At the January 8-9, 2015 FDA public meeting on the agency's proposal to regulate a portion of lab developed tests (LDTs), there was much debate regarding whether FDA has jurisdiction over IVDs made at clinical laboratories. Not coincidentally, on January 7, the day before the meeting, the American Clinical Laboratory Association released a white paper developed for the Association by a couple of prominent constitutional law scholars. The paper outlined the arguments at a high level against FDA jurisdiction over lab developed tests generally. But with all due respect to the authors as well as the speakers at the FDA public meeting, the discussion to date is taking place at such a high level that I do not find it particularly helpful. Mostly the discussions merely stake out the positions held by interested parties. They don't advance the collective understanding of the issues.
In connection with the public meeting, I developed five questions which help me think through the legal issues. I'd like to share those questions, in an effort to drive the discussion to a more granular level where differences can be more effectively debated and resolved. In addition, as with any lawyer, I'm drawn to precedent, so I'd like to share how FDA has tackled similar issues before. At the end of this post, based on precedent but also my conclusion that both sides are overstating their legal positions, I offer a path forward down the middle-of-the-road.
5 Questions That Frame FDA Authority Over IVDs Made at Labs
In posing these questions, I start with the most basic and simple and then move closer and closer to the current facts. In each case, I'll also give you what I think the answer is.
Question one – what is the scope of FDA's legal authority to regulate in vitro diagnostic devices?
BMT's answer – FDA's authority is very broad and is not limited to packaged kits.
The statutory definition of a medical device is very broad, and gives FDA authority to regulate instruments, in vitro reagents and other similar or related articles "intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man…." FDA has interpreted that statute as giving it authority over in vitro diagnostic products. Under FDA's regulations, "In vitro diagnostic products are those reagents, instruments, and systems intended for use in 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."
A few things are worth noting in that definition.
- Reagents and instruments are straightforward and refer to things used to conduct a laboratory test, but the word "systems" is a bit less tangible. This is because FDA regulates the collection of all those things used to conduct an in vitro diagnostic test, as specified in labeling. So the "system" is determined mostly off the written word, but to some extent based on features that reveal an intent that two items be used together. The scope of the system is determined by the all-important "intended use."
- It is also important what the definitions of "device" and "in vitro diagnostic product" do not say. You will not see in those definitions any mention of co-packaging, or of shrink-wrapped kits or anything else that suggests that the products that together comprise the in vitro diagnostic must be together somehow in a box or "kit." They don't. Never have. Often the various elements of an in vitro diagnostic arrive in separate packages to a laboratory.
- The definitions of "device" and "in vitro diagnostic product" are also agnostic as to who actually makes the article. The definitions in the statute and regulations contain no limitations on who might be considered a manufacturer.
It's no accident that FDA ended up with this authority. In the late 1960s, FDA was struggling with how to regulate in vitro diagnostics, and that struggle is a substantial part of what led to the 1976 Medical Device Amendments. Congress very consciously made the decision to give FDA authority to regulate these collections of reagents and instruments, intended to be used together in conducting a laboratory test.
The fact that CLIA exists does not change the result. CLIA regulates laboratory services, for example by evaluating the proficiency of laboratorians using a clinical test. The FDCA, on the other hand, regulates the tests themselves and how they are produced, not how clinical laboratories perform the tests, reports to physicians or those other "service"-related activities that CLIA covers. As CMS, which administers CLIA, has explained, FDA and CMS "regulatory schemes are different in focus, scope and purpose, but they are intended to be complementary."
Question two – if the clinical laboratory buys an existing IVD company, does that purchase alone change FDA's jurisdiction over the IVDs that company produces?
BMT's answer – no. A change in shareholders has no impact on the FDA's jurisdiction over the products a company produces. This is equally true if the new shareholders are somehow engaged in the practice of medicine.
I started to ask this question at the public meeting, and a few people got confused because they immediately wanted to make the question more complex than it is. They started asking me questions such as, is the medical device already approved? But the question I'm asking is actually very simple: if a clinical laboratory were to buy a company that makes FDA regulated IVDs, would that acquisition change FDA's authority over the IVDs?
Recognize too that this would be very legitimate business decision. Companies in many industries vertically integrate. In business terms, vertical integration simply means buying a supplier. Companies do this sort of thing in order to diversify and grow, but also to better control the supply of some key product and to control the cost of that product.
