FDA decision to stop quick review of lab developed tests raises payment concerns for labs
The Food and Drug Administration‘s announcement last week that it will no longer review COVID Emergency Use Authorization submissions for laboratory-developed tests has created new uncertainty for laboratories amidst an already tumultuous environment.
The agency’s decision raises questions around reimbursement and liability protections for those tests moving forward. It could also impact the ability of new lab developed tests to compete in the market. That’s because an EUA, which the new LDTs won’t have, are seen by many clinicians and payors as a mark of quality.
Timothy Stenzel, director of the Office of In Vitro Diagnostics and Radiological Health at FDA’s Center for Devices and Radiological Health, announced the policy change during a virtual town hall session on Oct. 7. He said that the decision to stop review LDTs for EUA was informed by the shift in the agency’s priorities toward reviewing EUA requests for tests like point-of-care and home-based assays that could allow for higher-throughput and more widely distributed COVID testing. Additionally, Stenzel said that HHS’ recent determination that FDA cannot not require premarket review of laboratory-developed tests without notice and comment rulemaking influenced the agency’s decision to stop review LDTs for EUA.
During a webinar hosted last week by 360Dx, Elizabeth Hillebrenner, associate director for scientific and regulatory programs at FDA’s CDRH, expanded on Stenzel’s comments.
“The HHS statement indicates that FDA authority can only be exercised for these tests following a lengthy notice and comment rulemaking process, which is not feasible to address the current public health need,” she said. She added that this notice and comment rulemaking requirement meant the agency “may not be able to remove a poorly performing LDT from the market or take other necessary steps to assure that these tests for COVID-19 are accurate, safe, and reliable. So we need to focus our efforts where we can do that.”
Like Stenzel, Hillebrenner suggested that the agency’s priorities were shifting to focus more on tests that could substantially boost the nation’s testing capacity.
“We’re in a different phase of the pandemic now where we have many authorized tests,” she said, noting that FDA has given EUA to more than 275 COVID tests at this point. “We are instead focusing our resources on the tests that increase access, those that have home collection or that can be done at the point or care or [are] for home use… or tests that significantly increase capacity, those that are high-throughput and distributed or reduce reliance on test supplies.”
This position perhaps makes sense in light of the HHS decision and FDA’s limited capacity to review EUA submissions, but it presents a number of questions for labs looking to develop COVID lab developed tests going forward.
The American Clinical Laboratory Association was generally supportive of the HHS move but was critical of FDA’s decision to stop reviewing SAR-CoV-2 LDTS.
“Many of the tests that have been granted EUAs for COVID-19 testing are innovative, high-throughput LDTs that have reduced reliance on supplies and been integral to expanding testing capacity,” ACLA President Julie Khani said in a statement last week. “These are exactly the kinds of tests that FDA has stated it wants to prioritize. ACLA believes the FDA should continue to allow labs to voluntarily submit EUAs for FDA review and authorization. Today’s announcement by the FDA creates unnecessary confusion.”
One area of confusion is how, or if, labs will be able to obtain liability protection for their tests. Typically, the Public Readiness and Emergency Preparedness (PREP) Act gives test providers immunity from liability claims stemming from the use of tests (or other disease countermeasures) during a public health emergency. However, the PREP Act provides this protection only for tests that have received EUA.
This means new SARS-CoV-2 LDTs won’t have any statutory liability protection, said Jeff Gibbs, a director at the law firm Hyman, Phelps & McNamara, who formerly served as FDA’s associate general counsel for enforcement. He said that while labs don’t generally consider liability to be a major concern impacting their decisions whether or not to offer LDTs, the SARS-CoV-2 situation could prove different.
“Labs are developing these tests much faster than perhaps they would, otherwise, and they are being used in different kinds of ways, and you can imagine scenarios where the risks are quite different from what they are accustomed to,” Gibbs said. “Normally, LDTs are developed and commercialized over a longer time frame, so there could be risk factors here that you would not normally have.”
This matches observations from others in the field. For instance, in May, Gregory Tsongalis, a professor of pathology and laboratory medicine, and director of clinical genomics and advanced technology at Dartmouth College’s Geisel School of Medicine, said when recounting his lab’s efforts to develop a SARS-CoV-2 LDT that he had been concerned that FDA’s EUA standards had been too lax and noted that they were considerably less rigorous than the standards his lab typically used for validating LDTs.
