FDA wants to regulate laboratory derived tests (LDT) and everyone's mad
What the heck is an LDT?
Currently, I’m applying to pathology residencies, and on the interview trail, I’ve been asking practicing clinical pathologists about a podcast which I listened to recently from the American Society of Clinical Pathologists (ASCP) discussing a FDA proposed rule to regulate LDTs.
Most of the pathologists who I’ve talked to think this will stifle innovation in the market for laboratory tests, largely because they will eliminate access for patients with rare diseases who have a low TAM and need diagnostic testing to determine the right course of treatment. In this post, I’d like to succinctly (is that even possible in healthcare?) discuss the changes which are happening in the regulatory space of diagnostic testing, and why it matters for you, the patient.
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What the heck are LDTs?
In the eyes of the FDA, there are two ways to bring a diagnostic to market—the in-vitro diagnostic (IVD) pathway and the LDT pathway. Technically, LDTs are a subset of IVDs but for this discussion, let’s keep them separate for simplicity’s sake.
IVDs are generally subject to harsher controls around pre-market and post-market surveillance, and are subject to FDA enforcement. Unlike IVDs, LDTs (AKA IVDs manufactured by a laboratory instead of a “device manufacturer”) are subject to the Clinical Laboratory Improvement Amendments (CLIA). In practice, LDTs are an easier GTM strategy than IVDs.
Why Regulate These Tests Now?
According to the FDA, in the 1970s and 1980s, when the framework was being created, LDTs were low-risk and low-volume, this wasn’t much of an issue because LDTs were mostly used for a local population for a hospital which wanted to develop the LDT. Additionally, it didn’t affect patient care in a widespread manner. Therefore, the FDA decided to create a carve-out for LDTs so that they had discretion from IVD regulation.
Since then, however, the use of LDTs have exploded, and they are used at a much higher rate, and therefore pose a higher risk. In the eyes of the FDA, therefore, it’s time now to regulate the LDTs to protect patient safety. The FDA has three major arguments (articulated in the proposed rule which they published in the federal register in September 2023):
The FDA’s general discretion for LDTs is no longer needed because they are interchangeable between those tests which are made by other IVD manufacturers, and no longer are “niche” products which are used locally by individual hospitals
The IVD vs. LDT bifurcation creates an “alternative pathway” for tests which want to circumvent pre- and post-market review, which is an unfair landscape for diagnostic assays
Since LDTs play a large role in modern medical care, false negatives and false positives can have adverse impact on patient health. As mentioned before, LDTs are not regulated as other IVDs are, and they can have deleterious impacts for patients if they are not regulated by the FDA
This isn’t the first time that the FDA has tried to regulate LDTs (they tried in 2016 and 2022, with the unsuccessful passage of the VALID act), however, this is the furthest that they have progressed with defining what regulation of LDTs can look like moving forward, using a phase-in approach.
First, LDTs will be required to comply with medical device reporting (MDR) requirements, then quality system (QS) requirements, and finally pre- and post-market review (starting with high-risk and moving down to moderate- and low-risk IVDs). This will all take place over a 4-year timespan, culminating in a final roll-out in April 2028.
The case against regulation
Critics of the proposed rule have responded in droves, with over 19,000 comments about the proposal during the public comment period (this is unclear, as there were 19,655 comments one day and then 6,732 the next). Their arguments have largely focused on two lynchpin issues which argue that the FDA has not considered the ramifications of this policy, both for patients and for the organizations who provide small, niche LDTs for patients in need of them:
The conservative estimates which the FDA has used to estimate how many new applications are approved are flawed, because they are using outdated numbers from 2018 (when they have 2023 numbers) to estimate tests. These would require substantially more regulators to review the influx of tests
The timeline of the rule change (4-years) is way too short for the aforementioned hiring spree to address the backlog of tests which result, causing delays and confusion on how to approve LDTs
The FDA plans to address this backlog by also increasing a third-party review program (i.e., other approved organizations, like the NY state DOH, can also review tests). This is short-sighted because the third-party review program has been used very sparingly (<3% of cases annually) and is only applicable for a portion of tests (only Class I and II devices) for already-approved agencies
40% of LDTs are made by small laboratories (defined by FDA as labs under $150,000), and they will shut down and not manufacture certain tests because the laboratory will not “choose to invest resources to meet those requirements.” The FDA recognizes that this will consolidate the market into larger companies to provide commercially available IVDs, however, it skips over the fact that it will primarily eliminate smaller tests which are focused at a more niche patient population and might shutter smaller laboratories
I’m squarely in the camp of the case against regulation for this issue. While regulation is important, the evidence which the FDA is using to justify a broad overreach of federal dollars to regulate LDTs is unwarranted.
Firstly, the evidence for false positives hurting patient safety is based on anecdotes and case reports, which doesn’t say much about the systematic harm to public health to create a large program for evaluating laboratory tests. Furthermore, the center which is focused on evaluating these tests is going to be overwhelmed with newer applications of LDTs, some of which will have new PMA applications just to add a new gene onto a panel. While the FDA has some solace in approval of new IVDs, this also doesn’t solve the issue that LDTs could be flawed.
For example, an analysis in STAT news proves this well—even if a test is approved as an IVD and is applied to a patient with a low pre-test probability, it can result in a false positive if the condition is very rare, leading to additional testing which may be more harmful than the test itself. Therefore, the answer is not to regulate a broad swath of tests and force them into a regulatory pathway which may halt needed tests from coming to market. Vice versa, a false negative reporting for a less rare condition should also be taken into account.
Indeed, a more measured approach of using CLIA reporting to include the sensitivity and specificity of tests, and more approaches to educate physicians and patients that testing may not be the panacea which they believe it is, is important. Physicians should be educated on the use of LDTs and recognize that testing is as much of a bet as the treatment is—most patients understand that treatments may not work. However, testing is held as the word of gospel, when it should be understood as a different type of bet.
I’m reminded of a talk that Bill Gurley did about regulatory capture—the idea that large businesses use their outsized influence in Washington to create favorable policies for themselves. It seems rather convenient that the FDA realizes, grudgingly, that this policy would shutter small laboratories and would benefit larger ones. However, a second-order insight which it fails to grasp is that it would affect patients downstream, who no longer have access to an innovative ecosystem to help them understand their diseases. As we’ll see, this proposed rule is rife with holes which I believe Washington isn’t ready to address—but this may be because they’re willing to ignore some problems to create favorable incentives for larger companies in this space. I know, I’m veering into the tin-foil hat conspiracy part of this post
In summary, I think that this space is largely due for an intervention and I am squarely against the policy of regulating LDTs. I think that the harm to patients is largely overstated and that many patients rely on these tests to make crucial decisions about their care. However, I do believe that with greater freedom comes greater fraud / potential for harm, and therefore, we have to inculcate a sense of understanding of what it means to use a test, how to deploy one effectively, and create smart bets to guide clinician and patient decision making rather than rely on regulators to tell us what is allowed and not.