FDA Finalizes LDT Regulation; Partial “Grandfather” Exemptions for Existing LDTs

by Jondavid Klipp | May 14, 2024 | FDA, Lab Developed Tests (LDT), Laboratory Regulations

FDA Finalizes LDT Regulation; Partial “Grandfather” Exemptions for Existing LDTs

Although less severe than the FDA’s initial proposed regulations, the Final Rule (published May 6) will add a new complex layer of bureaucracy for labs offering laboratory-developed tests (LDTs). LDTs on the market prior to May 6 will not have to go through the full FDA application and clearance process. However, labs will need to develop quality system complaint files, registration, labeling, etc. for each LDT they currently offer. New LDTs will ultimately need to go through the full FDA application and
clearance process.

Jonathan Genzen, MD, PhD, Chief Medical Officer and Senior Director of Governmental Affairs at ARUP Laboratories (Salt Lake City, UT), has been closely following the FDA’s movement toward regulating laboratory developed tests. Below we summarize Dr. Genzen’s perspectives on the Final Rule with an emphasis on what it means for currently marketed LDTs.

What are the Stage 1 requirements for “grandfathered” LDTs under the Final Rule?

These tests are not fully “grandfathered” under the Final Rule, as certain FDA oversight requirements still apply.

Currently marketed LDTs (on the market prior to May 6, 2024) will need to comply with FDA Medical Device Reporting (MDR) regulations. This includes reporting certain device-related adverse events and product problems to the FDA, as well as correction and removal reporting requirements.

Currently marketed LDTs will also need to comply with one of the Stage 3 quality system requirements (Complaint Files — 21 C.F.R. 820.198). Laboratories will be required to establish and maintain procedures for receiving, reviewing, and evaluating complaints for their LDTs.

The Stage 1 requirements will need to be met by May 6, 2025.

What are the Stage 2 requirements for “grandfathered” LDTs under the Final Rule?

Currently marketed LDTs will need to comply with FDA registration, listing, labeling, and investigational use requirements by May 6, 2026. The most complex of these requirements is labeling. It appears that all LDTs eligible under the currently marketed enforcement discretion policy will need to meet full FDA labeling requirements for IVDs. This will be a complex task to conduct retrospectively, as labeling requirements are extensive and will need to be completed within two years to remain in compliance with the Final Rule.

Which anatomic pathology services are covered under the Final Rule for LDTs?

From my interpretation, with the exception of manual staining and manual immunohistochemistry (“1976-type” LDTs), the Final Rule doesn’t distinguish between AP and CP testing. The Final Rule appears to apply to all LDTs, with the exception of manual interpretation of the final slides by a pathologist. This means that currently performed anatomic pathology LDTs, including non-manual IHC staining, are now subject to FDA oversight.

What happens when an existing LDT is modified?
The moment a currently marketed test has a modification considered to be significant by the FDA (and they provide representative examples in the Final Rule), then the LDT would be subject to additional QS requirements including design controls, purchasing controls, acceptance activities, corrective and preventive action (CAPA), and records requirements. Such modifications to existing LDTs will also require a premarket submission to the FDA.

Over time, I anticipate that many routine test modifications, including sample type changes and automation of manual assays on liquid handlers, will now necessitate FDA submissions. And I suspect that the FDA is underestimating the number of tests that will ultimately need to go through premarket review, as well as the financial impact to the clinical laboratory community.

Is the NYS CLEP less expensive and a quicker process than FDA review?

I believe that LDT submission and review under the NYS Clinical Laboratory Evaluation Program (CLEP) – which oversees clinical laboratory testing for NY patients – is available only to NYS-accredited labs. NY clinical laboratory accreditation is likely not a practical option for most laboratories that do not intend to perform testing on NY patients. The NY CLEP performs outstanding, high-quality work, and they will need to share their perspective on how the program should or should not be used in the context of the FDA’s Final Rule.

Is a lawsuit challenging FDA’s authority to regulate LDTs likely?
I believe that litigation is very likely. The FDA’s language in the Final Rule regarding “illegality” (page 30) makes this even more likely in my opinion. If not following the FDA’s new framework for LDTs is deemed illegal—even if it compromises the ability to care for patients (e.g. emergency validations for clinically urgent testing in acute settings) – then the lab industry has been backed into a corner and judicial review could be the only remaining remedy.

New Law For Medi-Cal Aimed At Eliminating Retroactive Recoupments

by Jondavid Klipp | Aug 15, 2021 | Laboratory Regulations, Medi-Cal

New Law For Medi-Cal Aimed At Eliminating Retroactive Recoupments

On July 27, California Gov. Gavin Newsom signed a comprehensive health care budget trailer bill (AB 133), which prevents future retroactive reimbursement reductions and recoupments from labs and pathology groups that occur due to “a lack of timeliness in Medi-Cal updating their rates.” In the past, Medi-Cal fee schedule rate changes have been chronically delayed, which has often led the program to seek retroactive recoupments from labs and pathologists—a major administrative and billing headache.

In addition, the new law has made a minor adjustment to the methodology used for setting MediCal fee schedule rates for clinical lab tests and pathology services. Beginning on July 1, 2022, Medi-Cal rates will be based on the lowest of the following: 1) the amount billed; 2) the charge to the general public; 3) 100% of the lowest maximum allowance established by the federal Medicare program for the same or similar services; or 4) a reimbursement rate based on an average of the lowest amount that other payers and other state Medicaid programs are paying for similar clinical laboratory or laboratory services.

