On Monday, March 31, a federal district court vacated FDA’s final rule to regulate laboratory developed test services (“LDTs”) as medical devices. The court concluded that FDA’s final rule exceeded the agency’s authority under the Food, Drug & Cosmetic Act (“FDCA”) because LDTs are not devices. American Clinical Laboratory Association v. FDA, No. 4:24-CV-479-SDJ (E.D. Tex. March 31, 2025). While this decision may answer the longstanding question about whether LDTs are medical devices, it raises new issues for laboratories, device manufacturers, and other stakeholders.
Covington has been deeply involved in the legal issues surrounding FDA regulation of LDTs for decades and represented one of the parties in this litigation.
Background
LDTs are diagnostic testing services developed and offered by clinical laboratories certified under the Clinical Laboratory Improvement Amendments (“CLIA”) to perform high-complexity testing. LDTs are distinct from in vitro diagnostics (“IVDs”), which are test kits that are manufactured and distributed to clinical laboratories as devices. While FDA has long asserted that it has authority to regulate LDTs as medical devices, it had never broadly exercised that authority. Instead, the agency maintained that it was exercising “enforcement discretion” – that is, not enforcing the requirements of the FDCA – with respect to most types of LDTs.
On May 6, 2024, however, FDA finalized a rule to end this policy of enforcement discretion and to begin to regulate virtually all LDTs as medical devices under the FDCA. Specifically, the final rule amended the regulatory definition of “in vitro diagnostic product” to include the words “when the manufacturer of these products is a laboratory.” While the changes to FDA’s regulation may appear to be modest, the accompanying preamble to the final rule made clear that FDA intended this as a far-reaching policy change that would impact virtually all LDTs. The preamble described a staged process by which FDA’s enforcement discretion for LDTs would be phased out, and device requirements would be phased in. The preamble also included carve-outs for some device requirements for specific types of LDTs.
After FDA finalized the rule, several plaintiffs challenged the validity of the final rule in the Eastern District of Texas. The plaintiffs argued that the rule must be vacated under the Administrative Procedure Act (“APA”) because it exceeds FDA’s statutory authority under the FDCA. Among other arguments, the plaintiffs asserted that the plain language of the definition of “device” in the FDCA was limited to tangible articles that traveled in commerce, whereas LDTs are professional services provided by health care professionals in a certified or accredited laboratory. In addition, the legislative history of the FDCA and CLIA and the broader statutory scheme clearly indicate that Congress assigned responsibility for regulating laboratory testing services to the Centers for Medicare and Medicaid Services (“CMS”), not FDA.
The case was assigned to Judge Sean D. Jordan and fully briefed in 2024. Judge Jordan held a lengthy (3+ hours) hearing on February 19th.
The Decision
In his decision, Judge Jordan agreed with the plaintiffs that the LDT final rule exceeded FDA’s authority under the FDCA. The opinion holds that FDA’s device authorities are limited to “tangible, physical products” but that LDT services are “professional medical services that are qualitatively and categorically distinct.” The opinion states—in no uncertain terms—that LDT services are not medical “devices” under the FDCA. Moreover, use of devices as part of an LDT service “does not transform this medical service into” a device (emphasis original). FDA’s contrary view, the court states, “implicates limitless FDA oversight of all surgical procedures and physical examinations that use ‘devices.’” Judge Jordan also pointed to Congress’ consideration and decision to not enact certain legislation in the past, such as the VALID Act. Given that the VALID Act would have expressly provided FDA with jurisdiction over LDTs, the court found this to be further evidence that FDA lacks authority over LDTs.
Having concluded that the rule exceeds FDA’s authority and is unlawful, the district court vacated the rule and remanded it to FDA for further consideration.
Key Issues
The immediate question following the district court’s ruling is whether FDA will appeal to the Firth Circuit Court of Appeals. Such an appeal may be unlikely, however, because the Trump Administration has been heavily focused on a deregulatory platform. In addition, the opinion raises several interesting legal, regulatory, and practical issues for stakeholders, including:
- How do laboratories think about existing PMA approvals, 510(k) clearances, and de novo authorizations for LDTs?
- How can laboratories ensure that FDA will review future submissions for clearance or approval of a diagnostic test, should they choose to submit to FDA?
- What is the impact for drugs and biologics with labeling that references the use of an FDA-approved companion diagnostic that is an LDT?
- Could FDA shift its enforcement priorities to focus on “tangible, physical products” and other inputs used to support LDTs, such as (i) “research use only” (“RUO”) products; (ii) specimen collection kits; or (iii) software?
- What are the implications for diagnostic “software as a service”?
Next Steps
Although this decision is a significant development in the long saga of FDA attempting to regulate LDTs—and a resounding victory for the laboratories—it is unlikely to be the last chapter. The current Administration has 60 days to decide if it will appeal this decision. Although the first stage of compliance with FDA’s final rule would have gone into effect before the full 60 days passes, FDA does not need to decide whether to appeal the ruling in advance of that compliance date. This is because, with the rule vacated, the compliance dates are no longer in effect. Nonetheless, in the interest of providing clarity to the laboratory industry, FDA may decide—and announce—its decision with regard to an appeal before the full 60 days passes.
If FDA does not appeal this decision, the agency will need to withdraw or revise certain guidance documents. It also likely will need to issue statements clarifying key issues, including at least some of those raised above.
In addition, it is possible that this decision will reinvigorate discussions about appropriate legislative frameworks for diagnostics, both for LDTs and IVDs.
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Covington will be hosting a webinar to discuss the impacts of this decision and what comes next for diagnostics regulation. Details will be announced soon.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Medical Devices and Diagnostics practice.
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