Why is HHS blocking FDA from regulating some diagnostics, and how will this affect COVID-19 testing?

By Lisa Larrimore Ouellette, Nicholson Price, Rachel Sachs, and Jacob S. Sherkow

This week’s FDA news has been dominated by the tumultuous emergency authorization of convalescent plasma on Sunday, but let’s not forget last week’s news: On August 16, the Department of Health and Human Services (HHS) surprised public health experts by publishing a one-paragraph notice on its website rescinding FDA guidance related to laboratory developed tests (LDTs). The notice states that the FDA will not require premarket review of LDTs absent notice-and-comment rulemaking, including for COVID-19 tests. LDTs are tests “designed, manufactured and used within a single laboratory,” such as tests run by large academic medical centers, hospitals like the Mayo Clinic, and testing giants LabCorp and Quest Diagnostics. Former HHS national coordinator for health information technology Farzad Mostashari described this change as “bizarre” and like “[c]losing the barn door 6 months after the horse left the barn, and 3 months after she moved to a different barn!” What’s going on, and how will this change affect COVID-19 testing?

How were LDTs regulated before this announcement?

As we explained in April, LDTs have been regulated by multiple agencies under a messy patchwork of laws and regulations, and interagency coordination problems slowed the rollout of COVID-19 testing. When the FDA acquired the authority to regulate medical devices under the 1976 Medical Device Amendments, it promptly decided that it would exercise enforcement discretion—i.e., not enforce its typical regulatory requirements—for LDTs. It has maintained this posture ever since, though with some waffling: In 2014, the agency decided LDTs had gotten complex enough that it proposed regulating them more; after pushback and the change of administrations, the agency backed off in 2017.

Some oversight still occurred. Sometimes the FDA found ways to enforce its requirements against egregious examples; while 23andMe’s direct-to-consumer genetic testing service was an LDT in that all services happened at one lab, the FDA threatened to yank that test off the market based on a conclusion that the saliva collection tubes mailed to consumers were themselves medical devices. And under the 1988 Clinical Laboratory Improvement Amendments (CLIA), most laboratories conducting LDTs need a certificate of compliance or accreditation every two years from the Centers for Medicare and Medicaid Services (CMS). (Laboratories in New York and Washington state are exempt because these states maintain their own certification programs that are at least as stringent as CLIA’s requirements.) But the FDA typically took a hands-off approach. 

For COVID-19, after HHS declared that the public health emergency justified the use of emergency use authorizations (EUAs) on February 4, the FDA initially said that diagnostic LDTs needed an EUA. This created a Catch-22, as former FDA Commissioner Scott Gottlieb put it; rapid development of COVID-19 tests was needed in the emergency, but the emergency-based EUA requirement slowed them down. Shortages ensued. On February 29, the FDA changed its policy again (in this guidance, which has since been updated), allowing the use of RT-PCR LDTs to determine COVID-19 infection while developers awaited an EUA. Nevertheless, the agency retained the ability to revoke EUAs if a particular LDT turned out to be problematic. For antibody tests to identify past infection, the FDA took the opposite approach. Initially, it allowed anyone to offer tests without going through the agency, but on May 4 it began requiring EUAs—some of which have since been revoked. As the FDA’s website stated, there were important reasons for requiring LDTs to obtain EUAs during this crisis, as these tests have “serious implications … for analyses of disease progression and public health decision-making.”

How does the new notice change regulation of existing LDTs for COVID-19?

HHS’s notice strips (or, if you prefer, narrowly interprets) the FDA’s authority to regulate LDTs. The notice—thus far, only a “brief missive” on its website—states that the FDA “will not require premarket review of [LDTs] absent notice-and-comment rulemaking, as opposed to through guidance documents, compliance manuals, website statements, or other informal issuances.” Given that the FDA has not engaged in notice-and-comment rulemaking for LDTs, and assuming HHS’s statement has legal authority, the notice has the effect of essentially removing a large swath of LDTs from the FDA’s premarketing purview. 

This does not mean that LDT developers are free as the wind; as noted in HHS’s statement, LDT providers must still comply with CLIA, which includes requirements that laboratories set individual benchmarks for the analytic validity of their tests, known in CLIA parlance as “performance specifications.” But CLIA only addresses tests’ analytic validity—essentially, whether tests work as intended—not tests’ clinical validity—“the accuracy with which the test identifies, measures, or predicts the presence or absence of a clinical condition.” In the context of COVID-19, this means that every two years, CLIA will continue to ensure that laboratories are faithfully running their protocols—using the correct reagents, employing qualifying technicians, and so—but will do nothing to guarantee that the specific protocols employed by the laboratory are accurately diagnosing COVID-19.

The notice suggests that developers may voluntarily submit LDT premarketing materials to FDA: “[t]hose seeking approval or clearance of, or an emergency use authorization (‘EUA’) for an LDT may nonetheless voluntarily submit a premarket approval application, premarket notification or an EUA request, respectively, but are not required to do so, and FDA will adjudicate those submissions.” LDT marketers might engage in voluntary submissions to be eligible for PREP Act coverage (immunizing laboratories from liability related to distributing tests in a pandemic), or to help with reimbursement. The FDA might also retain some control on the back end: a recent Washington Post article noted that “the FDA will [continue] have the authority to take a bad test off the market.” But nothing in the notice, or the process it complicates, makes clear how the FDA, legally and mechanically, could do so.

