Gene Patents No More

Eric Schuur

As most of you know at this point, on Jun 13, 2013 the Supreme Court of the United States ruled essentially that native DNA sequences are not patentable subject matter.  The question ended up with the Supreme Court precisely because there are good arguments on both sides and, as you would expect, there was a lot of highly charged rhetoric exchanged leading up to the decision.  I’m not going to settle those questions here, but I did think it was worth a few moments musing about less technical aspects of patent issues.

I have tended to side with those who believe that gene sequences, at least the ones that exist in the body, should not be patented because they are a principle of nature—it just feels like giving too much away to me.  However, as one of the founders and early investors in Myriad Genetics shared in The Wall Street Journal, without the monopoly guaranteed by a patent, investors would not have anted up to launch a company to develop the genetic tests, certainly not at that high risk time (circa 1991) when it was all but certain if these tests would be worth anything.  Others have argued that the monopoly on the gene sequences that Myriad (and others, with respect thousands of other genes) have enjoyed have impeded progress in understanding genetic function and utility.

As with most persistent debates, both points of view are probably true in part.  From the perspective of the pro-patent camp, a large shift in how diagnostic products are developed that was necessary to bring tests such as these to market.  A huge promise of the human genome project was to provide for health care based on the sequence of an individual’s genome—personalized medicine.  But, it was a promise made, lo these many long years ago, when we really had no idea if it would actually work.  To get to market, we would need to generate a large amount of experience with these sophisticated new tests, the operating characteristics of which were largely unknown.  Would genetic prediction of cancer susceptibility actually work?  Would patients and doctors actually find the test useful?  Much different than measuring the number of white blood cells in a blood sample.

To get physicians and patients to order the tests, data on the validity of the tests was needed.  That required a lot of free testing to generate the data on the relationship between the gene variations and cancer incidence.  Myriad Genetics, as well as Genomic Health and other vendors of gene-based tests, have invested heavily in clinical validation of their tests in order to convince patients and physicians of their value.  Investors paid for much of this and patent monopolies were their reward.

On the anti-patent side of things, I wonder if Myriad Genetics has shot itself in the foot by jealously guarding its monopoly and appearing to be greedy (even after the Supreme Court decision, Myriad continues to aggressively pursue its perceived monopoly, see this article).  Stanford University and UCSF famously structured their genetic engineering patents to allow broad-based licensing, winning high levels of praise for licensing savvy and social conscientiousness.  Their patents did not meet the raucous challenges faced by Myriad.  In contrast, articles such as the one mentioned above  and this article decry the excessive costs imposed by companies of not only diagnostics, but therapeutics, as well.

Now I haven’t sat down and poured over Myriad’s (or anyone else’s) financial statements to ascertain if they really need to charge $4000 per test to recoup their investment and earn a reasonable rate of return for their investors.  But, what is clear is that that $4000 number is very high compared to what the world is used to paying for diagnostic tests.  It probably would have helped Myriad if they had been more transparent about why they needed to charge that amount, given that their soon-to-be competitors are planning to charge under $1000 in some cases.

Since that our government grants patent monopolies for the betterment of our society in general, I wonder if it might be prudent for companies and other patent holders to consider public reaction to how they handle the right to charge what the market will bear.  If the public perception is that the patent owner’s behavior is not in the best interest of society, they may be sacrificing goodwill, which ultimately, in closely watched cases, such as this one, might tip the balance one way or the other.

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