District Court Embraces Loper Bright and Overturns FDA Laboratory Developed Test Rule – What Lies Ahead?

On March 31, 2025, Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas issued an opinion and judgment in American Clinical Laboratory Association v. FDA (“ACLA v. FDA”), a closely watched case that consolidated two sets of challenges to the validity of FDA’s final rule on the regulation of laboratory developed tests (“LDTs”). Citing the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, the court found that FDA lacked statutory authority to regulate LDTs as devices and vacated the Final Rule in its entirety.

This Alert analyzes the opinion, provides thoughts on what might happen next in LDT regulation, and addresses potentially broader implications of the decision.

I. Summary of the Opinion

The consolidated complaints in ACLA v. FDA and Association for Molecular Pathology v. FDA sought relief on two separate but related counts under the federal Administrative Procedure Act (“APA”). First, each complaint claimed that the Final Rule constituted unlawful agency action exceeding FDA’s statutory authority. Second, each asserted that the Final Rule was arbitrary, capricious, and an abuse of agency discretion. The complaints sought relief in the form of a declaratory judgment, vacatur of the Final Rule, and injunctive relief prohibiting FDA from taking action in furtherance of the rule or regulating laboratory testing services as medical devices under the FDCA.

The court ruled in favor of the plaintiffs on the first count of unlawful agency action and therefore did not address whether the rule was arbitrary and capricious. Based on its finding that FDA lacked statutory authority over LDTs, the court ordered that the Final Rule be vacated and set aside in its entirety and remanded to the Secretary of Health and Human Services “for further consideration.” The court denied all other requested relief.

In its ruling, the court found that FDA’s interpretation of the FDCA as encompassing regulation of LDTs as medical devices was “foreclosed by the text, structure, and history” of the FDCA and another statute, the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), which established federal regulatory oversight of clinical laboratory testing. In the court’s view, the statutory scheme and history demonstrated that Congress had “considered the unique regulatory issues raised by clinical laboratories and the tests they develop and perform” and “addressed those issues through the comprehensive but distinct statutory regime of CLIA, not through the FDCA.” Because Congress had vested authority for CLIA implementation in a different federal agency, the Centers for Medicare and Medicaid Services (“CMS”), and because federal administrative agencies only have such authority as Congress grants them, the court concluded that Congress had not granted FDA the “regulatory power that it seeks to exercise” over LDTs.

A. Textual Analysis

The court focused first on a textual analysis of the FDCA, concluding that the statutory definition of “device” does not encompass LDTs, and that FDA had misunderstood the meaning of other words used in the statute, including the term “manufacture.”

The court adopted the plaintiffs’ characterization of LDTs as intangible “test services,” defining LDTs as “in-house diagnostic tests developed, validated, and performed by trained professionals within a single clinical laboratory.” The Government, by contrast, had argued that the Final Rule regulates “IVD test systems made by laboratories,” comprising a “set of physical components that function together to produce a test result.” The court disagreed, finding that LDTs comprise intangible services in which no “physical product is sold” and no “article of personal property is transferred such that title passes from one party to another.”

The court contrasted intangible services with drugs, devices, and other “tangible, physical products” over which FDA has regulatory authority. Applying this logic, the court distinguished LDTs from the equipment, instruments, materials, and tools that laboratories use to perform LDTs, which it acknowledged are devices subject to FDA regulation. The court also rejected FDA’s argument that the terms “apparatus” and “contrivance” within the FDCA’s statutory definition of “device” may refer to intangible processes, looking to dictionary definitions of the terms that, the court said, generally encompass a physical product or group of products.

The court also found that FDA misunderstood the meaning of “manufacture” when it determined that laboratories that assembled the components for and performed LDTs were engaged in IVD manufacturing. Looking to how this word is generally understood in “common parlance,” as well as other FDCA provisions and FDA device regulations, the court concluded that LDTs are not “manufactured” physical products.

B. Broader Statutory Context

Although finding that “the FDCA’s text alone is enough to conclude that FDA lacks authority to regulate laboratory-developed test services as medical ‘devices,’” the court also explored additional considerations that it found “reinforce[] the conclusion that the [F]inal [R]ule attempts to assert authority over professional medical services that FDA lacks.”

