FDA Warning Letter Marks Significant Shift in Enforcement of Laboratory Developed Tests

From the West Coast Healthcare Desk

The U.S. Food and Drug Administration's (FDA) March 21, 2024, warning letter to Agena Bioscience Inc. (Agena), a genetic diagnostic test developer, generated a lot of immediate commentary among regulatory lawyers and professionals. However, the warning letter is considered a component of an important shift in FDA and U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) enforcement priorities for laboratory developed tests (LDTs) and the use of research use only (RUO) designations for products that are intended for diagnosing, curing, mitigating, treating or preventing diseases or other conditions.

The letter called for Agena to "immediately cease any activities that result in the misbranding or adulteration of [its] devices." The letter was issued just weeks before the agency announced a final rule on April 29, 2024, aimed at ensuring the safety and effectiveness of LDTs. This uptick in regulatory changes with respect to LDTs suggests growing enforcement activity from the FDA. This Holland & Knight alert summarizes the warning letter, explains the new final rule and highlights key takeaways from these developments.

Digital health manufacturers should pay particular attention to this shift in enforcement priorities, as many novel technologies such as digital assays, artificial intelligence (AI) or machine learning-assisted research platforms may not be able to use LDT or RUO pathways to market for products that do not meet the traditional in vitro device (IVD) standard.

Agena Bioscience Warning Letter: Mistaken Classification Does Not Mitigate Downstream Consequences

In its warning letter, the FDA stated that Agena was marketing the "iPLEX HS Colon Panel" without the required premarket approval or proper clearance. The agency determined that the panel, intended for clinical diagnostic use, was mislabeled as RUO. The panel was marketed as RUO, which means it should be used only in research settings and not for clinical diagnostic purposes. However, the FDA found that the device was being used in clinical environments, which requires premarket approval or clearance. This mislabeling bypasses regulatory scrutiny and could lead to inaccurate results, posing significant health risks to patients if not corrected.

Additionally, the letter stated that Agena failed to report device corrections, which could lead to false negative results. Agena made a correction to the iPLEX HS Colon Panel that was necessary to address a problem that could lead to false negative results in clinical testing. By not reporting this correction to the FDA, Agena violated regulatory requirements that help ensure the safety and effectiveness of medical devices.

Manufacturers of medical devices are fully responsible for ensuring their devices comply with the law before placing them into interstate commerce. Mistake is not a defense and will not mitigate the legal and regulatory consequences of an error in classification.

FDA Review of the Totality of the Information Available Demonstrated the Product's Intended Use Required Premarket Approval (PMA)

The FDA regulates medical devices based upon the risk posed to the patient. Here, the facts indicate that the manufacturer intended to use the product as a clinical diagnostic tool that should have been properly submitted for PMA under 515(a) of the Federal Food, Drug, and Cosmetic Act (FDCA).

Importantly, the FDA noted that the totality of the information reviewed by the agency demonstrated that Agena intended to use the product as a medical device requiring clearance or premarket authorization. The manufacturer's statements on its website, in customer communications and user guides, and during inspection were all used by the FDA to determine that the manufacturer's objective intent was to use the iPLEX HS Colon Panel for clinical diagnostic use – essentially, as a regulated medical device – without following the appropriate regulatory pathway. As a result, this product was not eligible to be sold as an RUO or LDT product, and it was deemed both adulterated and misbranded.

The FDA regulates medical devices based upon the risk posed to patients. Here, the facts indicate that the manufacturer intended to use the product as a clinical diagnostic tool. Therefore, without a PMA, the manufacturer cannot conclusively establish whether the test works for its intended use, which is to diagnose patients with certain variants of colon cancer.

FDA's New Final Rule for LDTs

The Agena warning letter came just weeks before the FDA announced its new final rule related to LDTs. (For analysis on the final rule, see Holland & Knight's previous alert, "FDA Announces Final Regulation Governing Laboratory Developed Tests," May 1, 2024.) LDTs are diagnostics created and used within a single lab. The agency stated that it is concerned that the lack of consistent oversight has led to variability in test quality, potentially putting patients at risk. The agency's goal is to implement regulatory changes that would require premarket review and compliance with quality standards for LDTs. These changes aim to protect public health while still fostering innovation in the diagnostic testing industry.

Effective July 5, 2024, the FDA updated the definition of IVDs to include LDTs: "In vitro diagnostic products are those reagents, instruments and systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of health, in order to cure, mitigate, treat, or prevent disease or its sequelae. Such products are intended for use in the collection, preparation and examination of specimens taken from the human body. These products are devices as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (the act), and may also be biological products subject to section 351 of the Public Health Service Act, including when the manufacturer of these products is a laboratory" (emphasis added).  21 C.F.R. § 809.3.

This change demonstrates the agency's commitment to increasing regulation of LDTs and ensuring that all manufacturers understand that LDTs are regulated IVDs.

Special Caution for Digital Health Manufacturers

Companies using AI or machine learning platforms to develop faster or more accurate testing of disease should be careful not to assume that nascent technologies are exempt from the IVD regulation.¹ An LDT must be developed in a laboratory for that laboratory's exclusive use. 

