Oversight of Laboratory Developed Tests One Year After ACLA v. FDA: Assessing Legislative Proposals in Context

Advances in genetic medicine, coupled with recent breakthroughs in mental health and weight management, have renewed the scientific community’s attention on the role of biomarkers in the management of disease and development of new therapeutics. Similarly, the success of expedited therapeutic approval programs and a public-private shared interest in speeding the pace of clinical trials has refocused attention on the role of validating new analytes as potential surrogates. Coupled with the rapid scaling now possible with artificial intelligence (AI), we are seeing an explosion in interest in next-generation diagnostics and wellness tools, many of which are testing existing and often outdated state and federal regulatory frameworks. Unsurprisingly, this has refreshed calls to modernize, but not hinder, the development of laboratory-developed tests, including through a proposal to expand the Centers for Medicare & Medicaid Services’ (CMS) role.

Laboratory-developed tests (LDTs) are part of a continuing debate over the appropriate scope and structure of federal oversight. The central regulatory question is how to support reliable test performance and appropriate clinical use — within the existing legal framework — while preserving the ability of laboratories to adapt to changing scientific and clinical needs. That balance is increasingly difficult because many modern tests rely on complex algorithms or data analysis that can resemble device or software functions even when the test is offered as a laboratory service.

The current LDT landscape presents both opportunity and risk for laboratories, test developers, diagnostic manufacturers, software companies, investors, and drug developers. Although U.S. Food and Drug Administration’s (FDA) 2024 LDT Final Rule was vacated by a court, and FDA has rescinded that rule, the absence of a comprehensive FDA framework does not mean the absence of regulatory scrutiny. Rather, the oversight environment has become more fragmented, with FDA, CMS, state laboratory regulators, accreditation bodies, payers, Federal Trade Commission (FTC), and private litigants each retaining potential roles depending on the test, claims, technology, and commercial model.

For companies operating in this space, the most important takeaway is that LDT strategy should not be treated as a narrow laboratory-compliance issue. LDT policy now intersects with product development, clinical evidence generation, reimbursement, software regulation, promotional review, commercialization strategy, transactional diligence, and risk management. Companies that account for these issues early will be better positioned to bring tests to market, support payer coverage, withstand regulatory scrutiny, and preserve options if Congress or CMS moves toward a more formalized Clinical Laboratory Improvement Amendment (CLIA)-based framework.

What Authority Does FDA Likely Continue to Retain?

In 2024, FDA sought to formalize its long-asserted authority over laboratory-developed tests by issuing a final rule that would have regulated most LDTs as medical devices under the Federal Food, Drug, and Cosmetic Act. The rule was issued during the Biden administration after Congress considered — but ultimately declined to enact — comprehensive LDT reform legislation known as the Verifying Accurate and Leading-edge IVCT Development (VALID) Act that would have created a new category of “in vitro clinical tests” which would have subjected LDTs to FDA oversight.

FDA promulgated a regulation that was a significant shift away from FDA’s historical enforcement discretion approach and would have subjected laboratories to device requirements such as premarket review, quality system regulation, and adverse event reporting. The rule was immediately met with industry challenge, culminating in litigation before the U.S. District Court for the Eastern District of Texas, which vacated FDA’s regulation in May 2025. FDA did not appeal that ruling, and the second Trump administration subsequently rescinded the rule. This effectively reverted FDA’s oversight over LDTs to its prior limbo, with the agency continuing to assert jurisdiction over certain aspects of diagnostic products, including test components, distributed kits, and software. As a result, manufacturers and laboratories that rely on commercially distributed equipment and reagents remain subject to FDA requirements at least in some respects.

FDA’s longstanding policies governing research use only (RUO) and investigational use only (IUO) products also remain an important enforcement tool in this context. Under these policies, products that are labeled and distributed for research or investigational purposes may not be promoted for clinical diagnostic use, and FDA has historically taken action where marketing practices suggest otherwise. Written RUO-related guidance is narrow, non-binding, and unfortunately predates the advent of software algorithms as an essential component to complex or high-throughput diagnostics. Still, these policies remain relevant for laboratories that rely on RUO-labeled reagents or components to develop LDTs, as FDA may scrutinize whether such products are, in practice, being used or promoted for clinical purposes.

Together, these authorities reinforce that, even in the absence of a comprehensive LDT rule, FDA retains jurisdiction over the commercialization of the tangible inputs into LDT development, even if the agency may not regulate the laboratory service itself. Thus, FDA continues to play a meaningful role in the regulation of diagnostic testing.

FDA also regulates certain software functions associated with diagnostic testing. For example, software that meets the definition of Software as a Medical Device (SaMD) may be regulated as a device, e.g., where it is intended to analyze or interpret medical information for clinical use. This is increasingly relevant in the LDT context, as many modern tests incorporate algorithm-driven analyses, including gene profiling, risk scoring, and other data-intensive outputs. As with physical devices, FDA’s authority in this area turns on intended use, including how the software is designed, described, and marketed. Accordingly, even where an underlying test may be treated as an LDT, standalone or integrated software components may independently be subject to FDA oversight.

Despite FDA’s jurisdiction over such components even after vacatur of the LDT Final Rule, and perhaps because FDA is wary of drawing another legal challenge, the agency’s enforcement in this space has remained limited. We expect that to continue, with narrowly targeted enforcement that is focused on components of LDT services that remain neatly within FDA’s recognized device authorities or raise significant public health issues, such as misdiagnosis or underdiagnosis of serious or life-threatening conditions. Use of LDTs as diagnostics for drug use may also give FDA a jurisdictional lever, though here too, FDA may be reticent to take enforcement action. Laboratories and manufacturers should therefore continue to assess claims, labeling, distribution models, and validation support for products used in testing workflows, with special attention to the use of software in both sample analysis and results-report development and interpretation.

