The U.S. Food and Drug Administration has announced that it will ease regulation of direct-to-consumer medical tests used to identify carriers of certain genetic diseases. These tests, which are used infrequently, will be classified as “Class 2”—low-to-moderate risk—medical devices and will thus be exempt from premarket review. With the announcement, regulators congratulated themselves for boosting innovation and benefiting consumers.

As with much regulatory policy in the Obama administration, however, even when there is some liberalization, it’s often a case of one step forward, two (or more) steps back. A far more significant—and regressive—action by the FDA in the regulation of medical devices was a decision last October to begin regulating a class of products called “laboratory-developed tests” (LDTs). They are used to diagnose and treat a wide array of illnesses, from cancer and metabolic abnormalities to infections. These tests are often referred to as “home-brew” tests because they are developed and used in a single clinical laboratory rather than being manufactured and sold by big companies. There are an estimated 10,000 of them, produced by thousands of laboratories, that perform the tests on samples they receive.

Why now? / Up to now, these tests have had little federal oversight. But that is about to change.

In 1976, Congress defined most diagnostic tests as “medical devices,” which by definition fall under the purview of the FDA. But at the time, LDTs were not widely dispersed or commercialized. They tended to be relatively simple and their results were typically interpreted where the tests were performed. The FDA thus exercised “regulatory discretion,” which is bureaucrat-speak for exempting the tests from regulation. Currently, the agency regulates diagnostic tests only if they are developed, sold, and distributed by device manufacturers as kits.

The FDA contends that LDTs have become much more complex and are used much more frequently and in higher-risk settings than they were decades ago. And, the agency says, some of the tests are defective and dangerous. Alberto Gutierrez, FDA director of in vitro diagnostics and radiological health, cites OvaSure, a test for early detection of ovarian cancer, which gave a high rate of false positives that in some cases led to operations to remove healthy ovaries.

In a guidance document published last October, the FDA announced that it intends to enforce certain device requirements “for laboratories that manufacture, prepare, propagate, compound, assemble, or process LDTs.”

(It should be noted that, in the words of attorney David Hoffmeister of the firm of Wilson, Sonsini, Goodrich and Rosati, “LDTs are already regulated—by the Centers for Medicare and Medicaid Services (CMS) through the 1988 Clinical Laboratory Improvement Amendments (CLIA), which ensure that a test is performed properly and gives reproducible results.” Specifically, CLIA regulations include requirements for establishing and maintaining quality laboratory operations and ensuring the lab is staffed by qualified personnel. However, the CMS’s oversight does not extend to determining whether a test actually has clinical validity for the patient.)

Review process / There is significant uncertainty about what the FDA’s LDT regulatory scheme ultimately will look like. It does appear that the agency intends high-risk LDTs to undergo internal review of their Premarketing Applications, which is the most stringent type of device marketing application required by the FDA. But most low- and moderate-risk LDTs will likely be eligible for third-party review, which is less rigorous, time consuming, and costly.

Such external review isn’t new: the FDA’s “Accredited Persons Program” was created by the FDA Modernization Act of 1997 to improve the efficiency and timeliness of the agency’s 510(k) process, the pathway through which most medical devices receive marketing clearance in the United States. Under the program, the FDA has certified certain third parties, so-called “Accredited Persons,” who are authorized to conduct the primary review of applications for eligible devices. The Accredited Person conducts the primary review of the 510(k) application and then forwards its review and recommendation to the FDA.

Nongovernmental, non-monopolistic regulation of consumer products operates efficiently and safely in the United States and abroad.

With the increasing complexity and use of medical diagnostics, an argument can be made for greater scrutiny of some of them, but this could be accomplished under the FDA’s Accredited Persons Program. Under such a regime, the increased regulatory burden on the makers of LDTs would likely be tolerable and the medical community would benefit from greater confidence in the tests.

But there are even better options, which needn’t involve the FDA in day-to-day regulation at all.

Another model is the way medical devices are regulated in the European Union. There, there is heavy reliance on various sets of product standards, and oversight does not involve government regulators directly. For low-risk devices, such as tongue depressors or reflex hammers, manufacturers themselves are allowed to certify that their products meet the necessary standards. For higher-risk devices, manufacturers must obtain third-party reviews from private sector “notified bodies,” which test products, inspect manufacturing systems, and verify that EU standards have been met. Following this certification, the products can be marketed.

Notified bodies are designated by the national regulatory authority (also known as the competent authority) of an EU member state to carry out one or more of the “conformity assessment procedures” required for approval of a device. Because these notified bodies compete with one another for business but need to maintain certification from a national authority, they have reason to be both expeditious and thorough. This system works well; approval of new medical devices in Europe takes only half as long as in the United States, shortening the development process by roughly two years without compromising safety.

Congress could mandate a system that more closely resembles Europe’s. Sadly, the FDA and its boosters would likely fight such a proposal tooth and nail: it’s in the DNA of regulators to oppose ceding any of their power. As former FDA commissioner Frank Young used to quip, “Dogs bark, cows moo, and regulators regulate.“Although we tend to take government regulatory monopolies for granted, they are not sacrosanct. Nongovernmental, non-monopolistic regulation of consumer products operates efficiently and safely in the United States and abroad. In this country, Nationally Recognized Testing Laboratories, the prototype of which is Underwriters Laboratories, certify more than 20,000 categories of consumer products. Many of these products, such as electrical equipment, bulletproof glass, and fire-resistant building materials, present potential hazards if they are defective. Despite the lack of direct government involvement, there is considerable respect for the work of the testing laboratories.