In a significant reversal that has sent ripples through the diagnostic testing industry, the FDA has officially rescinded its controversial Final Rule that would have classified laboratory-developed tests (LDTs) as medical devices. This decision, announced in September 2025, marks the end of a contentious regulatory battle that pitted federal oversight against laboratory autonomy—and raises important questions about the future of diagnostic innovation and patient safety.
The Rise and Fall of the Final Rule
The FDA’s journey to regulate LDTs has been decades in the making. Although historically the FDA has generally exercised enforcement discretion for most LDTs, meaning that the agency generally has not enforced applicable requirements with respect to most LDTs, the agency had grown increasingly concerned about the risks associated with modern diagnostic tests.
In May 2024, the FDA issued its Final Rule, which made explicit that IVDs are devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act) including when the manufacturer of the IVD is a laboratory. The rule would have fundamentally transformed how laboratories operate, requiring LDTs to undergo pre-market review and post-market quality surveillance through a four-year phase-in period.
However, the rule faced immediate and fierce opposition. FDA’s final rule was scheduled to go into effect in May 2025 and would have affected nearly 80,000 existing tests offered by almost 1,200 laboratories. The scale of this impact became a central concern for industry stakeholders.
The legal challenge came swiftly. The American Clinical Laboratory Association (ACLA), HealthTrackRx, and the Association for Molecular Pathology filed suit in the U.S. District Court for the Eastern District of Texas, arguing that applying medical device regulations to LDTs was inappropriate and ill-suited for these specialized tests.
In March 2025, District Judge Sean Jordan agreed with the plaintiffs, striking down the Final Rule in its entirety and referring the matter back to the Department of Health and Human Services for further consideration. Rather than appeal the decision, the FDA, under Health Secretary Robert F. Kennedy Jr., chose to amend the rule, effectively removing the language that would have brought LDTs under medical device regulation.
Understanding LDTs: More Than Just Tests
To appreciate the significance of this regulatory reversal, it’s essential to understand what makes LDTs unique. Laboratory-developed tests are in vitro diagnostic devices that are designed, manufactured, and used within a single laboratory. Unlike traditional medical devices that are mass-produced and distributed widely, LDTs are often created to address specific clinical needs or serve particular patient populations.
These tests range from routine blood work to highly specialized genetic analyses that might be developed for rare diseases affecting only a handful of patients. Many LDTs are created rapidly in response to emerging health threats—a capability that proved invaluable during the COVID-19 pandemic when laboratories quickly developed testing protocols before commercial tests became available.
The Historical Context: Decades of Enforcement Discretion
The FDA’s approach to LDT regulation has been characterized by what’s known as “enforcement discretion.” FDA contended that LDTs have always been subject to the regulatory requirements for medical devices, but the agency had generally declined to apply these requirements as a matter of enforcement discretion.
This policy emerged from practical considerations. When the Medical Device Amendments were passed in 1976, giving the FDA broad authority over diagnostic tests, most LDTs were simple, low-risk tests performed in hospital laboratories. The regulatory framework was designed for commercial manufacturers, not individual laboratories creating tests for their own use.
Over the decades, however, LDTs have become increasingly sophisticated and commercially significant. Some laboratories now offer LDTs that compete directly with FDA-approved tests, leading to questions about whether the enforcement discretion approach remained appropriate.
The Arguments: Safety vs. Innovation
The debate over LDT regulation highlighted a fundamental tension in healthcare policy: balancing patient safety with innovation and access to care.
The Case for Regulation
Proponents of the Final Rule, primarily within the FDA, argued that the regulatory landscape had not kept pace with the evolution of LDTs. They pointed to concerns about test accuracy, clinical validation, and the potential for patients to receive incorrect diagnoses based on poorly validated tests.
The FDA estimated that the Final Rule would have cost between $1.29 billion and $1.37 billion over 20 years—a substantial investment that the agency argued was necessary to ensure patient safety and test reliability.
The Case Against Regulation
Critics of the Final Rule, led by laboratory organizations and many healthcare providers, argued that applying medical device regulations to LDTs would create several significant problems:
- Access Issues: The final rule is in response to a March 31 federal district court decision that also vacated the FDA’s 2024 final rule, but the broader concern was that regulatory requirements would make it economically unfeasible for many laboratories, particularly smaller ones, to continue offering specialized tests.