The court explained that “Congress has established a separate, comprehensive, specialized regulatory framework” for addressing and regulating LDTs in the form of CLIA. In enacting CLIA, the court said, Congress vested regulatory authority over LDTs in CMS, not FDA. In the court’s view, interpreting LDTs as falling within the scope of the FDCA’s regime of device regulation “cannot be sustained without rendering CLIA largely, if not entirely, pointless.”

The court characterized CLIA’s regulatory framework as “comprehensive” and cited various regulatory requirements related to quality control, training, and accreditation required for laboratories to offer LDTs as evidence that FDA regulation of LDTs is not only superfluous, but also inappropriate. In so doing, however, the court failed to engage meaningfully with the distinctions between the two regulatory frameworks that both FDA and CMS (under the Biden Administration) had considered a key reason the Final Rule was needed—namely, that while CLIA has various standards regarding quality and reliability of laboratory activities and facilities and their ability to measure certain substances and materials in biological specimens accurately and reliably (known as analytical validity), it does not entail meaningful review of the clinical utility or performance of LDTs or the accuracy with which LDTs identify, measure, or predict the presence or absence of a clinical condition or predisposition in a patient (known as clinical validity).

Additionally, the court raised the fact that “Congress has considered but declined to enact several pieces of legislation concerning the regulation of [LDTs]” as evidence to support its reasoning that Congress did not intend FDA to have authority over LDTs. Among the pieces of legislation cited by the court as considered but not enacted are (1) a 2007 bill that would have amended the FDCA to provide that “[a]ny laboratory-developed test shall be deemed to be a device” under the FDCA’s “device” definition; (2) a 2011 bill that would have required CMS, not FDA, to undertake premarket review of most LDTs by explicitly excluding them from the FDCA’s “device” definition; (3) the Verifying Accurate Leading-edge IVCT Development (“VALID”) Act of 2020 that would have created a new regulatory pathway, separate from both drugs and devices, for FDA premarket review and regulation of LDTs; (4) the Verified Innovative Testing in American Laboratories (“VITAL”) Act of 2020 that would define LDTs as “professional health care activities” regulated under CLIA and expressly excluded from the FDCA; and (5) new versions of both the VALID Act and VITAL Act introduced in subsequent congresses without success.

Lastly, in an aspect of the decision the court referred to as “extra icing on a cake already frosted,” the court reasoned that FDA’s interpretation of the FDCA is untenable because it “turns on the assumption that a breathtaking amount of criminal activity has been occurring in the clinical laboratory field for many years.” Noting that the FDCA has both civil and criminal applications, the court explained that FDA’s position (that LDTs have always been considered devices subject to its jurisdiction but FDA has declined to enforce device requirements under its policy of enforcement discretion) would mean that, practically speaking, members of the LDT industry have been engaging in unlawful activity for years and simply have not been prosecuted under a “policy of enforcement discretion that FDA maintains it is free to revoke at any time.” According to the court, this “implausible implication” affirms that “FDA’s strained reading of the FDCA flouts, rather than effectuates, Congress’s intent.”

C. Remedy

Having found that the Final Rule exceeded FDA’s legal authority, the court addressed the scope of the remedy. Under the APA, courts are instructed to “hold unlawful and set aside agency action” that violates the law. Courts typically comply with this APA instruction by remanding the rule to the federal agency that issued it. But remand can occur with or without an order in which the court vacates the rule in its entirety, which has nation-wide effect, as opposed to ordering narrower relief tailored to the parties to the case. The court looked to Fifth Circuit precedent establishing vacatur as the “default” remedy for unlawful agency action and remand without vacatur as appropriate only in “rare cases.” According to the court, evaluating whether such a rare case is presented turns on two factors: (1) the seriousness of the deficiencies of the action (i.e., how likely the agency will be able to justify its decision on remand), and (2) the disruptive consequences of vacatur.