The next three questions continue to build on the same basic scenario, so for the sake of clarity let me give names to the companies. I will call them Bradley's ClinLab, Inc. and Thompson's IVD Co. I've always wanted to be famous.
Question three – if Bradley's ClinLab, Inc. decides to tell Thompson's IVD Co. that it (Thompson's) may only sell to Bradley's, does FDA lose jurisdiction over the IVD's that Thompson's makes?
BMT's answer – no. Contractually requiring Thompson's IVD to only supply Bradley's ClinLab would not change the regulatory status of the IVD that Thompson's makes. The regulatory status of an IVD is based on the intended use of the reagents and instrument systems in diagnosing patients, and does not change based on commercial agreements that might limit the number of companies that could purchase those products.
Actually, this question is quite realistic because Bradley's ClinLab may want to become the sole provider of clinical laboratory services that use the IVD manufactured by Thompson's. If Thompson's IVD is particularly innovative, Bradley's ClinLab can enhance the value it offers by being the sole supplier of laboratory services making use of Thompson's IVD. Thus, whatever diminished sales there might be of Thompson's IVD to other clinical labs might be compensated for by the increased sales to Bradley's ClinLab.
From the parent company standpoint (i.e. Bradley's ClinLab), sales would go up substantially. Presumably Bradley's would widely promote the availability of the exclusive laboratory testing service that makes use of the Thompson's IVD, basically wrapping the IVD product in a clinical laboratory service.
Question four – if Bradley's ClinLab, instead of buying Thompson's IVD Co., builds an IVD company to be the same as Thompson's IVD Co., does that change FDA's jurisdiction over the IVD's that the homegrown company makes?
BMT's answer – no. There is nothing in the law that would distinguish between buying an IVD company and building an IVD company for FDA jurisdiction purposes. The law is solely focused on activities related to making reagents and/or instruments intended for use in the diagnosis of disease or other conditions, not how those activities come to be.
This question is simple. The only fact that I'm changing is moving from buying an IVD company to building an IVD company. So assume, for the sake of this hypothetical, that is the only difference. The resulting company has all of the same people and processes. Bradley's ClinLab simply built the company instead of buying it.
Question five – if rather than managing Thompson's IVD Co. as a separate company, Bradley's ClinLab decides to merge the IVD operations into Bradley's ClinLab, does that merger mean that FDA loses the ability to regulate the IVD manufacturing?
BMT's answer – no. Merging two corporations to one, and moving from two different facilities into one, does not change FDA's jurisdiction over the IVD operations. As already explained, it is the nature of the activities that determine FDA's jurisdiction.
This question probably requires a bit more explanation. Here I'm focused on corporate law distinctions between two companies, and the difference between an acquisition and a merger. In this question I'm suggesting that we think about a corporate merger instead of the corporate acquisition. In this hypothetical, I'm not proposing any change in the actual operations of the clinical lab or the IVD operations, except potentially that they might be housed under one roof at one location.
Why These Five Answers Make Sense
Whether or not you are an attorney, perhaps none of these answers surprised you. Indeed these answers should not be surprising because in each case the risk does not change. In each of these scenarios, whatever risk is associated with the use of the IVD is the same, except for two possible variables that come into play with moving to the sole source contract.
- Quantity. It is possible that these changes in business relationships would produce either an increase or a decrease in the volume of the IVDs sold depending on how adept Bradley's ClinLab is at marketing the test.
- The knowledge of the clinical laboratory users. Bradley's ClinLab in these hypotheticals might become particularly skillful at performing the test because it would do a higher volume than before.
But those two changes are pretty speculative and indeterminate. FDA's jurisdiction has never turned on whether a medical device manufacturer becomes a sole-source supplier for a single healthcare provider.
If you agree with me on the answers to those 5 questions, you would conclude that FDA can regulate IVD's made at clinical laboratories. But by itself, that's only a partial answer. The next question is: what constitutes making an IVD at a clinical laboratory? More specifically, how do regulators tell the difference between making IVDs at a clinical laboratory and testing services performed in the laboratory under CLIA.
And here's the real problem. The tasks performed by clinical laboratory professionals conducting clinical laboratory services clearly overlap with, and indeed in some cases look identical to, IVD manufacturing operations. Here are a few examples of activities that we could reasonably expect might be performed either by a technician at a clinical laboratory or a technician at an IVD manufacturing establishment:
- Making a mixture of 3 fluorescent markers that are coupled with different clusters of designation (CD) markers for use in immunophenotyping.
