144: Court Halts FDA Rule on Lab-Developed Tests: What It Means for Pathology

Will FDA rules disrupt the way we diagnose diseases? 

In this episode, I break down a seismic shift in lab medicine: a federal court has vacated the FDA’s controversial rule classifying lab-developed tests (LDTs) as medical devices. This change carries serious implications for innovation, digital pathology, AI-based diagnostics, and small labs across the U.S.

🎧 What You’ll Hear:

• What LDTs are and why they matter for rare diseases and personalized medicine
  
  
  
• Why the FDA rule sparked backlash from the pathology community
  
  
  
• What the court’s decision means for AI algorithms in digital pathology
  
  
  
• What’s next: Will Congress revive the VALID Act?
  
  
  
• How this affects labs, startups, and the future of diagnostic innovation
  
  
  

This podcast is packed with updates every pathology professional should know. 🔍

Transcript

Court Halts FDA Rule on Lab-Developed Tests_ What It Means for Pathology

Introduction and Viral Post

Aleks: [00:00:00] I came back from uscap, the United States and Canadian Academy of Pathologists Annual Conference, and then I saw this post by College of American Pathologists go viral on LinkedIn. At the time of this recording, it has 1,299 reaction, 41 comments, and 290 reposts, which in the pathology space is like really viral breaking news.

“LDT UPDATE FEDERAL COURT DECISION. COURT THROWS OUT LDT RULE.” 

To give you a little bit more context why the pathology community is so excited about this decision.

FDA's LDT Rule and Its Implications

Aleks: In May, 2024, the FDA dropped a bombshell.  A final rule that LDTs are medical devices under the Federal Food and Drug and Cosmetic Act. This meant labs with FDA approval or clearance for thousands of tests, a process costing a lot of money.

[00:01:00] The FDA. Said it was about patient safety, citing cases of faulty tests.

Understanding LDTs

Aleks: So what are LDTs lab lab-developed tests and why do they matter? So LDTs or lab-developed tests are diagnostic tests that are designed and validated to be used in one single lab. So think of them as custom tools for diagnosing diseases, rare diseases, and cancer.

Guiding cancer treatments or monitoring patient responses. And they're not commercial kits. They're tailored by pathologists, lab professionals or vendors to meet specific patient needs. And they are confined to this one laboratory and they are super important in precision medicine. For example, a lab can develop a test to.

Detect a mutation, validate a new biomarker, or for example, use a device and that is not a medical device, [00:02:00] like a scanner within a certain lab. So that would be relevant for digital pathology that you could use. Digital pathology, you could create scans, use a scanner within a CLIA lab as an LDT.

Impact of FDA's Rule on Labs

Aleks: This meant that lab develop tests would need FDA clearance or approval to be used.

And that would mean like thousands of tests not being available because they would have to go through the approval or clearance process. And that would also mean very high costs. And the FDA said. This is about patient safety. They cited cases of faulty tests, but this of course. Met serious criticism and the critics, including CAP College of American Pathologists, said, this is gonna crush innovation, limit access to tests, especially for rare diseases and underserved populations.

And obviously it's gonna be super costly. How costly the FDA's estimates where. Listen to this, [00:03:00] $79 billion in compliance costs over 20 years. So that would affect us for the next two decades. And obviously, for small labs, small companies, that would just mean that they wouldn't exist anymore.

Legal Battle Against FDA's Rule

Aleks: So a lawsuit happened.

Labs and medical groups swiftly sued, leading to. American Clinical Laboratory Association versus FDA, and two main arguments emerged. First, statutory authority. Plaintiffs argued that FDA never had the authority to actually regulate LDTs, the FDCA. Defines devices as actually tangible products and not lab services.

And lab services were granted that CMS oversight via CLIA by the Congress instead of being regulated by the FDA. This was a law specifically for lab quality. And then [00:04:00] the other argument was that it was arbitrary and capricious. I love this capricious. FDA was capricious. CAP's Amicus Brief highlighted the FDA's failure to justify the rules costs or explain how its non-binding enforcement discretion policies would prevent test shortages.

The FDA countered that LDTs have evolved in into complex tests requiring its oversight, but the court wasn't convinced the court made the decision.

Court's Decision and Its Impact

Aleks: On Monday, March 31st and the Eastern District of Texas delivered at sweeping win for labs, Judge Jordan ruled the FDA overstepped its authority because LDTs are services not devices.

So the FDCA’s texts mention words like machine and contraband. These refer to physical products, and LDTs are professional services that are already regulated under CLIA [00:05:00], and Congress drew the line already in 1988 with CLIA 1988 amendments. They created a separate framework for labs, and if Congress wanted FDA involved, it would've said so.

Also, the enforcement discretion isn't a fix, and the court called the FDA's reliance on non-binding policies a house of cards that failed to address the rules, catastrophic costs, and the ruling vacated the final rule, halting the FDA's oversight. Immediately. So it wasn't in effect even for a year. It was less than a year ago in May last year.

This whole debacle started, so to say. And what's the impact of the current state for pathology and specifically digital pathology? For most. Pathologists, it's a relief. Labs can continue to develop LDTs without FDA hurdles, and those LDTs are critical for rare [00:06:00] diseases. For small volume tests that aren't profitable for commercial kits, they make it possible to innovate rapidly.

Tailoring tests for new therapies are emerging pathogens faster. We still remember COVID and for digital pathology, the main area affected are the AI based LDTs, so all the algorithms image based, image analysis based algorithm for cancer detection for, pathology support they can keep being used as LDTs and we know that the path or the goal is to have the algorithms that we want to scale that are good enough and can have really massive impact to have them as medical devices, as software, as a medical device.

But there are many that are not there yet, or are in the initial stage of development or more data is needed, but they can already help patients and help pathologists [00:07:00]  as a lab-developed test.

Future of LDT Regulations

Aleks: Obviously the fight isn't over the FDA may appeal and Congress could revive the valid act.  And this is a bill to create a risk-based framework for LDTs.

So high, medium, and low risk LDTs. And CAP actually supports this approach, but all opposes. FDA overreach. So to recap, LDT stays under CLIA for now. Labs can breathe a little easier, but they need to stay vigilant. As long as I have been in the digital pathology space, which is around a decade right now, this has been like hanging.

Somewhere, there that FDA is gonna rule the lab, develop test. And finally they said, oh yes, we're gonna do it. And now it happened. Who knows what's gonna happen? Later, but for now, and this is not the case, they're not regulating LDTs.  [00:08:00] For me, this is a win for digital pathology and AI driven LDTs, image-based biomarkers that are being developed as LDTs can continue being used as such with a parallel path.

To some of them, or some vendors, some developers, and going the software as a medical device path. So we can have both. If Congress holds the pen, the valid act could still reshape LDT regulations, and as CAP brief warrants, the FDA's rule would've forced labs to abandon tests. Delay, diagnosis, and high costs.

And as they say, this decision preserves pathologists ' role as medical professionals, innovators and not just service providers or manufacturers.

Conclusion and Call to Action

Aleks: As I told you at the beginning, I have not seen a pathology-related post go so viral. So I needed to do this podcast. [00:09:00] If you wanna learn more and actually read in depth the documents I based this podcast on, then go ahead to the CAP website.

Everything is cited there. I'm gonna put it in the show notes as well. If you know somebody who would benefit from listening to this, please share it with them. Copy the link and share it. Or repost it. I will very much appreciate it, and I will talk to you in the next episode.