The court found that neither factor favored remand without vacatur of the Final Rule. The court stated plainly that there is “no likelihood that FDA can justify its decision on remand,” given that the rule exceeds FDA’s authority under the FDCA. Further, the court stated that FDA has not identified any “disruptive consequences” that would support remand without vacatur. To the contrary, the court found that it would be impractical, if not impossible, to fashion party-tailored relief in this case. According to FDA’s own economic analysis of the Final Rule, the phaseout of enforcement discretion and application of medical device rules to LDTs would initially affect more than 79,000 existing tests offered by more than 1,000 laboratories and continue to affect more than 10,000 new tests every year. This would impose estimated costs of tens or even hundreds of billions of dollars, with additional billions of dollars required in annual compliance costs. The court pointed to the American Medical Association’s comments that the Final Rule would force “a wholesale shift from how the industry has operated for decades,” which would be “massively disruptive” and have a “significant and detrimental impact on patient care” as well as “a chilling effect on innovation in the diagnostic space, with resource strapped laboratories either unable or unwilling to engage in innovative test development.” Beyond the financial burden to laboratories, the court noted that the Final Rule would substantially increase FDA’s workload based on the Agency’s own estimations. Consequently, the court held that relief in the form of remand with vacatur of the Final Rule was appropriate. The court vacated the rule in its entirety and remanded the matter to the Department of Health and Human Services (“HHS”), the FDA’s parent agency, for “further consideration in light of this opinion.”

II. Looking Forward

Members of the laboratory testing industry are viewing the court’s decision as a decisive victory. See, e.g., ACLA, Federal Court Vacates FDA Rule on Laboratory Developed Testing Services, Siding with ACLA (available at https://www.acla.com/federal-court-vacates-fda-rule-on-laboratory-developed-testing-services-siding-with-acla/). Under FDA’s planned phase-out of enforcement discretion, the first compliance deadline for laboratories offering LDTs, set for May 6, 2025, would have required compliance with FDA’s medical device reporting, correction and removal reporting, and quality system complaint file requirements. Because the court vacated the rule in its entirety and found that FDA lacked legal authority to regulate LDTs, FDA cannot apply those requirements to LDTs unless there is an appeal that results in the court decision being overruled.

A. What Happens Now with LDTs?

The court’s decision raises several questions regarding the future regulation of LDTs:

Will the Government appeal? Many were surprised when the Department of Justice, representing HHS and FDA, continued to defend the Final Rule in court after the change in administration in January 2025. Some have speculated that the new administration did not have enough time to evaluate the issue prior to oral argument on the cross motions for summary judgment the court held in February 2025. Now, the current administration has 60 days from the district court’s decision to file a notice of appeal. Such an appeal is in doubt, however, and perhaps unlikely. After all, HHS under the first Trump Administration had called into question FDA’s analysis of its legal authority to regulate LDTs (see Former HHS General Counsel Robert Charrow’s June 2020 memorandum to Former Commissioner of Food and Drugs Stephen Hahn (available at https://www.politico.com/f/?id=00000174-e9b2-d951-a77f-f9fe04fa0000). Given that the administration is responding to numerous legal challenges on topics it likely considers more urgent and is pushing an agenda generally oriented toward limiting rather than expanding federal agency authority and capacity, it seems unlikely that the administration would choose to seek redress at the appellate level.

Will Congress finally act? The most direct and obvious consequence of the court’s ruling is to put the onus back on Congress to resolve the question of how LDTs should be regulated. But as the court’s opinion explained, there have been repeated failed attempts in Congress to pass LDT legislation since 2007, with the most recent round including the re-introduction of the VALID Act during the last Congress (H.R. 2369). The vacatur of the Final Rule could potentially provide renewed motivation for Congress to act and clarify the regulatory framework, but with multiple competing political priorities, slim majorities in both houses of Congress, and a highly partisan political climate, congressional action in the foreseeable future remains highly uncertain.