- Adding interference filters to the optical chamber of a flow cytometer to enhance signal quality.
- Installing custom sequencing data analysis software on a Next Generation Sequencing platform.
- Altering the pH of a buffer solution used in testing to enhance sample stability.
- Developing a process (system) for extracting certain analytes from blood samples using various pieces of equipment and reagents together.
If a regulator walked into a building and just saw one of those operations being performed, the regulator may not know if she was standing in a clinical laboratory or an IVD manufacturer.
We need a way of differentiating the types of activities occurring in clinical laboratories which really fit appropriately within the practice of laboratory medicine subject to CLIA oversight from the types of activities occurring in clinical laboratories which really fit appropriately in the IVD manufacturing category subject to FDA oversight.
That is not at all an easy task or a black and white line.
As we think about how to draw that line, as all lawyers, I am drawn to precedent. This is not the first time that FDA has had to figure out when activities being conducted by some healthcare professional are part of the practice of medicine or cross the line into FDA jurisdiction. It's an old problem. Consider, as examples, the following FDA enforcement initiatives:
- Drugs manufactured for or by physicians and administered to patients as a part of the physician's medical practice. In some ways, this is where FDA started about 100 years ago when medical professionals were making and marketing various elixirs to their patients.
- Medical devices reprocessed by hospitals. To save money, rather than throw away single-use medical devices, some hospitals chose to reprocess them. But reprocessing a single use medical device is treated under law as the same as manufacturing a new device. The fact that hospitals are the ones doing the reprocessing is of no consequence – FDA regulates the activity. In these cases the reprocessed devices are not being sold to patients, but rather used by doctors.
- The promotion by ophthalmologists of medical procedures using Lasik technology. Over the last several years, FDA has become concerned that ophthalmologist using FDA-cleared laser technology are promoting the use of that technology without adequately disclosing to their patients the associated risks in promotional statements. It's important to recognize that in these cases what the doctors are selling is the medical procedure that makes use of the device. FDA has been sending enforcement letters to doctors who downplay the risks of using this particular technology in this particular procedure.
The fact that somebody practices medicine has never by itself been a defense to a charge by FDA that the person is violating the FDCA. Instead, the issue is whether the activity involved better fits within the practice of medicine regulated by the state boards of medicine or the manufacturing of a drug or device regulated by FDA. And that, to be sure, is not always an easy question to answer. Let's look at one more precedent.
Analogy to Pharmacy Compounding
While pharmacy compounding is extremely different from laboratory services, and while the two types of services have very different risk profiles, legally they present much the same issue. And it is the legal framework – not the risk – I want to analyze.
Comparative History of LDT and Pharmacy Compounding Issue
|Historical Practices FDA Protects||Under traditional pharmacy practice, pharmacists have compounded drugs behind the drugstore counter, working with physicians to provide personalized treatments for individual patients.||Under the traditional practice of clinical laboratory testing, labs have sought to fill in the gaps in approved, commercially available tests. Those gaps exist because of the huge variety of diseases and conditions, many of which are unique.|
|Historical Policy Approach||Although FDA says all compounded products are subject to FDA regulation, the agency historically has exercised considerable discretion to enable pharmacies to continue this traditional type of pharmacy practice.FDA took this position, in part, because:
||FDA historically has taken the position that it has the authority to regulate lab‑made tests, but is exercising enforcement discretion to permit the practice to continue.The agency typically offers two reasons for this approach:
|Change in the Nature of the Practice||Some pharmacies began to develop into large‑scale "compounding" operations that are far removed from the traditional compounding, promote their drugs as alternatives to FDA-approved products for the same uses, and look more like drug manufacturing activities.||Some clinical labs began to engage in large‑scale making of tests with complex components, promote their tests as alternatives to FDA-approved tests for the same uses, and look more like diagnostic test manufacturing activities.|
|FDA's policy responses||In 1992, FDA issued its first CPG providing criteria for distinguishing when a pharmacy crossed the line from traditional pharmacy practice into large scale drug manufacturing subject to FDA regulation, including premarket approval.||In 2014, FDA issued its proposed framework for regulating certain types of LDTs.|
In both cases – pharmacy compounding and LDTs – you have highly educated healthcare professionals who are trained to provide complex services and who are regulated under specialized regulatory programs.
