CEO SUMMARY: In September, Palmetto, a Medicare carrier serving California and seven other states, made public two draft local coverage determinations (LCDs) that revamp its coverage guidelines for molecular diagnostic tests (MDT) and laboratory-developed tests (LDT). All labs submitting claims to Palmetto would need to apply to Palmetto for each MDT or LDT it plans
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Laboratory developed test (LDT) is a term used to refer to a certain class of in vitro diagnostics (IVDs). They are clinical laboratory tests used to diagnose disease, and as such, pathologists and clinical laboratory scientists have long used LDTs to solve clinical diagnostic problems and as a way to use new technologies to address unmet clinical challenges. As a result, these medical laboratory tests are critically important to the growth of personalized medicine.
“LDTs are in vitro assays that clinical laboratories develop as testing services according to their own procedures. These tests are often created in response to unmet clinical needs, and are commonly used for early and precise diagnosing, monitoring, and guiding patient treatment,” according to the American Clinical Laboratory Association (ACLA)
The ACLA defines LDTs as laboratory services as opposed to products, and they are not distributed, nor delivered or placed into market. “They are proprietary procedures for performing a diagnostic test using reagents and laboratory equipment… essentially know-how…” writes the ACLA.
“LDTs are also used to diagnose and assess diseases and disorders for which no FDA-authorized test kit currently exists, such as rare diseases, or those with small patient populations,” ACLA says. “Indeed, in some cases, LDTs represent the standard of care. The ability of laboratories to develop custom diagnostic tests has been critical to the growth of personalized medicine and to keep pace with the changing face of disease.”
A large number of medical laboratory tests that have been in use for decades and are run daily in labs throughout the country. These LDTs have broad clinical acceptance.
LDTs are subject to increased scrutiny from the Food and Drug Adminstration, which has historically allowed them to enter the market without prior FDA approval, and to cost-cutting concerns among payers. In a report to Congress in 2014, the Medicare Payment Advisory Commission (MedPAC) showed that the costs of clinical lab tests for Medicare patients rose by 9.1% in 2012. It also showed that spending on clinical laboratory testing rose by 5.6% annually, on average, from 2003 through 2012.
FDA says that due to advances in technology and business models, LDTs have evolved and proliferated significantly since the FDA first obtained comprehensive authority to regulate all in vitro diagnostics as devices in 1976. Some LDTs are now more complex, have a nation-wide reach and present higher risks, such as detection of risk for breast cancer and Alzheimer’s disease, which are similar to those of other IVDs that have undergone premarket review.
To help health care providers and patients better rely on the thousands of laboratory tests that are used every day, on July 31, 2014 the FDA notified Congress of the Agency’s intent to issue a draft oversight framework for LDTs based on risk to patients rather than whether they were made by a conventional manufacturer or a single laboratory. This draft oversight framework includes pre-market review for higher-risk LDTs, like those used to guide treatment decisions, including the many companion diagnostics that have entered the market as LDTs. In addition, under the draft framework, the FDA would continue to exercise enforcement discretion for low-risk LDTs and LDTs for rare diseases, among others. The framework would be phased in over many years.
Southern California’s always-crazy lab testing marketplace has a new laboratory competitor. In recent months, Richard Nicholson re-entered the business by acquiring West Pacific Medical Laboratory, based in Santa Fe Springs, California. He is assembling a team of experienced professionals to put his new laboratory company on the path to sustained growth.
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