To the extent congressional steps are taken, any efforts will likely find champions in those members of Congress who introduced prior draft legislation or expressed strong public opposition to the Final Rule. Shortly after the Final Rule’s issuance, for example, Senator Bill Cassidy (R-LA), now chair of the Senate Health, Education, Labor, and Pensions (“HELP”) Committee, and House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) issued statements expressing that FDA lacks statutory authority to implement the Final Rule. Senator Rand Paul (R-KY) and Congressmen Brad Finstad (R-MN) and Dan Crenshaw (R-TX) introduced Senate and House resolutions, respectively, to overturn the Final Rule under the Congressional Review Act. Although the joint resolutions were unlikely to pass at that time, they served as strong statements of opposition. And disdain for the Final Rule was not limited to one side of the aisle. Shortly after the issuance of the Final Rule, Congresswoman Diana DeGette (D-CO) and Congressman Larry Bucshon (D-MD) released a statement acknowledging that although the Final Rule was a by-product of congressional inaction, it was “a burdensome rule based on an inflexible statute that was never designed to regulate in vitro diagnostics.” The vacatur of the Final Rule wipes the slate clean, leaving open a potential avenue for the introduction and passage of bipartisan legislation.

If legislation were passed, would FDA be equipped to implement it? Even assuming federal legislation could be enacted that clearly authorized FDA’s jurisdiction over LDTs, it is unclear that FDA would have adequate resources to implement it. FDA is currently undergoing a shake-up of potentially seismic proportions. Recent layoffs and other efforts to reduce the size of the federal government have affected thousands of FDA employees. Although details are murky at present, it appears that entire FDA divisions or offices may have been eliminated, and there is significant turnover among FDA leadership. There also exists concern that FDA’s user fee programs may be in jeopardy. Because the implementation of any new regulatory framework would require significant expertise and funding, FDA would likely struggle to implement such a scheme in the near term.

Is there still room for FDA to assert authority over some LDTs? The court’s characterization of LDTs as “in-house diagnostic tests developed, validated, and performed by trained professionals within a single clinical laboratory” reflects a traditional understanding of this category of clinical tests. One question that follows is whether the court’s decision to vacate FDA’s Final Rule and plan to phase in regulation of LDTs leaves open the possibility for FDA to regulate tests that do not fit squarely within the bounds of this classic interpretation of what constitutes an LDT.

It could be argued that the court’s interpretation of LDTs failed to account for what FDA referred to as “IVDs offered as LDTs” in the preamble to its Final Rule, referring to IVDs that are manufactured and offered as LDTs by CLIA-certified laboratories and used within such laboratories, even if they do not fall within FDA’s traditional understanding of an LDT because they are not designed, manufactured, and used within a single laboratory. FDA’s preamble to the Final Rule emphasized that the LDT landscape has evolved significantly since 1976 and acknowledged that, today, LDTs are often manufactured by laboratory corporations that market tests nationwide, accept test specimens from across the country, and run LDTs in large volumes. In the preamble to its Final Rule, FDA expressed concern about premarket submissions it had reviewed for IVDs offered as LDTs “showing that laboratories do not always properly validate tests or have sound clinical data to support a test’s intended use.” FDA noted that it “retains discretion to pursue enforcement action at any time against violative IVDs when appropriate.”

Given the court’s emphasis on the distinction between the intangible nature of laboratory-developed test services and the tangible nature of physical goods that FDA may regulate as “devices,” however, it seems unlikely that there is much if any room for FDA to regulate IVDs that the agency previously has considered to be improperly offered as LDTs. If FDA lacks authority to regulate any in vitro diagnostic test “services” as “devices,” it would appear to be irrelevant that those services fail to meet FDA’s definition of a classic LDT for purposes of its historical enforcement discretion policy.

The court acknowledged that FDA will have regulatory authority over test kits manufacture and commercially distributed by laboratories. Although not addressed in the opinion, the same logic would appear to support FDA regulating laboratories that manufacture and distribute physical components that can be used as part of an LDT. This might include, for example, the manufacture and distribution of reagents, test sample collection kits, or software algorithms for use in laboratory testing.

Does this mean clinical laboratories can halt all activities being undertaken to prepare for compliance with FDA’s planned phase-in of device requirements beginning in May 2025? Assuming the Government does not appeal the case, FDA will not have authority to phase out its “enforcement discretion” policy (i.e., phase in the application of device requirements) for LDTs beginning in May 2025, as it had planned, and presumably will announce that it no longer intends to do so. Laboratories that offer LDTs and do not also manufacture test kits or other FDA-regulated components will not need to comply with FDA device requirements and will be able to halt any work towards such compliance. Laboratories should carefully follow any future developments in this area, including potential federal legislation.

