Report: LDT market to exceed $17B

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A new report from Kalorama Information estimates the market for laboratory-developed tests (LDTs) is currently valued at $12 billion, and this figure will grow to $17 billion by 2025. The COVID-19 pandemic is driving demand for new LDTs, even as regulatory agencies duel over how to regulate the tests.

Bruce Carlson from Kalorama Information.Bruce Carlson from Kalorama Information.

The findings come from sister company and IVD research firm Kalorama Information in a new report, "The Market for Clinical LDT Services and LDT Supplies." Kalorama noted that the LDT market is driven by relaxed regulatory activity and the need for improved cancer tests.

LDTs are not a new or recent phenomenon, but due to the incredible need for testing of SARS-CoV-2, there has been a flood of new tests, and regulatory guidance for LDTs has changed dramatically. Historically, these tests were called "home-brew tests" or "in-house tests." The novel coronavirus pandemic has been instrumental in changing the landscape of LDTs, Kalorama wrote.

When no commercial tests were available, LDTs provided the infrastructure for the first detection of COVID-19 cases. This hasn't been lost on regulators and legislators, and it has shaped LDT policy for what may be a long time to come. What can be applied to COVID-19 can be applied to faster detection of cancer and other diseases.

Most of the LDTs offered today continue to be small-volume tests. However, some large-volume LDTs have emerged, often based on technologies (such as next-generation sequencing) that are not easily packaged into kits or that can be shipped to clinical labs for them to perform the test. Tests for oncology applications make up the largest segment of the LDT market, though lab-developed tests are used for a wide range of applications.

Kalorama projects the market to reach almost $17.7 billion by 2025.

Clinical laboratories can develop LDTs based on any diagnostic test technology used in the clinical lab. For some technologies, such as chemistry tests or immunoassays, automated platforms with large test menus are commercially available. As a result, in some labs, there may be less development and use of LDTs based on these technologies than LDTs based on newer technologies such as next-generation sequencing.

However, laboratories may develop tests on widely used technologies such as immunoassays to offer tests for rare diseases. Clinical laboratories may also perform tests on types of specimens that are not included in the approved labeling for a test or may have other reasons why they decide to develop an LDT.

Much of the focus and attention in recent years has been on the emergence and growing use of complex LDTs based on technologies such as polymerase chain reaction (PCR), microarrays, and next-generation sequencing. To generate test results that were not previously possible, LDTs are being developed and used in many different applications. The largest segments of this market are oncology, genetic disorders, and infectious disease, but LDTs can be developed and used for virtually all disorders.

The Kalorama report includes all clinical tests developed by laboratories for their own use, in contrast to IVD kits that are manufactured and sold by diagnostic companies for use by many different clinical labs. This definition is somewhat broader than the U.S. Food and Drug Administration (FDA) definition of LDTs. The FDA's website states: "A laboratory-developed test (LDT) is a type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory."

This significant activity in the development of new LDTs, growing revenues from current LDTs, and large addressable markets for many of the emerging LDTs have attracted the interest of investors and other companies looking for acquisitions.

Kalorama's report indicated that growth of this market is also fueling growth in the market for products sold to and used by clinical laboratories performing LDTs. In the U.S., LDTs are most prominent in the area of advanced clinical oncology testing. Demand for FDA-approved assay kits for prognostic and pharmacogenetic cancer testing is notably less than assays that have the CE Mark in Europe.

However, there is a concern that the high cost of some LDTs may limit accessibility due to reimbursement challenges. Hence, some LDTs may eventually be offered as kits by labs or IVD companies that are entering the LDT space through product diversifications as well as acquisitions. However, that transition is expected to be slow since the current regulatory environment in the country is favorable for the LDT business model, and conversion of LDT services to FDA-approved products is not an urgent priority for many labs.

There has been considerable discussion in recent years about regulation of the LDT market, and the FDA has proposed a draft guidance calling for more FDA oversight of these tests. However, at this time, the likely outcome of this discussion is not clear. The COVID-19 pandemic has changed the focus due to the need currently presented. However, some LDTs available today have already been FDA cleared or approved, and others are likely to be developed into IVD tests that a company can ship widely to clinical laboratories.

Meanwhile, new LDTs are being developed and introduced, and some segments of this market (especially cancer diagnosis, prognosis, personalized medicine, and monitoring of patients) have become very competitive. Some companies will not survive, but there are also examples of successful companies. This field has attracted considerable interest from investors and from companies making acquisitions. This is a rapidly moving, highly dynamic market.

In September 2020, the FDA was directed by the U.S. Department of Health and Human Services (HHS) to drop its pursuit of regulation of LDTs. Both the American Clinical Laboratory Association (ACLA) and the Association for Molecular Pathology (AMP) backed the HHS move. HHS stated that the action is part of the agency's ongoing department-wide review of regulatory flexibilities enacted since the start of COVID-19.

Bruce Carlson is the publisher of Kalorama Information, part of Science and Medicine Group.

Disclosure: is a sister company of Kalorama Information.

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