Gibbs said that it is unclear “what is going to happen in the product liability world once the crisis calms down.”
“Lawyers are always looking for ways to sue,” he said, noting that the first wave of COVID-19-related lawsuits has largely focused on employers with, for instance, workers claiming that businesses have not complied with workplace protection regulations.
Gibbs said it was hard to say if there would be a later wave of lawsuits around erroneous test results, but he suggested it could be a cause for concern for labs.
Reimbursement could also be an issue. Under the Family First Coronavirus Act (FFCRA), most commercial payors must cover medically necessary SARS-CoV-2 testing without cost sharing, prior authorization or other medical management requirements, and requires payors to cover testing by out-of-network labs.
These requirements only cover tests with EUA, however, which raises the question of whether labs developing new SARS-CoV-2 LDTs will struggle to get reimbursed for their tests since they will not be able to get EUA.
“It’s a serious question,” said Robert Boorstein, medical director at Brooklyn-based Lenco Diagnostic Laboratories.
He added that beyond potential reimbursement struggles, new tests would likely face difficulties getting clinicians to use them without EUA.
“A lot of people look for FDA approval as a mark of quality,” he said. “And if you eliminate the FDA from that, then you are dependent on the LDT process, which some of the stakeholders may not really respect.”
Boorstein said that a number of his lab’s clients had only wanted to use assays with EUA for testing.
He noted that many reference labs have diversified SARS-CoV-2 offerings that would allow them to shuffle between EUA and non-EUA tests as customers demand. However, he said that the FDA decision could present a challenge to labs that have not traditionally done infectious disease testing but are now developing SARS-CoV-2 testing to support their businesses during the pandemic.
For instance, Myriad Genetics, which has been hit hard by the pandemic, said earlier this year that it was developing a SARS-CoV-2 molecular test for which it planned to seek EUA. It is unclear, however, whether the company managed to received authorization prior to the FDA’s announcement last week. A Myriad spokesperson declined to comment.
Gibbs agreed that the unavailability of the EUA pathway will make it more difficult for companies developing new LDTs to compete with those tests with EUAs. He added that the FDA move could also impact the ability of labs to make modifications to existing LDTs.
“Different companies are at different stages,” he said. “Companies that have LDTs that were under review by FDA, they are committed to this process. They may [now] be at a competitive disadvantage, but I imagine that many of those companies will go ahead and offer the test having developed it and made it ready to be commercialized.”
“Other companies that are just beginning the process may look at this, see how many LDTs are already out there, look at how many there are with EUAs, and say, can we really compete.” he said.
Boorstein said that while, in theory, other bodies could step into the gap left by FDA to provide a mark of test quality, these organizations lack the bandwidth to serve this role. For instance, he noted that New York State’s stringent clinical testing requirements could provide customers confidence that tests having gone through this approval process are up to standard.
“But if everyone decides to go through New York, that is just going to bury New York and slow the process down,” he said.
Boorstein said he believed that accreditation agencies like the College of American Pathologists that are responsible for ensuring that laboratories meet the CLIA standards required for facilities to offer LDTs also lack the capacity to provide timely oversight of SARS-CoV-2 LDTs.
CMS is in charge of enforcing CLIA regulations, and last week the agency announced that it had issued 171 cease-and-desist letters to laboratories that were offering SARS-CoV-2 LDTs without having proper CLIA certifications in place. In a statement, CMS said the letters “ordered these laboratories to stop immediately to safeguard the integrity of COVID-19 testing, and protect patients from potential endangerment if provided inaccurate or unreliable test results.” Though CMS did not explicitly tie its announcement to FDA’s LDT decision, its timing suggests the agency may be trying to reassure users about the quality of SARS-CoV-2 tests offered as LDTs.
On a related note, Hillebrenner’s comments during the webinar shed some light on the status of home collection devices, which has been an outstanding question since the HHS announcement. Many observers have assumed that FDA would consider these devices part of the larger LDTs for which they were used and, as such, exempt from premarket regulation by the agency without notice and comment rulemaking.
During the webinar, however, Hillebrenner said that “tests that are run with home-collected specimens… are not considered LDTs,” and that the agency will still review these tests for EUA if labs make a submission.
This story first appeared in our sister publication, 360Dx, which provides in-depth coverage of in vitro diagnostics and the clinical lab market.