What about state regulation of laboratory testing? The court’s ruling affects only FDA’s federal Final Rule. It does not displace or otherwise alter state laws or regulations. In New York, the Clinical Laboratory Evaluation Program (“CLEP”) includes pre-market review of certain laboratory tests generally analogous to FDA’s premarket review of IVDs. Despite the court’s finding that CLIA “comprehensively regulates” LDT test services, CLIA does not provide the equivalent of FDA or New York CLEP premarket review, particularly with respect to assessing a test’s clinical validity. In the absence of federal regulation of LDTs other than under CLIA, it is possible that other states might consider adopting a program similar to New York’s to ensure that LDTs performed in their states or on samples taken from residents of their states are sufficiently reliable and clinically validated. However, such a program requires considerable resources and expertise and will likely be infeasible for most states.

Will this ruling affect FDA’s regulation of companion diagnostic (“CDx”) or other tests that are functionally indistinguishable from LDTs? FDA has historically approved various CDx and other tests using its medical device authorities even though those tests, like LDTs, often are not sold as test kits, do not involve the sale of any “physical product,” and do not entail “manufacturing” as that term is most commonly understood. Although a detailed discussion of this topic is beyond the scope of this Alert, the ruling brings into question FDA’s legal authority to continue regulating such tests using its medical device authorities. FDA will need to consider this issue as it contemplates the implications of the court’s decision.

Where does this leave FDA’s regulation of tests intended for emergency use? FDA historically has not applied enforcement discretion to LDTs during a declared public health emergency. For example, during the COVID-19 public health emergency, FDA insisted that COVID-19 test developers obtain an Emergency Use Authorization (“EUA”) to offer such tests. Despite some disagreement on this policy between HHS and FDA leadership during the first Trump Administration, FDA’s longstanding approach to requiring EUAs for LDTs for emergency use was adopted in COVID-19 EUA-specific guidance documents.

In the preamble to its Final Rule, and in response to comments on the rule’s prior proposed version, FDA stated that it was “not changing its existing approach to tests for emergency use in this final rule.” The court’s vacatur of the Final Rule suggests that FDA will no longer be able to approach LDTs for emergency use as it has done in the past. If LDTs are not devices, it appears FDA would be without legal authority to regulate them at all, even in a public health emergency. For the same reason, as it reviews the LDT Final Rule on remand, FDA might withdraw or substantially revise guidance documents it published concurrently with the LDT proposed rule setting out enforcement discretion policies for certain IVDs offered as LDTs for emergency use (see, e.g., Draft Guidance for Laboratory Manufacturers and Food and Drug Administration Staff: Enforcement Policy for Certain In Vitro Diagnostic Devices for Immediate Public Health Response in the Absence of a Declaration under Section 564 (May 2024), available at (https://www.fda.gov/media/178122/download)).

B. Does the Court’s Reliance on Loper Bright Have Broader Significance for Future Challenges to FDA Rules?

In finding that the Final Rule exceeded FDA’s statutory authority, the court embraced the recent Supreme Court ruling in Loper Bright, which overturned the longstanding Chevron doctrine requiring courts to defer to agencies’ construction of ambiguous statutes if the agency’s interpretation of the statute was a reasonable one. Plaintiffs had offered alternative grounds for vacating the rule, including the so-called “major questions” doctrine, which requires an agency to point to clear congressional authorization when acting on issues of major economic or political significance. While the court emphasized the Final Rule’s potentially significant economic effects, it determined that it need not consider whether the major questions doctrine applied because it had already found that the statute unambiguously foreclosed FDA’s reading of the law. Had the court relied on the major questions doctrine, it could have invalidated the rule while acknowledging potential ambiguity in the statutory language as it relates to LDTs. Instead, the court appears to have taken to heart Loper Bright’s direction that courts “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” using the tools of statutory interpretation to determine the “best” reading of a statute. In so doing, the court issued an opinion that flexes its judicial powers of statutory interpretation, finding the statutory text unambiguous despite the Government’s substantial arguments to the contrary. This decision may embolden future litigants in challenging other FDA regulations.

Ropes & Gray will continue to monitor developments in this area. If you have any questions about this Alert, please contact any member of our FDA regulatory practice or your usual Ropes & Gray advisor.