The FDA Is Seen as an Unwelcome Guest in the Lab Sector, But Its Presence Is Likely to Grow

It’s been a given that the U.S. Food and Drug Administration regulates drugs, medical devices and the lab sector’s in vitro diagnostic tests. Although the agency has come under criticism in recent years as a government bureaucracy that has stifled business innovation in health care, that situation has not deterred its intentions to regulate additional facets of laboratory medicine. The FDA has said that the advances that have been made in the sector require closer scrutiny in order to guarantee the safety of patients and integrity of the tests being performed. In recent years, the FDA has begun to try to assert itself into two significant areas of the laboratory field. The first, laboratory developed tests (LDTs), is a work in progress, with labs resisting the incursion, although it is likely that the FDA will eventually prevail and have some level of scrutiny in that area. The other area where the FDA is seeking regulatory oversight is next-generation sequencing (NGS). It is a portion of the laboratory business that has grown nearly exponentially in just the past several years, as the number of molecular tests that involve multi-gene panels has rapidly multiplied (and most NGS-based tests are also LDTs). The Obama administration’s recent push for personalized medicine is also expected to fuel future growth. “Most IVDs detect only a single or a defined number of substances to diagnose one or several specified conditions. In contrast, NGS tests are capable of detecting the over 3 billion bases in the human genome, and in doing so identify the approximately 3 million genetic variants an individual may have. A single use of an NGS test could enable the diagnosis of any one, or more, diseases or conditions a patient presents with,” the FDA said in a recent white paper on the issue. As a result, the agency believes closer regulation of those tests is necessary. It has been seeking input from the lab sector as to how to do this from a series of workshops that began in 2011 and are continuing into this year. The agency is expected to eventually issue draft regulations of NGS, although FDA officials have not given a timeline for that event.
The friction point The FDA’s intent to regulate NGS-based tests not only raises the issue of government intervention, but comes at a time when the use of NGS-based assays is booming. Labs often charge four figures to perform such tests, and they have become a steady source of revenue at a time when reimbursements from government and commercial payers for more traditional assays have been ratcheted down. One company that specializes in both NGS testing and platforms, San Diego-based Illumina, has seen revenue and profit explode. It reported $1.6 billion in revenue for fiscal 2014, nearly triple the total of five years before. The company did not immediately respond to a request seeking comment for this article. Spokane, Wash.-based PAML, the largest regional laboratory in the western United States, has made over a significant amount of its business model in just the past few years due to NGS. According to its Chief Executive Officer, Francisco Velázquez, M.D., the company has made about 10 hires in just the past year— including physician and doctorate-level positions—as it brings most of its NGS testing in-house. “It has certainly strengthened our competitiveness, and our focus on oncology, as well as our ability to attract talent,” Velázquez said. He added that he expects NGS-based testing to play a significant role not just in cancer detection and treatment, but public health issues such as the control and prevention of infectious disease outbreak.
Redundancy? Not surprisingly, the laboratory industry has greeted the latest incursion from the FDA about as warmly as it has on the LDT issue: It has questioned whether the agency’s scrutiny is needed at all. The American Association of Clinical Chemistry (AACC) observed in a recent statement that it “appreciates FDA’s efforts to seek input from the healthcare community before developing new policy in this area, but is concerned that FDA regulation of next-generation sequencing could impede the advancement of precision medicine.” One of the lobby’s specific concerns is that the FDA will be intruding into an area where the CLIA regulations work just fine. “We believe ... that the current oversight mechanisms in place for next-generation sequencing are sufficient for dealing with the particular challenges this technology presents and that further FDA involvement at this time might hinder the advancement of this field,” said AACC President David Koch, M.D. in the statement. Of course, it’s the same argument that has been put forward over the regulation of LDTs. The AACC believes the Clinical Laboratory Improvement Amendments, or CLIA, are sufficient to regulate the sector. And given the Centers for Medicare& Medicaid Services, itself a huge regulatory body, already has purview of that domain, the FDA’s presence seems redundant at best. Velázquez shares that position. “The lab industry is already regulated through CMS and CLIA, and there is industry-specific knowledge that is very important, as well as various regulatory requirements, whether it is CLIA or deemed status,” he said. “And the FDA has minimal if any experience (in this area), and the learning curve is going to be enormous.” Velázquez is particularly concerned that the years it may take for the FDA to thoroughly acclimate itself to this new regulatory environment could mean lengthy delays in obtaining product approvals for tests that would move fairly quickly through the CLIA process. There’s also confusion as to whether the FDA would tier the regulatory process based on how complicated the test is, or on its potential for causing patient harm (which is how it proposes to regulate LDTs). “The more complex this process becomes, the more difficult it will be to have resources to (comply),” Velázquez said. “It may be easier among labs with significant size that can allocate the excess capacity to the process,” which would put smaller labs at a distinct competitive disadvantage in terms of developing groundbreaking new NGS-based tests. The Association for Molecular Pathology has taken a slightly softer position, although it is still wary of the FDA’s involvement in the laboratory business. “It is critical that FDA recognize the promise these new technologies hold for patients and health care providers, and refrain from taking actions that could impair this progress. As such, we believe that FDA can best contribute to patient care, medical advancement, and public health by ensuring that the performance characteristics of FDA-cleared or approved instruments, test kits, software, and reagents that are sold to customer laboratories are consistent with vendors’ claims in their labeling, promotional materials, and sales activities,” it said in a statement. But in the comments it sent to the FDA in response to another workshop it held in February, the AMP believes that the agency should not have any say in test creation or adjustments. “Any modifications made within a laboratory to adjust an NGS test to better suit the needs and requirements of the laboratory and the patient are within the purview of appropriately trained molecular professionals, and thus, should be regulated by the Centers for Medicare & Medicaid Services under the CLIA program,” it said. The American Clinical Laboratory Association has retained top-flight legal counsel over the wrangling with the FDA concerning the regulation of LDTs. It hasn’t reached that level yet with the issue of NGS-based tests—but then again, the agency has yet to draft any regulations. Takeaway: The wrestling over the FDA’s move toward regulating next-generation sequencing technology suggests that the lab sector will battle the agency’s incursion into other portions of its business over the long-term.