People do not go to pharmacy school to learn to count pills. In pharmacy school, they learn how to compound drugs to meet unique patient needs including rare diseases and the idiosyncratic needs of particular patients (e.g., dosage forms they can tolerate). Pharmacists can lawfully compound drugs for those purposes. Indeed, it is not just lawful; it's an extremely important practice that undoubtedly saves many lives. Those activities are regulated by state boards of pharmacy, just as the activities of clinical laboratory practice are regulated under CLIA. And just as with the practice of medicine more generally, because there is a specialized regulatory program in place, FDA does not regulate traditional compounding.
But there comes a point when a pharmacist could start behaving more like a drug manufacturer than a pharmacist. Being a pharmacist and being regulated by state boards of pharmacy does not mean that anything the pharmacist does cannot be regulated by any other agency. To pick an extreme example, if pharmacist began printing dollar bills, the Secret Service would have no difficulty pursuing enforcement even though the pharmacist is regulated by the state board of pharmacy. As another example, if a pharmacist had enough money to buy a drug manufacturing company, I doubt anyone would seriously contend that the drug manufacturing company ceased to be regulated by FDA just because it is owned by a pharmacist. Simply put, we need to look at the particular activities in which the pharmacist is engaged to decide the applicable law.
So where exactly is the dividing line between (A) traditional compounding that is regulated under the state boards of pharmacy, and (B) compounding that crosses over into drug manufacturing that requires compliance with FDA rules? On its face, much like laboratory services and IVD manufacturing, the actual process of producing a drug looks remarkably the same whether done by a pharmacist or done by a drug manufacturer.
To clarify the difference, FDA developed a Compliance Policy Guide which explained factors FDA would weigh in determining whether a pharmacy had crossed the line into drug manufacturing. The task was difficult enough that FDA could not simply provide a singular definition of drug manufacturing, or for that matter provide even specific boxes to check. Instead, FDA offered a list of factors which it would consider holistically, not mechanically. Here's what FDA came up:
- Compounding of drugs in anticipation of receiving prescriptions, except in very limited quantities in relation to the amounts of drugs compounded after receiving valid prescriptions.
- Compounding drugs that were withdrawn or removed from the market for safety reasons….
- Compounding finished drugs from bulk active ingredients that are not components of FDA approved drugs without an FDA sanctioned investigational new drug application (IND)….
- Receiving, storing, or using drug substances without first obtaining written assurance from the supplier that each lot of the drug substance has been made in an FDA registered facility.
- Receiving, storing, or using drug components not guaranteed or otherwise determined to meet official compendia requirements.
- Using commercial scale manufacturing or testing equipment for compounding drug products.
- Compounding drugs for third parties who resell to individual patients or offering compounded drug products at wholesale to other state licensed persons or commercial entities for resale.
- Compounding drug products that are commercially available in the marketplace or that are essentially copies of commercially available FDA-approved drug products. In certain circumstances, it may be appropriate for a pharmacist to compound a small quantity of a drug that is only slightly different than a FDA-approved drug that is commercially available. In these circumstances, FDA will consider whether there is documentation of the medical need for the particular variation of the compound for the particular patient.
- Failing to operate in conformance with applicable state law regulating the practice of pharmacy.
According to FDA, the foregoing list of factors is not intended to be exhaustive. Other factors may be appropriate for consideration in a particular case.
Application to Lab Developed Tests
Drawing from that analogy, the pharmacy compounding rules offer us guidance as to how we might approach the dividing line between laboratory services regulated under CLIA, and IVD manufacturing that FDA regulates, even if both are conducted in a clinical laboratory.
FDA has already identified many of these factors, but I think the agency has also left a couple out. I would divide the criteria into two buckets that the admittedly overlap. The two buckets include (1) criteria that focus mostly on the public health implications of the LDTs, and (2) criteria that focus on the legal distinction between the practice of medicine and the practice of manufacturing.
Public Health Criteria
These are practical criteria that the agency applies in order to minimize public health risk or negative impact. In adopting these criteria, FDA's goal is regulating high risk uses. In my analogy to pharmacy compounding, these criteria are similar to, for example, number two above (compounding drugs that were withdrawn or removed from the market for safety reasons).
