a guidance document. At the public meeting, FDA asserted that because it had been exercising enforcement discretion before, the change in policy from nonregulation to regulation would not require rule making.

Using the guidance document route is far easier and faster for FDA. For example, before issuing a final rule, FDA would need to formally address each significant comment. There is no parallel requirement for guidance documents. Also, rule making does need to analyze economic impact, while guidance documents do not.

Regulating LDTs will impose a large financial burden on laboratories. Whether FDA is correct regarding the legality of using guidance documents is legally debatable. If FDA’s authority over LDTs is challenged in court, the failure to use formal rules rather than informal guidance should feature prominently in the litigation.

Defining "High Risk"

Another major issue that will fundamentally affect the impact of the policy relates to its reach. While many speakers agreed FDA should play a role in regulating high-risk LDTs, there is not an agreement as to which tests fall into that category. Classifying the criteria will not be easy but it will be vital, since it will determine which LDTs will need to comply with FDA requirements.

To FDA, high risk means the risk to the patient of an incorrect result. FDA does not consider the risk/benefit ratio. Nor is performance likely to be a factor—a test will still be high risk even if the assay has excellent sensitivity and specificity. However, in conversations with laboratory personnel, they rarely say their test is high risk—they point to someone else’s test instead as an example of a test that ought to be regulated.

Clear criteria are also important for another reason—uncertainty imposes its own costs on innovation and investment. The lack of clarity as to which regulatory scheme applies to a particular test can itself chill innovation.

FDA has a fairly well-developed system now for classifying IVD kits. However, companies still cannot always predict whether they will need a 510(k) or premarket approval application, and FDA cannot always tell manufacturers up front how they will be classified. Developing a clear, straightforward approach to stratifying tests as high risk (or whatever the threshold is) will be indispensable.

Potential Consequences

Another important issue is ensuring that low-volume tests are not impeded. Many tests will not be offered if device regulation applies, because the costs will be too great for the limited market. The Humanitarian Use Device program—the device analogue to orphan drugs—has a low ceiling: 4,000 patients tested per year.

There was broad agreement at the meeting that maintaining patient access to low-volume LDTs is important. Regulating LDTs for small populations will have unintended negative consequences. In many cases, companies would not offer IVDs because sales would be too low in comparison with the regulatory costs. The details of how the regulatory scheme would protect are unsettled.

A related concern is that once a product is cleared or approved, any significant modifications may trigger the need for a new FDA clearance or approval. LDTs are often modified. This may result from new technology, enhanced clinical understanding of the disease, new biomarkers, improved bioinformatics, or evolving diseases.

IVD kit companies sometimes defer making improvements because of the costs and time needed to go through the regulatory process. Applying the same model to LDTs could level the playing field but also delay or prevent beneficial improvements in the test.

Quality System Regulation

Another open question relates to the applicability of the FDA Quality System Regulation (QSR), which governs the manufacture of devices. Device manufacturers must comply with QSR requirements.

In contrast, laboratories need to meet CLIA requirements. While there are some common areas, the two systems do differ. The QSR regulations, for example, mandate that devices be developed in accordance with design controls. CLIA has no counterpart provision.

When FDA first proposed the IVDMIA guidance, the laboratory industry cited difficulties in operating in both a CLIA and QSR regime. FDA has recognized that applying these dual regulatory schemes to laboratories will create challenges. Although a number of suggestions were floated, e.g., delaying applicability of QSRs to laboratories or using CLIA inspections in lieu of FDA QSR inspections, no clear solution has been identified.

This is hardly an exhaustive list of issues. For example, reconciling FDA regulation of device labeling and CLIA requirements for communicating results to doctors will not be simple. FDA restricts communications by device companies to the FDA cleared or approved intended use. CLIA mandates more open communications. The devil is in the details, and applying device regulation to LDTs will generate many details that need to be addressed.

Nobody at the meeting disputed that LDTs play a vital role in healthcare. Nor was there much disagreement that FDA should scrutinize in some manner some higher-risk tests. However, converting these broad principles into fair, concrete, predictable regulatory requirements that will provide patient protection but not deter innovation or unduly hamper access to tests will be a daunting task indeed.