The US District Court for the Eastern District of Texas issued a pivotal ruling in the consolidated lawsuit American Clinical Laboratory Association v. US Food and Drug Administration (FDA) challenging FDA’s final rule to end its longstanding policy of enforcement discretion for laboratory-developed tests (LDTs) and regulate them as medical devices. The court ruled in favor of the plaintiffs, bringing to a halt FDA’s planned regulatory oversight for LDTs.
Although this decision is a significant victory for the clinical laboratory industry, LDTs and related products remain subject to other legal and regulatory requirements, including the Clinical Laboratory Improvement Amendments (CLIA).
This LawFlash discusses the court’s ruling and key regulatory considerations for clinical labs and other LDT stakeholders in the wake of the LDT final rule’s demise.
BACKGROUND AND DECISION
FDA and the Center for Medicare and Medicaid Services (CMS), which implements CLIA, have long defined LDTs to include clinical diagnostic tests developed, manufactured, and used within a single CLIA-certified clinical laboratory. Although FDA previously asserted that LDTs were subject to its medical device authority, it has long exercised enforcement discretion for the vast majority of LDTs, with limited exceptions (e.g., direct-to-consumer LDTs and LDTs marketed for high-risk uses, such as COVID-19 and Ebola).
FDA’s final rule, issued on May 6, 2024 and described further in our prior LawFlash, makes explicit that FDA considers LDTs to be devices by amending FDA’s regulatory definition of in vitro diagnostic (IVD) products to include such tests. The final rule also includes a policy under which FDA would phase out enforcement discretion for LDTs over a four-year period. The agency justified the rule by citing the growing complexity and broader use of LDTs, arguing that stricter oversight was necessary to ensure public safety and prevent harm from inaccurate or unvalidated tests.
In American Clinical Laboratory Association v. US Food and Drug Administration, the court was not swayed by FDA’s argument that LDTs are “devices” as that term is defined in the Federal Food, Drug and Cosmetics Act (FDCA). Rather, the court characterized LDTs as “services,” distinguishing them from “tangible, physical products” and finding that only the latter is included in the definition of a “device.”
The court therefore agreed with the plaintiffs’ argument that FDA’s final rule should be vacated under the Administrative Procedure Act (APA) because the final rule exceeds FDA’s statutory authority. To reach this conclusion, the court relied on congressional intent, as well as the US Supreme Court’s decision in Loper Bright, the landmark decision overturning Chevron, emphasizing the court’s duty to apply rules of statutory construction and state what the law is (refer to our prior LawFlash on Loper Bright).
KEY CONSIDERATIONS FOR LDT STAKEHOLDERS GOING FORWARD
In the wake of the court’s ruling, clinical labs and other LDT stakeholders should be mindful of the following:
- The LDT definition appears largely unchanged, but some ambiguities remain: The court defines LDTs as “in-house diagnostic tests developed, validated, and performed by trained professionals within a single clinical laboratory,” which is generally consistent with historical FDA and CMS definition. The court’s opinion also makes clear that a test distributed from one site to another would be considered a regulated medical device, even if the test was produced by a clinical lab. However, some of FDA’s prior policies further restricting the scope of LDTs exempt from FDA oversight may be affected by the court’s ruling. For example, FDA had previously asserted that when labs offer LDT testing directly to consumers, such LDTs were subject to FDA oversight. The court’s ruling in the American Clinical Laboratory Association case, which emphasizes the difference between a tangible product and a service, raises challenges for this prior FDA position.
- Tests that do not meet the definition of an LDT remain subject to FDA oversight: The court’s decision also supports that tests outside the scope of the above definition remain within FDA’s purview. This will affect clinical labs and others that may have marketed or promoted a test as an LDT when the test does not fully meet the LDT definition (e.g., a test offered in more one than clinical laboratory). Notably, FDA’s 2024 final rule provided a grace period for such tests (i.e., tests “offered” as LDTs that did not fully meet the LDT criteria), allowing clinical laboratories to continue offering such tests with the four-year phase out of enforcement discretion. Now that FDA’s 2024 final rule has been vacated, it is unclear whether FDA will provide any grace period for labs offering such tests or require more immediate compliance with the medical device regulatory requirements. Clinical labs should take inventory of their LDT offerings to determine whether they fully meet the definition of an LDT. For those tests that do not meet the definition of an LDT but are offered as such, clinical labs should consider implementing mitigation measures should FDA resume oversight and enforcement for such tests.