Specifically, FDA proposes not to regulate LDTs intended for:
- Rare diseases
- Unmet medical need
- Low risk
FDA proposes not to regulate those applications because either they are low risk or because there is no other feasible way that patients with those needs would have access to the necessary tests.
In addition to the public health criteria, FDA needs to apply criteria that stem from the legal task at hand – separating those activities that Congress intended to regulate under CLIA from those activities that Congress intended to regulate under FDA's rules. These criteria are not so much risk focused but rather focused on identifying the characteristics of IVD manufacturing. Based on the pharmacy compounding precedent, FDA could use the following kinds of factors:
- Test materials are made in advance of receiving an order from a physician for the test, and stored until such time as a physician places an order.
- Tests that duplicate already manufactured tests, with a similar narrow exception as described under pharmacy compounding for small batches of slight variants.
- Test materials made using manufacturing equipment and manufacturing processes not customarily used in laboratory testing services (e.g., a commercial-scale filling system to pre-make reagent cocktails for later use in the lab).
- Promotion of the protocol as evidence that it is really the protocol that is being sold.
- Whether the LDT is designed and used by a single laboratory.
- Whether the LDT is comprised only of components and instruments that are legally marketed for clinical use (e.g., analyte specific reagents (21 CFR 864.4020), general purpose reagents (21 CFR 864.4010), and various classified instruments).
- Whether the LDT is both manufactured and used by a health care facility laboratory (such as one located in a hospital or clinic) for a patient that is being diagnosed and/or treated at that same health care facility or within the facility's healthcare system.
- Whether the LDT is interpreted by qualified laboratory professionals, without the use of automated instrumentation or software for interpretation.
Some of these criteria are not precisely stated, and that is part of the challenge. Judgment needs to be applied regarding the totality of the circumstances. But I would suspect that these criteria would lead to a clear answer for many tests if applied in good faith, and those that are in a gray area might require dialogue between FDA and the lab.
It seems to me that two extreme statements are equally untrue.
- On the one hand, FDA seems to be saying that it has legal authority to regulate all LDTs. That is not true. Some LDTs fall within the practice of medicine and are thereby excluded from FDA jurisdiction.
- On the other hand, most laboratories seem to be saying that FDA has no legal authority to regulate any LDTs. That is not true. The primary fallacy in that argument, at least where I've seen it expressed, is in the argument that "laboratorians provide the service, therefore the service is part of the practice of medicine." A laboratorian could do my taxes, but the tax services would hardly be part of the practice of medicine. We can't just focus on the who. We need to analyze the what.
Understanding the scope of FDA jurisdiction and in particular discerning the dividing line between the practice of laboratory medicine and IVD manufacturing requires a much more nuanced analysis. We have to separate out those specific activities that Congress intended to regulate under CLIA from those specific activities that Congress intended to regulate under the FDCA. We have to look carefully at what Congress wrote in both CLIA and the FDCA, and carefully at the specific facts regarding what laboratories are actually doing in their labs. That analysis is not furthered by generalizations, but by specifics.
 21 U.S.C. 321(h)
 21 CFR 809.3
 Further, FDA law has long held that intercompany transfers can still qualify as being 'held for sale" as that term is used in the FDCA. Being held for sale is one of the ways that a product intended for diagnostic use can be placed in "commercial distribution," which gives FDA jurisdiction over that product (device). FDA regulations provide that "Internal or interplant transfer of a device between establishments within the same parent, subsidiary, and/or affiliate company" fall outside the definition of "commercial distribution." 21 CFR 807.3(b)(1). This exemption cannot save a transfer from one unregistered establishment to another unregistered establishment.
 FDA, Center For Devices And Radiological Health, Guidance For Industry And For FDA Staff: Enforcement Priorities For Single-Use Devices Reprocessed By Third Parties And Hospitals (2000)
 FDA Letter to Eye Care Professionals (September 23, 2011) and Warning Letter to 20/20 Institute, Indianapolis Lasik, dated 12/18/12.
 CPG Sec. 460.200 Pharmacy Compounding (1992, 2002) was declared obsolete because of some recent legislation on pharmacy compounding (Withdrawn 78 FR 72841 December 4, 2013).
 Using promotion in this context does not run afoul of the First Amendment analysis under the Supreme Court decision in Thompson v. Western States Medical Center, 535 U. S. 357 (2002). Here promotion plays the same role it does in intended use. It is simply looked at as a factor to determine what the laboratory actually intends to sell.
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