Friday, December 06, 2013

The way regulations are enforced sometimes feels like the Prisoner's Dilemma scenario from game theory. If everyone ignores a particular rule, FDA is essentially powerless to enforce it. On the other hand, if anyone is about to go legit, it's in everyone's interest to be the first one out of the coaltion.

With that in mind, the recent announcements regarding NGS and RUO and the 23andMe warning letter should take on extra significance. Combined with February's announcement of the first Sanger clearance, it is clear that the game has changed and it's time for everyone else to cut a deal while they still can. 

In the bad old days of January 2013, the LDT business model was looking very strong and it was pretty easy to make a case that many molecular diagnostics didn't have a better path to market.

Back then, FDA hadn't cleared the newest molecular technologies, so they were unable to make much of a dent on the issue of RUO marketing abuse and it appeared the DTC genomic model was continuing unabated. But because they couldn't crack down on RUO marketing, FDA couldn't compel the newest technology to come in for review. Worst of all, the lack of quality and accountibility drove prices down, making good work more difficult to sustain and regulation more threatening. It was a classic death spiral... or vicious cycle, if you prefer. 

But that was January. In February, FDA issued the first Sanger clearance to Life Technologies. It was a modest one (for HLA) but a clearance, nonetheless. Then a couple weeks ago. FDA cleared two Illumina NGS assays for CF, but most news stories and press releases really buried the lede: FDA also cleared the instrument itself and a kit of general-purpose reagents for the instrument. We're used to seeing seeing companies act as though their assay clearance is a platform clearance... but Illumina actually pulled it off. There is now such a thing as a cleared next-gen sequencer that can be used for many purposes. And in today's news 23andMe has ceased marketing in compliance with FDA's directive. It's not clear at this time the path back to providing health information to new customers.

We had a long run there where you could win a modest amount by betting against the house. That run appears to be over and the smart money is already shifting to a more conventional play. After years of playing a weak hand, FDA is finally holding the best hand at the table. Now we just need to work on raising standards to the point where payers are willing to pay more for high-value diagnostics.

Tags: Enforcement, FDA, LDTs, RUO

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