- Innovation Stifling: The lengthy and expensive pre-market approval process required for medical devices could discourage laboratories from developing innovative tests for rare diseases or emerging health threats.
- Regulatory Mismatch: Many argued that LDTs are fundamentally different from commercial medical devices and require different regulatory approaches. Congress instead intended for regulation to occur exclusively under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), which vested the power to regulate clinical laboratories in the Center for Medicare.
Industry Reaction: Relief Mixed with Uncertainty
The FDA’s decision to rescind the Final Rule has been met with cautious celebration from the laboratory community. Roslyne Schulman of the American Hospital Association captured the sentiment of many when she stated that “the return to enforcement discretion for LDTs rightly recognizes that applying the device regulations to these tests would likely prompt many hospital laboratories, particularly small ones, to stop offering safe and effective tests upon which patients and their communities rely.”
However, this victory comes with uncertainty. The fundamental questions that prompted the FDA’s regulatory effort haven’t disappeared. As LDTs continue to evolve and become more commercially significant, the pressure for some form of oversight is likely to persist.
What This Means for Patients and Healthcare
The practical implications of the FDA’s decision are complex and far-reaching:
Immediate Benefits:
- Continued access to specialized and innovative diagnostic tests
- Preservation of laboratory flexibility to respond to emerging health needs
- Reduced regulatory burden on healthcare institutions
Ongoing Concerns:
- Potential variability in test quality and validation standards
- Limited FDA oversight of commercially significant LDTs
- Continued uncertainty about the appropriate regulatory framework
Looking Forward: The Need for Balance
The FDA’s retreat from LDT regulation doesn’t resolve the underlying policy challenges. The diagnostic testing landscape continues to evolve rapidly, with advances in genomics, artificial intelligence, and precision medicine creating new categories of tests that blur traditional regulatory boundaries.
Several potential paths forward merit consideration:
- Legislative Clarity: Congress could provide clearer guidance on how LDTs should be regulated, potentially creating a framework specifically designed for these tests rather than trying to fit them into existing medical device regulations.
- Risk-Based Approach: Future regulatory efforts might focus on the highest-risk LDTs while maintaining enforcement discretion for lower-risk tests.
- Industry Self-Regulation: Professional organizations and accrediting bodies could play a larger role in establishing standards for LDT development and validation.
- Collaborative Framework: A new approach might involve collaboration between the FDA, CMS (which oversees laboratory operations under CLIA), and industry stakeholders to develop appropriate oversight mechanisms.
Conclusion: A Temporary Resolution
The FDA’s decision to scrap its Final Rule represents a significant victory for laboratory independence, but it’s unlikely to be the final word on LDT regulation. The underlying tensions between innovation and oversight, access and safety, remain unresolved.
For now, laboratories can continue operating under the historical enforcement discretion framework, maintaining their ability to develop and offer specialized tests without the burden of medical device regulations. However, the industry should not assume this represents a permanent resolution.
The rapid evolution of diagnostic testing, combined with growing concerns about test quality and patient safety, suggests that some form of regulatory reform may be inevitable. The challenge will be developing an approach that protects patients without stifling innovation—a balance that has proven elusive thus far.
As the healthcare industry continues to evolve, the LDT regulatory saga serves as a reminder of the complexity of governing medical innovation in a rapidly changing technological landscape. The FDA’s retreat may have won this battle for laboratory independence, but the war over appropriate oversight of diagnostic testing is far from over.
The ultimate measure of success will not be whether laboratories or regulators prevail in these disputes, but whether patients continue to have access to accurate, innovative diagnostic tests that improve their health outcomes. Achieving that goal will require continued dialogue, compromise, and perhaps most importantly, a regulatory framework that can adapt as quickly as the science it seeks to govern.
References
- https://www.globaldata.com/newsletter/details/fda-scraps-final-rule-classifying-ldts-as-medical-devices_231178/
- https://www.cov.com/en/news-and-insights/insights/2024/05/unpacking-fdas-final-rule-to-regulate-laboratory-developed-testing-services-as-medical-devices
- https://www.fda.gov/news-events/press-announcements/fda-takes-action-aimed-helping-ensure-safety-and-effectiveness-laboratory-developed-tests