PUBLISHED:February 03, 2015

Submission to the Food and Drug Administration, Docket No. FDA-2011-D-0360

The Center for Innovation Policy (CIP) at Duke Law School works to identify improvements to federal law and policy that will promote socially valuable innovation. It is affiliated with the campus-wide Duke Innovation and Entrepreneurship Initiative (I&E), which works to foster interdisciplinary research on innovation and entrepreneurship.

CIP has specific expertise in how administrative law and intellectual property can be used to foster socially valuable innovation.  Duke Law professor Arti Rai, faculty co-Director of CIP, is a member of the Administrative Conference of the United States and the former Administrator for Policy and External Affairs at the U.S. Patent and Trademark Office.  CIP’s Executive Director, Stephen Merrill, founded and led the National Academies’ Science, Technology, and Economic Policy Program, which produced numerous influential policy recommendations, including proposed changes to the patent system that served as a blueprint for the America Invents Act of 2011. Duke/Sanford School of Public Policy Research Professor Robert Cook-Deegan, a faculty affiliate of the Center, directs the Duke Center for Public Genomics. Professor Geoffrey S. Ginsburg, a faculty affiliate of the Center, is the founding director for the Center for Applied Genomics in the Duke University Medical Center and the founding executive director of the Center for Personalized and Precision Medicine in the Duke University Health System.  He is a professor of Medicine, Pathology, and Biomedical Engineering at Duke University.

David Robinson is Senior Strategist for Research at I&E and the J. Rex Fuqua Distinguished Professor at Duke's Fuqua School of Business.  His research addresses financing of entrepreneurial firms.

On behalf of CIP and I&E, we submit the following brief comments on the FDA’s proposed “Framework for Regulatory Oversight of Laboratory Developed Tests.” 

Administrative Law and Process

Notice-and-Comment Rulemaking

Many commentators are concerned about the administrative process by which this guidance has been developed.  At the hearing held on January 8-9, 2015, the National Venture Capital Association (“NVCA”) among others noted that the large number of questions that remain open counsel in favor of FDA’s issuing another version of the guidance before it is finalized. 

In fact, conventional administrative law principles strongly indicate that an FDA decision of this nature and magnitude should be implemented through notice-and-comment rulemaking. See 5 U.S.C. 553.  Notice-and-comment rulemaking would also assist the FDA in defending against potential legal challenges to its actions.  Under the U.S. Supreme Court’s recent decision in City of Arlington v. FCC, 133 S.Ct.1863 (2013), an agency that follows formal procedures receives Chevron deference even when it makes “jurisdictional” interpretations of its organic statute. In contrast, under the Court’s decision in United States v. Mead, 533 U.S. 218 (2001), statutory interpretations made in less formal contexts like guidance documents do not receive such deference.

Notification Requirements

            From an administrative process standpoint, it is also unclear why FDA is immediately asking all laboratory-developed testing (LDT) services to notify, or register and list.  Under the Clinical Laboratory Improvements Act (“CLIA”), LDT labs have already registered with CMS.  Prior to asking for potentially duplicative information, FDA should begin with the CMS registry. 

Scope of Guidance

            Administrative efficiency, and concern for undue negative impact on private-sector innovation, also suggest that the guidance could be narrower in scope.  Most commentators appear to agree that the area of greatest public health concern is tests that apply complex, “black box” proprietary algorithms.  As the Institute of Medicine’s prominent 2012 report on “omics” testing recognized (1), absent greater transparency in the data and computer code used to develop these tests, they may pose some risk.  Limiting a requirement for premarket review to such tests would best balance the dual objectives of promoting innovation and minimizing risk. It would also represent the most prudent use of scarce regulatory resources.

            Coordination With CLIA and CMS

As for other tests, enhanced post-market surveillance is likely to be the most cost-effective regulatory route.  In order to conserve scarce agency resources, the CLIA program could be expanded to conduct such post-market surveillance, including monitoring for adverse events.

Additionally, to the extent that FDA approval of a diagnostic led to CMS coverage, following the Cologuard® precedent, firms would be more likely to seek FDA review voluntarily.  Another possibility would be the option of initial FDA approval for analytic validity, with a clear path to further evidence development for purposes of reimbursement.  Measures that incentivized voluntary use of the FDA route would diminish the number of tests that have the same “intended use” as an FDA-approved test but are not themselves approved by the FDA. 

In general, small, entrepreneurial enterprises may be disproportionately harmed by mandatory FDA review.  Recent changes in the intellectual property regime combine with the prospect of FDA review to further diminish prospects for small players.

Intellectual Property

A number of academic studies indicate that patents are very important for FDA-regulated medical device entrepreneurs, particularly those backed by venture capital.  The rationale is straightforward: without the protection provided by patents, investment in the clinical studies required to secure FDA approval is not likely to be forthcoming.  Indeed, according to the 2008 “Berkeley Patent Survey,” 94% of venture-backed medical device firms have patents, and they hold an average of 25 patents (2).  Another recent survey of VC investors in the medical diagnostic space found that these investors rank “intellectual property risk” as the third most important risk, immediately behind regulatory risk and reimbursement risk (3).

In the last few years, intellectual property risk in the area of diagnostics has increased substantially.  A number of Supreme Court decisions, particularly the Court’s 2012 decision in Mayo v. Prometheus (4), have made patents in the diagnostic arena considerably more difficult to secure. 

Weak diagnostic patents combined with FDA review requirements could substantially chill VC investment.  Specifically, given recent cases weakening patent protection, such protection may be insufficient to warrant the private investment in clinical studies required to get FDA approval. Already, according to the NVCA’s testimony at the January 2015 hearing, only 1 to 5 VC-backed companies have emerged in this space in the last few years.  

A requirement for FDA review may be also be problematic for competitors of tests that are already approved by the FDA.  The act of seeking FDA review could alert holders of patents associated with approved tests to the possibility of patent infringement, chilling competitor investment even when the underlying patents are not necessarily valid.


  1. IOM, Evolution of Translational Omics: Lessons Learned and the Path Forward. 2012.
  2. Graham, S.J.H., Merges, R.P., Samuelson, P., and Sichelman, T. Berkeley Technology Law Journal  2009. 24(4) 1255-1327.
  3. Ackerly, D.C., Valverde, A.M., Diener, L.W., Dossary, K.L., and Schulman, K.A., Fueling Innovation in Medical Devices (and Beyond): Venture Capital in Health Care.  Health Affairs 2009. 28(1): w68-w75.
  4. Rai, A.K., Diagnostic Patents at the Supreme Court. Marquette Intellectual Property L.Rev. 2013. 18:1-9.