Regulatory Reckoning, Revisited: We Wrote the Playbook for a Rule That Got Struck Down
In February 2024, Max Schmid and I published a whitepaper called Regulatory Reckoning. Its premise was simple: the FDA was about to pull laboratory-developed tests under the same oversight as in vitro diagnostics, and the tools and diagnostics companies whose products sit underneath every LDT workflow needed a plan. We laid out a four-part playbook — reassess the portfolio, build regulatory and clinical muscle, professionalize quality systems, engage the agency — and argued the smart move was to start before the deadlines forced it.
We were right about the rule. We were wrong about its survival. And the gap between those two facts is the most useful thing the whole episode has to teach.
What actually happened
The rule didn't just arrive — it arrived almost exactly as drafted. The FDA finalized it on May 6, 2024, codifying that LDTs were devices and laying out a phased four-year wind-down of enforcement discretion, with the first quality-system obligations due in spring 2025. For a year, the playbook looked prescient. Companies staffed up regulatory teams, mapped RUO products against IVD pathways, and started the long quality-system slog.
Then the floor gave way. On March 31, 2025, a federal court in the Eastern District of Texas vacated the rule in its entirety, holding that the FDA never had the statutory authority to regulate LDTs as devices in the first place — that Congress had handed laboratory oversight to CMS through CLIA in 1988, not to the FDA through the device statute. The timing wasn't an accident: the rule landed in the brief window after the Supreme Court dismantled Chevron deference, and it became one of the first high-profile tests of how far an agency could stretch its own mandate without a court second-guessing it. The agency declined to appeal, and on September 19, 2025 it formally rescinded the rule, reverting the regulation to its pre-2024 text — a tidy administrative epilogue to a rule the court had already erased. As of today, LDTs sit roughly where they sat in 2023: under CLIA, under CMS, under enforcement discretion.
So the forcing function we built a playbook around no longer exists.
What we got right, and what nobody priced in
Here's the part worth being honest about, because revisiting a public call a year and a half later is the only way these exercises are worth anything.
I'll own the scorecard: we called the rule right and its survival wrong. Wrong again — which my wife could have told you for free, and with a better track record than mine on my own confident predictions. We analyzed the rule on its merits: what it required, whom it hit, what to do about it. What we didn't model was the possibility that the rule would be erased not by lobbying or a softer final draft, but by a court deciding the agency lacked the authority to issue it at all. In early 2024, that scenario sat at the edge of the distribution. The collapse of Chevron moved it toward the center, and the litigation did the rest.
The lesson isn't "we should have predicted the docket." It's that in a post-Loper Bright world, the binding constraint on a diagnostics regulation may be a judge's reading of a 1988 statute, not the agency's guidance — and strategy has to track the legal and political environment, not just the regulatory one.
The 2024 playbook, re-graded
The interesting question isn't whether the rule survived. It's whether the advice did. Re-graded with a year and a half of hindsight, most of it holds — because almost none of it depended on the FDA actually following through.
| 2024 recommendation | Verdict | Why |
|---|---|---|
| Shift the portfolio from RUO toward IVD-grade products | Still holds | The demand-pull was never only the FDA. Reimbursement (MolDx/PAMA), pharma companion-diagnostic partnerships, and hospital procurement increasingly want IVD-grade evidence and documentation regardless of the mandate. The rule would have accelerated this; its death doesn't reverse it. |
| Build regulatory, clinical-development, and medical-affairs capability | Still holds — more so | Clinical validity is what gets a test reimbursed and what a pharma partner requires to co-develop. That was true before the rule and is true after it. Companies that built this muscle are ahead, not stranded. |
| Professionalize quality systems (QMS / CAPA) | Still holds | ISO 13485-grade quality is table stakes for any company with genuine IVD or global ambitions. The deadline that drove the urgency has moved, but the destination hasn't — and the work compounds whether or not a rule is ever pointing a clock at it. |
| Engage the FDA and track its expectations | Recalibrate | Necessary but insufficient. The decisive action moved from the agency to the courts. Watching FDA guidance while missing the litigation — and the Loper Bright shift underneath it — would have left you reading the wrong document. |
The through-line: the playbook was a market-positioning plan wearing a compliance costume. Strip the costume and the plan still stands.
