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Nov 15, 2010 (Vol. 30, No. 20)

Innovation Can Prosper in a Regulated Environment

Contrary to Popular Belief, Government Intervention May Be a Good Thing

  • Regulation fosters innovation. This phrase articulates a point of view that many will find inherently contradictory. How can it be that rules allow inventiveness to roam and develop freely? Yet, it is true. Regulation has helped foster major innovations in many industries. For example, the molecular device industry needs regulation to ensure patient safety and, if developed and applied correctly, that regulation will foster major innovation and bring greater investment.

    Today, the molecular diagnostics industry finds itself at a specifically critical juncture. In the past, laboratory-developed tests (LDTs) were developed and performed within single institutions. Under the Center for Medicare and Medicaid Services (CMS), the Clinical Laboratory Improvement Act (CLIA) of ’88 became the safeguard of laboratory quality standards, based on the fact that tests are developed and performed within the walls of one institution, for that institution, and focused on ensuring the quality of that specific laboratory.

    Commercial companies, however, have expanded this practice, developing and marketing LDTs nationwide in large laboratories, testing patients from many areas. Under the current regulatory framework, they can do this by simply complying with CLIA standards focused on the laboratory. Beyond the increased numbers in testing, the tests themselves have become more complicated and provide greater risk to patients as doctors rely on them to make important therapeutic decisions.

    As a result, the FDA began looking at regulating those tests that it deemed no longer intuitive to physicians, due to their underlying technology and algorithms. This led to guidelines for regulation of so-called in vitro diagnostic multivariate index assays.

    However, the agency started to recognize that complexity wasn’t the most important factor in LTDs—more important is the “risk” associated with the outcome of the test. For example, the outcome of a relatively one-dimensional test for the expression of the Her2 neu gene in a breast cancer patient decides if the patient is a candidate for Herceptin or not.

    Because a major therapeutic decision hinges on the outcome of the test, it’s not its complexity that is important, but its robustness, reliability, and reproducibility. It is on these aspects that the FDA now wants to focus on a more risk-based approach to regulation, acknowledging that many new LDTs have important therapeutic implications. A lab that complies only with CLIA standards is no longer sufficient.

    The ensuing debate has many in the laboratory industry pitted against regulation. One of the main arguments offered by the large clinical laboratory community is that regulation stifles innovation. Apart from the fact that concrete examples are painfully lacking, which is a sign in itself, we believe that it is actually the opposite. But, there is another, even more important point: who wants to knowingly champion innovation without transparent and solid rules to safeguard the safety of patients?

    Even if the current system of drug development is widely criticized, no one would advocate that industry go without regulations. Similarly, as molecular diagnostics and therapeutics are converging and doctors rely more and more on diagnostics to make lifesaving decisions, we must ensure that LDTs, first and foremost, are providing the most precise information to doctors and patients.

    Ensuring patient safety can still provide a platform for innovation which can and has thrived with regulation in place. Take, for instance, the automobile industry. Densely populated Europe needed solutions to cut back on damaging emissions from the glut of cars. However, it was California, the world’s eighth largest economy, that started driving more regulation on car emissions and safety.


Readers' Comments

Posted 02/10/2011 by Esah Ali

Dr. Sixt's point is well taken.  The important gauge to pay attention to would be one that measures when the market suffers due to over-regulation.  However, unlike banking or taxation, my belief is that biotechology becomes more relevant/trusted once it has been thru a thorough vetting process.  It's interesting how the political and economic models have now jumped on the scientific bandwagon and accepted peer-review as part of that same "vetting process".

Posted 11/24/2010 by Dr. Jack Coupal

It's ironic that Dr. Sixt uses California and motor vehicle regulation as an example. There have been many high-tech start-ups in California  because of the climate and availability of talented people. However, the heavy regulations and high taxation in California have driven many of those small firms to transfer their fragile start-up businesses to border states and Texas to escape those very regulations and taxes.

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