It’s Raining Regs: FDA Releases Major Laboratory-Developed Test Reg in Midst of Massive Reg Storm - McDermott+Consulting

It’s Raining Regs: FDA Releases Major Laboratory-Developed Test Reg in Midst of Massive Reg Storm

It’s Raining Regs: FDA Releases Major Laboratory-Developed Test Reg in Midst of Massive Reg Storm

McDermottPlus is pleased to bring you Regs & Eggs, a weekly Regulatory Affairs blog by Jeffrey DavisClick here to subscribe to future blog posts.

May 9, 2024 – Over the last several weeks, the Biden administration has released numerous final regulations in order to “beat the clock” before it ticks down to the Congressional Review Act (CRA) deadline. The CRA authorizes Congress to issue a joint resolution of disapproval and, working with the President, overturn a regulation within 60 legislative days of its receipt of such reg. To prevent Administrations from issuing regs at the end of a session of Congress, thereby denying Congress adequate time to review them, the CRA gives each new session of Congress a lookback period to review regs submitted during the previous Congress. More specifically, under the CRA, regs submitted to a Congress within 60 days of continuous session before it adjourns are reviewable by the next Congress.

While the Congressional calendar is always in flux, the number of remaining legislative days for this Congress is limited. And in this election year, with Congress out of session for all of October to campaign, 60 legislative days covers a span of many calendar months. Given current House and Senate calendars, the most conversative estimate is that the CRA deadline will fall in mid-May 2024. That is, any reg submitted to Congress after that date could be reviewable by the next Congress. The Biden administration is concerned that the regs it finalizes after May could be overturned through the CRA process if both Congress and the White House were to be controlled by Republicans next year. (For more information on the CRA, please check out our summary written by my colleague, Leigh Feldman.)

Some of the regs that the Biden administration has released over the last several weeks have been considered controversial by outside stakeholders, and that may be one reason why the Biden administration felt it was important to release the regs before the CRA deadline. One such reg relates to the US Food and Drug Administration’s (FDA) regulation of laboratory-developed tests (LDTs). To help me describe this reg, I’m bringing in my colleagues Deborah Godes and Rachel Stauffer.

LDTs are in vitro diagnostic products (IVDs), and the final reg in question amends the FDA’s regulations to make explicit that IVDs are devices under the Federal Food, Drug, and Cosmetic Act (FDCA), including when the manufacturer of the IVD is a laboratory. Along with this amendment, the FDA issued a policy to phase out, over the course of four years, its general enforcement discretion approach for LDTs. While the FDA mainly finalized its proposal from September 2023, CMS substantially expanded its list of tests that will be eligible for some form of “grandfathering” (i.e., continued enforcement discretion), including LDTs currently on the market, LDTs that obtain New York State approval, and certain LDTs offered by integrated health systems for patients with unmet needs. FDA stated in the reg that they will also be providing more detail on a number of these policies in the coming months via sub-regulatory guidance. (For more information on the final reg, please read our summary here.)

The reg has already been met with some criticism. First, some stakeholders question whether the FDA has the authority to regulate LDTs. Consistent with FDA’s longstanding position, the agency argues – at length – that the FDCA gives it authority to regulate LDTs as medical devices. Nevertheless, it appears likely that laboratory stakeholders will challenge the agency’s position in court.

To date, the courts have not conclusively addressed this issue. In addition, House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) issued a statement after the reg was released, calling it an “example of executive branch overreach that will have devastating impacts on patients and families across the country” and asking that the FDA “abandon the reg, as it lacks the clear statutory authority to implement it.” It is important to note that in the midst of this reg being released, Congress is considering legislation that may provide more explicit authority to the FDA – namely, the Verifying Accurate, Leading-edge IVCT Development (VALID) Act. During a House Energy and Commerce Health Subcommittee hearing held on March 31, 2024, regarding FDA’s regulation of diagnostics, committee leaders and the sponsors of VALID were quick to express interest in moving the legislation forward after the final reg was released. Stakeholders anticipate that the Energy and Commerce Committee will continue to prioritize this issue, but action in the US Senate is less clear.

We will keep you updated on the status of the LDT reg as it is phased in and whether the VALID Act gains traction in the Senate.

In the meantime, however, we want to take note of other major final regs that the Biden administration released over the last several weeks. We believe all these regs were released before the CRA deadline, but – as noted below – some may face legal challenges going forward.

Minimum Staffing in Nursing Homes Final Reg

On April 22, 2024, the Centers for Medicare & Medicaid Services (CMS) released a final reg that will require long-term care facilities (LTCFs) to satisfy minimum nurse staffing standards with the goal of addressing patient quality of care and safety concerns. CMS estimates that approximately 80% of LTCFs will need to add nursing staff to meet the requirements. Nursing home stakeholders have strongly opposed this reg. The American Health Care Association (AHCA), which represents more than 14,000 nursing homes and other long-term care facilities, stated that they were “extremely disappointed and troubled that the Biden Administration is resolved to issue this unfunded staffing mandate despite overwhelming concerns from experts, stakeholders, and policymakers on both sides of the aisle.”