- Testing kits are not LDTs: In American Clinical Laboratory Association, the court distinguished between a test kit—“a discrete set of tangible articles packaged as a product for commercial distribution,” which has long been regulated by FDA as medical devices—and an LDT. The court’s opinion also reaffirms that these test kits (which are sometimes marketed as “LDT kits”) remain regulated devices and thus must comply with FDA’s medical device regulatory requirements. The court made clear that this is true whether the kit is manufactured by a traditional device manufacturer or a clinical laboratory—“if a laboratory makes a test kit for commercial distribution, it is manufacturing a device” and subject to FDA regulation.
- Analyte specific reagents (ASRs) continue to be regulated by FDA: ASRs are the “active ingredients” that can be used in the development of an LDT. ASRs include antibodies, both polyclonal and monoclonal, specific receptor proteins, ligands, nucleic acid sequences, and similar reagents. Clinical laboratories that produce ASRs should be mindful of the applicable FDA regulatory requirements, including but not limited to registration/listing, Good Manufacturing Practices (GMP), and FDA authorization for certain higher risk ASRs. Clinical labs that source ASRs from manufacturers should consider appropriate contractual terms with their ASR suppliers to cover FDA compliance.
- Sample collection devices and kits remain FDA-regulated: Neither FDA’s 2024 final rule on LDTs nor the ruling in the American Clinical Laboratory Association case changes the FDA’s longstanding policy that sample collection devices—which may include, for example, swabs, vials, vacuum sample tubes, urine specimen containers, biopsy devices, and kits—are subject to FDA regulation as medical devices. To the extent clinical labs provide customers with sample collection devices as part of their testing services (whether such devices are made by the lab itself or sourced from a third party), they should ensure such sample collection devices are FDA compliant. When sourcing and distributing sample collection devices from a third party, clinical labs should consider appropriate contractual terms to cover FDA compliance. In addition, labs should consider what state laws may apply to the distribution of the sample collection devices, as several states regulate medical device distribution and dispensing activities.
- FDA has not yet publicly disclosed its next steps: Whether FDA will appeal this decision is currently unknown. It is possible that FDA may abandon seeking oversight through its rulemaking authority and instead focus its resources on lobbying Congress to pass the Verifying Accurate, Leading-edge IVCT Development (VALID) Act currently pending in US Congress. The VALID Act would create a new regulatory framework for IVDs, including LDTs, separate from the current regulatory scheme for other medical devices. While LDT developers do not currently need to implement measures to comply with FDA’s 2024 final rule, LDT developers should continue monitoring the regulatory environment.
- LDTs continue to be governed by CMS under CLIA oversight: LDTs will continue to be governed by CMS, which is responsible for CLIA oversight. CMS’s CLIA requirements emphasize lab quality and proficiency and require labs that develop and use LDTs to obtain a CLIA certification for high complexity testing. However, CLIA does not require agency preapproval to use individual tests. This preserves the flexibility many labs have relied on to develop and deploy tests rapidly, especially during public health emergencies such as the COVID-19 pandemic.
- LDTs also remain subject to state regulation: The court’s decision in American Clinical Laboratory Association does not impact state regulation and oversight for LDTs. Some states, such as New York, have their own laws governing labs and requiring approval of tests, including LDTs. Clinical labs remain subject to such state laws.
In summary, although the ruling in American Clinical Laboratory Association is a big win for the clinical laboratory industry, many legal and regulatory considerations remain for labs with LDT offerings.
HOW WE CAN HELP
Morgan Lewis guides and provides strategic counseling to clinical laboratories and other LDT stakeholders in navigating the complex intersection of FDA, CLIA, and state regulatory and legal requirements, including helping to evaluate whether their existing LDT and related product offerings are exempt from FDA oversight.
Our lawyers stand ready to assist clients in establishing processes and systems to meet FDA, CLIA, and state regulatory requirements, to the extent applicable, and drafting agreements with suppliers, customers, and other third parties to clarify each party’s regulatory roles and responsibilities.