Digital assays, AI-enabled pattern recognition algorithms and similar tools designed to assist healthcare providers in the detection, diagnosis or treatment of a medical condition are very unlikely to be appropriate candidates for RUO or LDT pathways if those products are sold to third parties. Instead, manufacturers of these products will need to carefully consider Investigational Device Exemption (IDE), product registration, clearance or PMA as part of their regulatory strategy.

Impact of Loper Bright

The U.S. Supreme Court's landmark decision in Loper Bright Enterprises v. Raimondo, 603 U.S. ___ (2024), which held that courts "must exercise their independent judgment" and may not defer to an agency's interpretation of an ambiguous statute, has created uncertainty about FDA's statutory authority to regulate LDTs and RUO products. The regulatory enforcement environment is expected to remain fluid as lower courts apply Loper Bright in new cases.

Manufacturers, particularly digital health manufacturers, might find Loper Bright helpful in challenging FDA's authority to regulate LDTs as IVDs. However, many of the relevant sections of FDCA (and related laws) are clear and unambiguous. Loper Bright may provide manufacturers new opportunities to challenge adverse administrative decisions or additional defenses to a charge of misbranding or adulteration. It is unlikely that the decision would permit manufacturers to disregard FDA rulemaking or guidance on LDT or RUO products that have not been demonstrated as safe and effective or substantially equivalent to a device that has been proven to provide accurate results.

OIG Workplan Update

Notably, shortly after publication of the warning letter and rulemaking, the HHS OIG updated its 2024 Workplan to include an analysis of the top 25 laboratory tests by expenditure for 2023. Though this Work Plan item relates to a congressional mandate that requires the Centers for Medicare & Medicaid Services (CMS) to establish payment rates under Title XVIII of the Social Security Act, the federal government can use the information to determine whether those lab tests have been appropriately cleared or approved as IVDs. This update further demonstrates a concerted effort by regulators to standardize laboratory practices and reduce the risk of error, fraud and abuse – especially for tests that are reimbursed by federal programs.

Key Takeaways

Considering the likelihood of increased enforcement in this area, LDT developers and others in the space that label products RUO should consider these five takeaways:

1. Do Not Label Products Designed for Sale as RUO. It is a common practice for startup companies to manufacture and distribute RUO products to third parties because RUO products do not require the same level of validation as other assays or diagnostics. However, legal, regulatory and quality professionals should carefully review any development plan involving RUOs – especially if those tests will be subject to reimbursement by a federal payer. The FDA has indicated that there will be increased enforcement against manufacturers who use the LDT and RUO designation to shortcut or avoid the medical device clearance and approval processes. Though the Agena devices in question were LDTs, the letter indicates that the FDA, as well as HHS OIG, is broadly concerned about manufacturers using the RUO designation for products that are in fact being sold to labs and healthcare providers.
2. Qualified Clinical Laboratory Improvement Amendments (CLIA) Labs Can Develop LDTs, but LDTs Must Conform to FDA Regulations and the Manufacturer's Quality Management System. An LDT is a diagnostic that is designed, validated and performed at a single laboratory site. It cannot be sold, transferred or licensed outside the lab that developed the test. Considering the new final rule, it is clear that LDTs must adhere to regulatory specifications and can only be used by the lab that developed the test.
3. Companion Diagnostics or Other FDA-approved Commercial Tests Become LDTs if Modified in Any Way by the Laboratory. If the test is subsequently modified by the manufacturer before sale, then the FDA would likely deem the product adulterated or misbranded.
4. Focus on Risk to the Patient. When considering product classification, focus on the risk to the patient, not on manipulating the product into a less-stringent classification. A product designated "for RUO" is a product to be used in scientific research. An RUO is not a product that has been demonstrated to diagnose, prevent or treat a disease. Therefore, using a product that has not been demonstrated effective in randomized controlled trials (or shown to be substantially equivalent to a legally marketed device) risks delivering incorrect results, which can lead to delayed or inappropriate patient interventions. The risk of enforcement is greater if a nascent technology (such as a digital assay) is used instead of cleared or approved devices already on the market.
5. Sophisticated Legal Counsel Should Always Be Present Whenever the FDA Conducts an Inspection of a Manufacturing Site. It is unclear whether Agena was represented by counsel during the FDA's inspection and investigation. Based on the description of events in the warning letter, a director of regulatory and quality appeared to answer the inspector's questions that involved making legal determinations such as the intended use of the tests at issue. Failure to provide satisfactory responses to questions that involve a company's legal and regulatory justifications for following a less-stringent pathway for an LDT could also result in penalties against that individual personally. This is particularly true for LDTs testing for serious diseases such as colorectal cancer, as a false negative could lead to a missed diagnosis for a disease where early detection is crucial for the patient's survival. It is important that manufacturers seek sophisticated legal counsel who understands these regulatory changes and can advocate for them during and after inspections.

Holland & Knight continues to monitor this and other related issues. 

Notes

¹ "General wellness" products that do not diagnose, treat or mitigate a medical condition (for instance, a direct-to-consumer (DTC) DNA test that predicts athletic ability) or ancestry DNA test would not be subject to this rule. However, DTC DNA tests that suggest an individual might be at risk of developing a particular disease do require clearance.