In parallel, CMS, state programs, accreditation organizations, payers, and the FTC may remain relevant to oversight depending on the test, the claims made, and the commercial model. DOJ’s increased attention over the use of AI in healthcare — particularly where AI is used to perform or output Medicare-reimbursed clinical care — suggests the need for diagnostics companies and providers to perform thoughtful diligence on their software providers and conduct regulatory and quality analysis on the integration of software into sample analysis, report creation, and billing workflows. Taken together, the practical result of these shifts in LDT oversight attention is not the absence of enforcement risk, but a more fragmented oversight environment requiring careful attention to the source of authority for each component of the testing ecosystem.

Emerging Opportunities for the Diagnostics Community to Shape Oversight?

In the wake of FDA’s unsuccessful effort to assert comprehensive authority over LDTs through rulemaking, attention has shifted toward alternative frameworks for oversight. Some policymakers and stakeholders have appeared to coalesce around the view that LDT oversight may be more appropriately situated within the existing CLIA framework administered by CMS, rather than through an expansion of FDA’s device authorities.

This emerging view reflects, in part, the existence of established mechanisms within the current regulatory landscape that already address elements of test quality and validity. For example, the New York State Clinical Laboratory Evaluation Program (CLEP) has long served as a model for pre-use review of certain laboratory-developed tests, including assessments of analytical and clinical validity. In addition, some LDTs have historically relied on prior FDA clearance or approval pathways, while others are evaluated through payer-driven processes such as MolDx coverage, which assesses clinical validity and utility in the context of reimbursement. Policymakers have also shown increasing interest in the potential role of certified third-party reviewers to provide independent validation of test performance. Together, these existing approaches suggest a potential path forward in which CLIA serves as the core regulatory framework, supplemented by targeted mechanisms to ensure test quality and clinical reliability without fully subjecting LDTs to the medical device regulatory regime.

Recently Proposed Legislation

On May 19, 2026, Representative Neal Dunn (R-FL) introduced the Enhancing Clinical Laboratory Innovation and Access Act of 2026, which reflects a legislative effort to recalibrate federal oversight of laboratory-developed tests by codifying a shift away from the FDA’s device-based framework. At its core, the proposal would clarify that LDTs are not medical devices under the Federal Food, Drug, and Cosmetic Act and fall within the scope of an updated and expanded CLIA framework administered by CMS. In doing so, the legislation seeks to provide long-sought jurisdictional clarity while establishing a pathway for more tailored, laboratory-focused oversight.

Rather than representing a deregulatory approach, unlike previous CMS-oriented efforts such as the Verified Innovative Testing in American Laboratories (VITAL) Act, the bill reflects a reallocation of regulatory authority, shifting primary responsibility for LDT oversight from FDA to CMS while maintaining, and in some respects expanding, requirements relating to test validity, transparency, and post-market oversight. In this respect, the proposed legislation is consistent with historical attempts to enhance LDT regulatory oversight, suggesting that future reform efforts will focus on building out the CLIA framework as the central mechanism for LDT regulation.

The window for legislative activity is narrowing as we approach November’s elections. For those monitoring the bill’s chances of success, they should note whether the legislation picks up additional cosponsors, receives committee consideration, and whether we see the introduction of a Senate companion.

Notably, CMS has prepared a Request for Information (RFI) titled “Request for Information; Clinical Laboratory Improvement Amendment (CLIA) of 1988 Regulations (CMS-3485)” and the Office of Management and Budget concluded its review of the RFI on July 7, 2026. With the imminent release of the RFI and renewed attention by Congress, this presents an immediate opportunity for public input on the agency’s CLIA regulations.

Conclusion

The vacatur of FDA’s LDT Final Rule reduced, for the moment, the impending burden that would have accompanied FDA premarket review, quality system regulation, and medical device reporting for many LDTs. However, pending and potential legislative activity, including proposals to modernize CLIA, indicates that policymakers remain focused on test validity, transparency, adverse event reporting, and patient safety. Companies should use this period to assess their LDT portfolios, identify higher-risk tests, and build regulatory strategies that can adapt to future federal action. At the same time, the evolving LDT environment creates opportunities for acquisitions, licensing arrangements, laboratory partnerships, pharma and biotech collaborations, and commercialization deals.

As covered in our previous advisories, LDTs have been the subject of significant regulatory and legislative action in recent years. We note relevant recent developments below.

• FDA Proposes to Actively Regulate Laboratory-Developed Tests After Years of Enforcement Discretion (October 2023)
• FDA Intends To Regulate Many Clinical Labs as Medical Device Manufacturers: What You Need To Know About the Laboratory Developed Test Final Rule Issued (May 2024)
• LDT Final Rule Litigation. Status of Pending Court Challenges and What May Happen Next (December 2024)
• LDTs Are Not Devices Under the FDCA: Eastern District of Texas Vacates FDA Final Rule on LDTs (April 2025)

Please contact one of the authors of this Advisory or your regular Arnold & Porter contact if you are interested in discussing strategies in this space. Among other topics, our team can assist you in assessing whether software components may independently implicate FDA’s medical device authorities, conduct due diligence, evaluate reimbursement and market access considerations, and review materials to ensure claims are adequately supported and tailored based on the current enforcement environment. 

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.