Medicaid Access Final Reg and Managed Care Final Regs

As you know from the previous two Regs & Eggs blog posts, on April 22, 2024, CMS published two final regs: the Medicaid Program; Ensuring Access to Medicaid Services (Medicaid access reg) and the Medicaid and Children’s Health Insurance Program Managed Care Access, Finance, and Quality (Medicaid managed care reg). The Medicaid access reg has a particular focus on home- and community-based services (HCBS), including direct-care worker compensation requirements, HCBS waitlists, grievance process development, critical incident reporting definitions and HCBS quality reporting. The final reg also seeks to increase transparency in payment rates. The Medicaid managed care reg includes technical and administrative processes changes in Medicaid managed care and includes provisions relating to state directed payments (SDPs), payment transparency, medical loss ratios (MLRs), wait time standards and in lieu of services (ILOS).

HIPAA Privacy Final Reg

On April 22, 2024, the US Department of Health and Human Services (HHS) Office for Civil Rights (OCR) released a final reg called the HIPAA Privacy Reg to Support Reproductive Health Care Privacy that aims to better protect the privacy of individuals who seek and receive reproductive care. The reg builds off the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy reg by prohibiting the disclosure of certain protected health information (PHI) when individuals travel to different states to seek reproductive services.

Ban on Non-Competes Final Reg

On April 23, 2024, the Federal Trade Commission (FTC) voted three to two in favor of banning noncompete clauses in all employer/employee contracts. Along with the vote, the FTC issued a final reg that finalized its proposal from January 2023 to ban non-compete clauses. The effective date of the final reg is estimated to occur in approximately 120 days, or on September 4, 2024. The reg bans new non-competes for all workers, including senior executives, after the effective date. For existing non-competes, the final reg adopts a different approach for senior executives than for other workers. For senior executives, existing non-competes can remain in force. Existing non-competes with workers other than senior executives are not enforceable after the effective date of the final reg. Questions remain on whether some non-profit hospitals are subject to the new ban, given the FTC’s potential lack of jurisdiction over these entities. The FTC may examine each non-profit hospital on a case-by-case basis to determine whether or not the ban applies, as it has stated its belief that “some portion of the 58% of hospitals that claim tax-exempt status as nonprofits likely fall under the Commission’s jurisdiction and the final rule’s purview.” The US Chamber of Commerce already announced its intent to sue the administration and block the reg from taking effect, so the reg’s future status is unclear.

Non-Discrimination Final Reg

On April 26, 2024, HHS/OCR issued a final reg regarding discrimination in healthcare. As background, Section 1557 of the Affordable Care Act (ACA) prohibits discrimination on the basis of race, color, national origin, sex, age or disability under any health program or activity that receives federal financial assistance. In this reg, OCR clarifies that discrimination on the basis of sex includes discrimination on the basis of sex stereotypes; sex characteristics, including intersex traits; pregnancy or related conditions; sexual orientation; and gender identity.

AHP Final Reg

On April 29, 2024, the Department of Labor issued the Definition of Employer – Association Health Plans (AHP) final reg. This final reg officially rescinds a reg from 2018 (the 2018 AHP reg), which intended to broaden the types of employer groups and associations that may sponsor a single group health plan (an AHP) under the Employee Retirement Income Security Act (ERISA).

DACA Final Reg

On May 3, 2024, CMS issued a final reg allowing Deferred Action for Childhood Arrivals (DACA) recipients to be eligible to enroll in a qualified health plan (QHP) through the Affordable Care Act (ACA) health insurance marketplace, or for coverage through a basic health program (BHP). CMS estimates that this reg could lead to 100,000 previously uninsured DACA recipients enrolling in health coverage through marketplaces or a BHP.

The Biden administration has certainly been busy and is not finished yet; there are a slew of proposed and final regs still in the pipeline and expected to be released over the next several months. Plus, we are not yet in reg season – the summer months when CMS drops all the Medicare proposed calendar year payments regs (like the physician fee schedule!). The cooks in the kitchen serving up regs with eggs will remain awfully busy!

Until next week, this is Jeffrey saying, enjoy reading regs with your eggs!


Join McDermottPlus and McDermott Will & Emery in Nashville May 15 – 17 as we host leading executives, investors and key decision-makers to discuss opportunities across the behavioral health sector, PPM and ASC industries and value-based care ecosystem. In between, we’ll enjoy live music and a variety of networking events.

  • Behavioral Health Forum (May 15)
    • A mix of unprecedented patient demand, a growing provider market and increasing payor support has resulted in strong investor interest in the behavioral health space. Join this new half-day program designed to help you navigate a growing sector.
  • Physician Practice Management and ASC Symposium (May 15 – 16)
    • Senior PPM and ASC executives, investors, bankers and lawyers will provide insights on the state of the market and the critical business, transactional and regulatory issues impacting the PPM and ASC industries.
  • Value-Based Care Symposium (May 16 – 17)
    • Join hundreds of C-suite leaders, investors, operators and counsel for a deep dive into the key business and policy issues shaping the value-based care landscape. Plenary sessions and fireside chats will touch on innovative joint ventures, investment trends, growth opportunities and more.

For more information, please contact Jeffrey Davis. To subscribe to Regs & Eggs, please CLICK HERE.