In a significant regulatory shift, the U.S. Food and Drug Administration (FDA) finalized its rule on April 29 regarding the oversight of Laboratory Developed Tests (LDTs). (Find Applied Policy’s summary here.)  This rule, which brings LDTs under the umbrella of medical device regulations, has immediate implications for hospitals and health systems nationwide. Hospitals will need to actively engage to navigate these changes in order to continue to deliver high-quality patient care.

A New Regulatory Framework

For over three decades, the FDA has generally exercised enforcement discretion for LDTs, often foregoing premarket approval and quality system regulations. This flexibility fostered innovation and enabled laboratories to quickly address urgent clinical needs. It also proved essential during public health emergencies. Most recently, the ability to develop LDTs under relaxed FDA oversight was critical in responding to the COVID-19 pandemic.

Discretionary oversight of LDTs by the FDA has not meant no oversight. LDTs are subject to a set of strict standards known as the Clinical Laboratory Improvement Amendments (CLIA). CLIA requires laboratories that perform LDTs to obtain certification, ensuring they meet established standards for quality, accuracy, and reliability. The level of CLIA certification depends on the complexity of the tests performed, with high-complexity labs—where LDTs are commonly developed—requiring the most stringent certification. Under CLIA, laboratories must adhere to quality standards concerning personnel qualifications, quality control, and proficiency testing. However, it is important to note that CLIA does not assess the clinical validity or utility of the tests, focusing instead on operational and technical competency. LDTs will still be subject to regulation under CLIA, which assigns complexity to LDTs in a manner that is distinct from how the FDA assigns risk to medical devices.

The final rule explicitly classifies in vitro diagnostic products (IVDs), including those manufactured and used within single clinical laboratories, as medical devices under the Federal Food, Drug, and Cosmetic Act (FDCA). This amendment marks a departure from the FDA’s previous policy of general enforcement discretion for many LDTs, transitioning to a more structured oversight model over the next four years. While the FDA has also expanded the list of LDTs eligible for “grandfathering”[1],  the majority will require adaptation to the new standards.

Implications for Hospital Laboratories

1. Increased Regulatory Oversight

Laboratories must prepare for increased scrutiny and compliance demands. This includes preparing for the phase-out of enforcement discretion in five stages, spanning from 2025 to 2028, covering aspects from adverse event reporting to premarket review for high-, moderate-, and low-risk tests.

2. Grandfathering and Its Limits

While the rule expands grandfathering, covering existing LDTs, those approved by New York State, and those fulfilling unmet needs within integrated health systems, these exemptions have boundaries. Tests cannot be significantly modified without triggering new FDA submissions, essentially freezing many LDTs in their current state unless laboratories opt into full compliance with new regulations.

3. Operational and Strategic Challenges

The constraints on modifying grandfathered tests may have an impact on innovation and responsiveness in hospital laboratories. As medical technologies advance, particularly with the integration of artificial intelligence and more complex genomic sequencing, hospitals must navigate these innovations within the strictures of the new rule or risk non-compliance.

4. Engagement and Advocacy

Hospitals are likely to actively engage with how these rules are implemented, particularly in areas still under guidance development by the FDA. The complexities of the rule and its impact on hospital operations will have significant implications going forward.

5. Legal and Competitive Risks

The FDA retains the authority to pursue enforcement actions in its oversight of LDTs and expects laboratories to submit detailed labeling for review. This will increase the compliance burden and may also introduce competitive risks as laboratories report issues with competitors’ tests.

Impacts and Implications

As we delve deeper into the FDA’s final rule, it becomes apparent that the devil is in the details. While the American Hospital Association and other industry analysts express relief regarding the exclusions for certain tests, especially those already on the market, how these special enforcement discretions will apply remains unclear. The nuances of the rule’s implementation could have significant ramifications for the day-to-day operations of hospital laboratories.

Compliance with Quality Systems

The FDA’s expectation that labs comply with stringent quality systems under the new regulations may present a challenge, particularly for smaller or resource-constrained facilities. Hospitals might need to invest in training, technology, and systems to meet these demands, which could impact budgets and redirect resources from other areas of care.

Innovation versus Regulation

The tension between maintaining an innovative edge and adhering to regulatory mandates is a delicate balance. Hospitals must navigate these waters carefully, as any new diagnostic tool or modification to existing LDTs could trigger regulatory requirements delaying the introduction of new tests.

Public Health and Emergency Response

The rule’s impact on tests used for public health surveillance and emergency responses is particularly poignant in light of recent global health crises. Hospitals will need to maintain their ability to develop and deploy LDTs rapidly in response to future public health emergencies.

Looking Ahead: Strategic Planning for Compliance

Hospitals will need to take a proactive approach to compliance planning. This involves a comprehensive assessment of existing LDTs, understanding the specific exemptions and grandfathering provisions which are applicable, and developing a roadmap for compliance that aligns with the phased implementation of the rule. Strategic planning for compliance may involve:

• Developing robust risk management strategies to handle potential regulatory challenges is crucial. This includes regular audits, continuous training for laboratory staff, and establishing clear communication channels with the FDA to clarify regulatory expectations and resolve issues promptly.
• Continued advocacy for regulations that recognize the unique role and capabilities of hospital laboratories is essential. Engaging with policymakers, participating in public comment periods, and collaborating with industry associations can amplify the voice of healthcare providers in regulatory discussions.
• Investing in technology that can streamline compliance and enhance the capabilities of LDTs is another strategic priority. This includes adopting electronic systems for documentation, leveraging advanced analytics for quality control, and exploring new diagnostic technologies that meet regulatory standards without compromising innovation.

An Initial Opportunity for Engagement

On May 14, 2024, the FDA will host a webinar to provide an overview of the rule and the phaseout policy.

Additionally, the FDA plans to schedule further webinars to discuss detailed aspects of the phaseout policy and the targeted enforcement discretion policies in the future.

Conclusion

The FDA’s final rule on LDT regulation is a landmark change and has garnered immediate and informed responses from hospitals. As the rule begins to take effect, hospitals will need to adapt to the new regulatory environment.

[1] The list of tests grandfathered under the new rule includes tests that are currently marketed; those approved by New York State; and LDTs developed within integrated health systems for specific unmet patient needs.