The California Department of Health Care Services (DHCS) will not adjust rates currently established on the Medi-Cal fee schedule that do not exceed the limitations mentioned above, according to a DHCS spokesman. Some labs and pathologists had hoped the new law would raise their Medi-Cal rates to 100% of Medicare rates next year, but it does not.

The DHCS spokesman confirmed that the DHCS will continue to conduct its triennial rate survey and adjust rates based on the average of the lowest amounts third-party payers are paying. The next rate survey will be based on third-party payer data collected from calendar year 2021, reported in 2022 and effective in July 2023.

The EKRA Law Banning Commission-Based Lab Sales Reps Remains In Effect

by Jondavid Klipp | Nov 15, 2019 | EKRA, Laboratory Regulations

The EKRA Law Banning Commission-Based Lab Sales Reps Remains In Effect

On October 24, 2018, The Eliminating Kickbacks in Recovery Act of 2018 (EKRA) became law (see LE, December 2018). EKRA was part of broader legislation (The SUPPORT Act) intended to address the national opioid crisis.

The EKRA law prohibits commission payments based on the number of patients referred to a laboratory, the number of tests performed, or the amount billed to or received from a “health care benefit program” (which includes commercial insurance plans as well as Medicare and Medicaid). EKRA applies to all laboratories (toxicology, molecular, routine clinical, anatomic pathology, et al.), not merely labs that perform testing for recovery homes and clinical treatment facilities. Violation of EKRA is punishable by a fine of up to $200,000 and/ or imprisonment of up to 10 years for each occurrence.

The American Clinical Laboratory Association and its largest member labs have lobbied to have EKRA narrowed so that it applies only to laboratories associated with substance abuse services. However, to date, no changes have been made to the EKRA law.

McDonald Hopkins’ attorney Rick Cooper says that although there are no changes to EKRA expected in the near term, there may eventually be some narrowing of the law made in the long horizon.

Does New Far-Reaching Anti-Kickback Law Apply To All Labs?

by Jondavid Klipp | Dec 15, 2018 | Laboratory Regulations

Does New Far-Reaching Anti-Kickback Law Apply To All Labs?

Hastily passed opioid legislation, signed into law by President Trump on October 24, outlaws the use of volume-based compensation for laboratory sales reps, regardless of the type of testing involved. The new law, Section 8122 of the “Eliminating Kickbacks in Recovery Act of 2018” (EKRA), authorizes criminal penalties for some conduct that is currently permissible under antikickback statute safe harbors.

The new law prohibits commission payments based on the number of patients referred to a laboratory, the number of tests performed, or the amount billed to or received from a “health care benefit program” (which includes commercial insurers as well as Medicare and Medicaid). As written, Section 8122 of EKRA applies to all laboratories, not merely labs that perform testing for recovery homes and clinical treatment facilities, and to all services covered by all payers, rather than only services covered by Federal healthcare programs.

Karen Lovitch, attorney at Mintz Levin, notes that Senators Marco Rubio (R-FL) and Amy Klobuchar (D-MN) introduced this provision in an effort to target patient brokers who recruit patients for addiction treatment centers and allegedly receive financial kickbacks in return. Brokers have reportedly paid for patients’ travel, rent, or other expenses to make it easier for them to seek treatment, and even helped uninsured patients obtain private insurance coverage by paying their premiums while in treatment.

Lovitch says the EKRA fails to carve out lab testing that has nothing to do with opioid or drug abuse. Furthermore, it applies to all labs when doing business with all payers. The legislative history fails to clarify whether Congress intended to construct this anti-kickback provision so broadly
with respect to laboratories and, if so, whether Congress had any rationale for doing so, according to Lovitch.

Lovitch believes that it’s unlikely that Congress will remove laboratories from the new law entirely, but expects that there will be significant pressure on Congress to limit its applicability to services related to opioid use and treatment.

GAO Warns Of Increased Costs From Unbundling Panel Tests

by Jondavid Klipp | Dec 4, 2018 | CLFS, GAO, Laboratory Regulations

GAO Warns Of Increased Costs From Unbundling Panel Tests

A new report from the U.S. Government Accountability Office (GAO) has zeroed in on the unbundling of common panel tests as a practice that could cause Medicare to overpay billions under PAMA’s new market-based CLFS.

The potential for overpayment stems from a loophole that enables labs to charge significantly more for common panel tests by billing for each component test individually (see LE, December 2017). Previously, Medicare had paid a lower bundled rate for routine panel tests such as Comprehensive Metabolic Panel (CPT 80053) and Lipid Panel (CPT 80061).

But starting January 1, 2018, PAMA limited CMS’s ability to automatically combine individual component tests into groups for bundled payment. Labs now have the ability to game the system for higher reimbursement by billing individually for tests in a panel. The GAO report has estimated that this practice could potentially increase Medicare expenditures by as much as $10.3 billion from 2018 through 2020.

The Department of Health and Human Services (HHS) commented that it is taking steps to address this issue. More specifically, HHS is developing an automated process to identify claims for panel tests that should receive bundled payments and anticipates implementing this change by the summer of 2019. In addition, HHS posted guidance on November 14, 2018, stating that for panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019.

In addition, CMS says that it has been monitoring changes in panel test utilization, payment rates, and expenditures. CMS says that preliminary data indicates that Medicare payments for individual component tests of panel tests have, in fact, increased substantially in 2018.