The forcing-function fallacy
The deeper mistake the industry kept making — and that the rule's death exposes — is treating regulation as the reason to professionalize rather than one forcing function among several. The companies that prepared well didn't do it because the FDA told them to. They did it because reimbursement, pharma partners, health systems, and their own ambition to scale all demand the same thing the rule would have demanded: clinical evidence, quality, documentation, and a test that behaves like infrastructure rather than a science project.
The clearest proof is in the market, not the Federal Register. LDTs are thriving. The specialty labs running ahead of the field right now — Natera, Guardant, GeneDx, alongside the broader set of comprehensive-profiling players — are compounding whether their flagship tests are FDA-cleared or run as LDTs. The regulatory status of the assay turns out to be almost beside the point. What separates the winners is something the rule never addressed.
That something is the live question I keep coming back to as the great diagnostics tension — centralized reference labs versus decentralized, distributed testing. The tension is genuine, and outside the U.S. it's still wide open. But inside the U.S., the large labs are quietly running away with it, and not because they run better assays. As my partner Andrew Aijian has laid out, they're spinning a flywheel: routine biomarker testing feeds large multiomic, clinically-annotated databases; those databases draw in pharma and academic partners; the partnerships surface novel signatures and algorithms; the validated algorithms fold back into the assay platform and drive utilization; and higher utilization spins the whole thing faster. A handful of comprehensive-profiling leaders — Caris, Tempus, Foundation Medicine, Guardant, and Natera among them — are already building versions of this. Each turn of the wheel makes it harder for a hospital lab or a distributed-kit vendor to catch up, because they can't easily replicate the data asset at the center. As biomarkers evolve from molecules toward algorithms, that gap widens. The FDA rule would have raised the compliance bar for everyone; it would have done nothing to slow this flywheel — which is the force actually reshaping who wins.
So the gravity didn't lift when the rule was vacated. It was never coming from Washington in the first place.
This is the same argument I keep making in different clothes. Biomarkers don't become markets until they become workflows. The future of diagnostics is systems, not tests. Precision medicine is becoming an operations business. A regulation that mandates rigor is just one more form of the rigor the market was already going to extract. If your entire LDT strategy was a compliance project, the vacatur was a reprieve. If it was a market-positioning project, the vacatur changed your timeline and nothing else.
What to do now
Three things. First, don't unwind the preparation. The threat is dormant, not dead — a future administration could try again on firmer statutory footing, Congress could revive a VALID-style bill, or states could move on their own. More importantly, the commercial reasons to be IVD-ready outlived the rule. Second, watch the right surface. The action in U.S. diagnostics regulation now runs through CLIA modernization, MolDx coverage decisions, and the courts — not a single FDA rulemaking. Third, mind the divergence. While the U.S. has effectively reverted to enforcement discretion, Europe has gone the opposite direction with IVDR, tightening evidence and notified-body requirements. Any company operating across both is now managing a widening gap between two regulatory philosophies — which is its own essay, and the next one I'll write.
The meta-lesson is the one I'd most want a CEO to take away: don't outsource your strategy to whether a rule survives a court challenge. Build for the market you're actually in — the one with the flywheels, the reimbursement bar, and the partners who demand rigor — and let the regulation, if it ever comes, be a tailwind rather than the whole reason you moved.
This is a personal essay. The views expressed are my own and do not necessarily represent the views of DeciBio, its clients, or any affiliated organizations. Nothing here should be interpreted as investment, medical, legal, transaction, or clinical advice. The underlying analysis draws on Regulatory Reckoning: Navigating the FDA's Laboratory Developed Tests Regulation, co-authored with Maximilian Schmid, M.D. (February 2024).