The U.S. Food & Drug Administration (“FDA”) is looking to elbow its way into the medical testing business by mandating stricter regulations that would slow the process of bringing lab-developed tests (“LDTs”) to market. LDTs are common medical diagnostic tests that have led to both diagnostic advances and setbacks that affect the everyday consumer. (FDA News Release, U.S. Food and Drug Administration). The FDA’s regulation was previously opened for a 60-day comment period and was met with vigorous discussion. Regardless, the FDA moved forward with the regulations on April 29, 2024, and has been met with legal push back and Congressional commentary that could threaten the future of the proposed rule. (Chair Rogers, U.S. House Energy and Commerce Committee).  This post examines the current structure of LDT regulations, their marketability, and how this regulation change will affect small startups and patient experiences.

LDTs are lab tests used for the medical diagnoses of numerous conditions, illnesses, and diseases, and the tests are designed, manufactured, and used within a single clinical laboratory. (FDA, Laboratory Developed Tests). Traditional LDTs included gram stains, manual differential cell counts, and microbiology cultures used to identify rare diseases in small populations. (William Finn, Warde Medical Lab). These traditional tests addressed local and individual needs and were manufactured in small volumes. (Jeff Shuren, U.S. Food & Drug Administration). 

LDTs are a type of in vitro diagnostic test (“IVD”). Id. IVD products, more broadly, are products used in the collection, preparation, and examination of specimens taken from the human body and are regulated under the Federal Food, Drug, and Cosmetic Act. (Code of Federal Regulations, 21 CFR 809.3). LDTs are currently subject to less stringent regulations than those imposed on IVD development. (FDA, Laboratory Developed Tests). The new regulation formally categorizes LDTs more specifically under IVDs, and thereby subjects LDTs to the existing, more rigorous IVD regulations. Id.

Today, LDTs have evolved in complexity and reach, and are now used to diagnose high-risk diseases with very little oversight. (Amanda Pedersen, Medical Device and Diagnostic Industry). In fact, modern LDTs include molecular genetic testing for numerous diseases, as well as the diagnosis and management of cancer,donor screening capabilities, and infectious diseases. (William Finn, Warde Medical Lab). However, as lab technology has grown, the FDA has identified LDTs that over and under-treat diseases, and incorrectly identify therapies and diagnoses. (Jeff Shuren, U.S. Food & Drug Administration). The new regulation stems from the FDA’s belief that patients may not fully understand the risks associated with the lesser-regulated LDTs and are unable to make informed heath decisions. (FDA, Laboratory Developed Tests Proposed Rule). Theranos, the multi-billion-dollar medical diagnostics company founded by Elizabeth Holmes, is an example of the potential gross regulatory oversight by the FDA. (Isabella Backman, Yale School of Medicine.) Holmes and her partner, “Sunny” Balwani, solicited, pressured, misrepresented, and defrauded doctors and patients to use their LDT blood testing services while knowing the tests were not capable of accurately or reliably producing results. (U.S. Attorney’s Office N.D.C, U.S. Department of Justice). Examples like this illustrate the FDA’s concern that the current lack of oversight has created a shortcut path to market because LDTs are not subject to the same clinical testing IVDs are. (Brian Gormley, Wall Street Journal).

The relative ease in producing LDTs has led to an influx of market entrants, something the new regulation is also hoping to address. (Jeff Shuren, U.S. Food & Drug Administration). One such example is CellMax Life, a startup that pulled its hereditary cancer screening tests off the market in 2020 due to fierce competition from a glut of market entrants. (Brian Gormley, Wall Street Journal). CellMax Life initially raised $52 million for a new product but is now seeking an additional $48 million in funding to ensure the product complies with the new LDT requirements. Id. Atul Sharan, the CEO and co-founder of CellMax Life, said that “it has become a system where anybody can market any test,” and that creates issues for those who are doing it right. Id. Startups like CellMax Life seem to appreciate the FDA’s efforts, so much so that the extra money in research, development, and compliance with additional regulation is worth the investment, if in return the FDA effectively thins out a saturated market.  

The FDA anticipates that benefits of the regulation will include a reduction of healthcare costs from unsafe or ineffective LDTs for patients and will also reduce the number of decisions made based on faulty or misleading tests. (FDA, Laboratory Developed Tests Proposed Rule). Susan Van Meter, President of the American Clinical Laboratory Association, like many LDT entrepreneurs, agrees that regulators must protect patients from faulty tests but says regulation should not impede the development of lifesaving new tests. (Brian Gormley, Wall Street Journal). Venture capitalists, investors, and startups alike argue these regulations could make the path to market longer and more expensive, with insurance reimbursements potentially unable to offset these increased costs, causing many startups to not be able to afford developing or bringing their products to market. Id.  

To hear and address these perspectives, the FDA opened a 60-day public comment period on the potential regulation. During that time, nearly 6,700 comments were made. (Erika Roberts, Med Device Online). The breadth of comments indicates a fierce debate amongst the laboratory community, physicians, and patients on the need for and effectiveness of the proposed regulation. Id. While most comments recognize and support the FDA’s mission as the only way to protect patients, there is an observable trend of opposition to the proposed regulation. Id. Ultimately, the comments had little effect on the final regulation that was pushed out and industry groups have started trying to delay the implementation through lawsuits and lobbying efforts. (William Schpero, National Library of Medicine). The first attempt came on May 29, 2024, when American Clinical Laboratory Association (“ACLA”) sued the FDA claiming that the regulations exceed the FDA’s powers. (Ferdous Al-Faruque, Regulatory Affairs Professionals Society).

The FDA believes that LDTs fit within the scope of its regulatory authority and that the agency needs to step into this space to ensure the safety of LDTs. (Gregory Levin et al., Ropes and Gray). The final ruling brought quick response from numerous members of Congress, including House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA), who said it exceeds the FDA’s existing regulatory authority and congressional action would be needed to validate such a change in regulation. (Chair Rogers, U.S. House Energy and Commerce Committee).

In light of the FDA’s previous attempts to regulate LDTs and their potential to create public health risks, it seems fair to ask why so many stakeholders are pushing back on what the FDA sees as an attempt to strengthen consumer protections. But the feasibility and constitutionality of the regulation will be at issue in the ACLA suit and the suits that are likely to follow. The FDA can expect to continue seeing pushback, though at what point this will drive Congress to step in on this issue and decide where the FDA’s regulatory powers end remains to be seen.