Moving forward, this puts a number of tests in legal limbo. LDTs which have already received EUAs—35 thus far—seem to be unaffected by the announcement for now, although whether the FDA retains jurisdiction to “adjudicate those submissions,” per HHS’s notice, is unclear. The status of other tests—including those with EUA revocations or entirely new tests—is also uncertain. Because an EUA is presumably no longer needed to operate, HHS’s announcement allows entry into the market that, in other circumstances, would have previously been denied. This may similarly be applicable to the almost 200 laboratories, without authorization, that previously reported to the FDA that they validated their own COVID-19 test.

More broadly, HHS’s announcement presents a puzzle as to whether the legal distinction between LDTs and in vitro diagnostics (IVDs) is a salient one. By statute and regulation—that is, independent of HHS’s recent statement—the FDA retains the authority to regulate IVDs, “reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions.” This text plainly includes LDTs. FDA’s enforcement over LDTs, however, has long been controversial, haphazard, and even constitutionally challenged—perhaps serving as one explanation for HHS’s announcement. Nonetheless, it remains to be seen whether the FDA nonetheless retains authority to oversee LDTs under its broader power to regulate IVDs. 

Why is this happening?

We don’t know for sure. But it’s important to at least talk about why it’s happening, because different motivations behind the action may have different implications going forward. 

One possibility is stated clearly at the beginning of the rescission notice: HHS is seeking to minimize “duplicative regulations and unnecessary policies” that are, in its view, impairing the fight against COVID-19. However, on this theory, the agency has not explained why rescinding existing LDT EUA regulation is helpful in fighting COVID-19. This explanation would be important, as it is also very possible that a lack of regulation might itself hamper the fight against COVID-19. The FDA has already seen this play out in the context of EUAs for COVID-19 antibody tests, where as we have explained, the agency’s initial decision not to require EUAs for those products resulted in a flood of inaccurate tests on the market, potentially jeopardizing public health.

A second possibility comes from news reporting on HHS’s decision. Anonymous administration officials told the Washington Post that the change “was made for legal reasons” because “FDA lacks the authority to regulate [LDTs].” Yet these arguments have been around for many years, predating the Trump Administration, and it is not clear why the administration would seek to implement such a view only now, in the middle of a pandemic. Further, if HHS’s view is that the FDA lacks the legal authority to regulate LDTs, it is not clear how these officials can also take the position that “the FDA will [continue] have the authority to take a bad test off the market.” If the FDA has no authority over LDTs, how could they take a bad test off the market? Further, the FDA would not even know that the bad test existed, as its manufacturer would no longer be required to notify the agency it was providing the test.

The lack of public explanation from HHS and the public silence from FDA Commissioner Stephen Hahn have raised a third possible explanation for several commentators: political issues. Professor Art Caplan argued that “HHS didn't have to pick this fight, and they're basically threatening FDA's science and independence.” The FDA’s independence is core to its ability to maintain the public trust, and will be needed if the agency and administration is to convince people that any vaccine eventually approved for COVID-19 is safe and effective. 

What effect will this change have on COVID-19 testing and policy going forward?

The rescission notice is likely to have at least two different impacts on COVID-19 testing going forward. First, it will very likely lead to new tests coming to market which would otherwise have been deterred by the EUA requirement, creating potential public health harms. As a former HHS senior official told POLITICO, the regulatory standard was already a “flexible and low bar” and the “tests likely to come to market under this policy are many of the ones that aren’t reliable and couldn’t get” EUAs at present. Dr. Gottlieb sounded a similar note of caution on Twitter, but the most succinct version of this argument came from Dr. Mostashari: “Regulatory oversight sucks, lack of regulatory oversight sucks more.” And if the FDA lacks the legal authority to regulate these products, it’s not clear how the agency could remove a bad test from the market.

Most challengingly, as noted above, the FDA will be deprived of the information it would need to even know that those bad tests were being marketed. Going forward, it does not seem that companies running LDTs without any FDA authorization need to inform the agency of anything at all. This is especially problematic not just to police the safety of laboratory tests but also because, in the words of Professor Rebecca Eisenberg, the FDA is in the business of “develop[ing] credible information about the effects” of drugs and devices. Without the reporting requirements that come with mandatory EUAs, the public—and other developers—will be left in the dark as to which tests work best and which, not at all. Although the rescission notice left open the possibility that the FDA could act through notice-and-comment rulemaking to exert jurisdiction over LDTs, it is not clear how the agency could do so if HHS believes that the FDA has no statutory authority in this area. Further, it is doubtful that the FDA could do so in the short term, to manage COVID-19-related LDTs. In general, notice-and-comment rulemaking is lengthy, expensive, and burdensome to agencies—tasks which an already-pressured agency could not easily add to its agenda. 

But second (and opposingly), the notice may make it easier for some labs to bring tests to market that otherwise would not have, or may make it easier to scale existing authorized tests (such as Yale’s new saliva test) to labs that have not themselves gone through the FDA’s process. At least some scientists have praised it along these lines. Professor Fyodor Urnov, at UC Berkeley, said the announcement had “simplifie[d] things moving forward and resolve[d] a substantial source of uncertainty that has lingered in the field for some time.” Some experts also note that the rescission notice relies on CLIA as a backstop, which may ensure a certain level of quality from the resulting tests.

Unfortunately, because the effect of the notice is to make it much more difficult for the FDA to observe these tests at all, it will be almost impossible to determine whether the balance of impacts is a good one. Further, the unexpected and unexplained way this change was implemented is particularly worrisome. In the middle of a pandemic, upsetting the expectations of firms that are attempting to address the crisis is not the basis of sound policymaking.

This post is part of a series on COVID-19 innovation law and policy. Author order is rotated with each post.