Lab-Developed Tests Under FDA Scrutiny: What It Means For Startups

A proposed regulatory shift has injected uncertainty into the laboratory-testing market just as startups advance various tests to detect diseases sooner and personalize treatments.

Startups seizing advances in fields such as genomics and artificial intelligence are designing laboratory-developed tests to spot cancer and other illnesses before symptoms arise and to identify optimal therapies.

Lab-developed tests are created and carried out in a single lab. 

Labs perform these tests on blood or other specimens shipped to them. Most genetic tests, for example, are lab-developed tests.

The FDA says it historically has exercised its discretion not to regulate such tests, thus allowing startups to introduce the tests quickly and at relatively low cost.

That would change under a proposal the FDA issued Friday. The agency, citing concerns about the efficacy of lab-developed tests, said it plans to regulate these diagnostics. 

As a result, many lab-developed tests would require review by the FDA before they can be sold.

But the agency’s latest salvo leaves lab companies with less certainty about future regulation, complicating investment and product-development decisions, Wall Street Journal noted, citing some observers.

“If the path to market becomes longer, less predictable and more expensive, that will affect our ability to invest and will affect the number of new diagnostics that come to market,” said Greg Yap, a partner with venture firm Menlo Ventures.

For a startup, performing all tests in its lab appeals because that can simplify quality control, especially for new and complex diagnostics.

In the 1970s and 1980s, the FDA said, many lab-developed tests were lower-risk and used for specialized needs of local populations. 

Today, they are applied much more widely, and modern lab tests pose more risks, according to the agency. It noted it is aware of lab-developed tests that led to over- or under-treatment for heart disease, patients being exposed to inappropriate therapies or not getting effective therapies, and incorrect diagnoses of diseases, including Alzheimer’s.

The FDA proposes regulating lab-based tests as medical devices, which may impact costs and insurance reimbursements.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.