Gene Patents and Diagnostics: The Economics of Innovation

11 June 2012 Personalized Medicine Bulletin Blog

The increasing importance of genetic markers and diagnostic tests in the drug approval process and the delivery of health care requires consideration of who will underwrite the necessary research and development, Michael Hopkins and Stuart Hogarth argue in the recent issue of Nature Biotechnology. “Biomarker patents for diagnostics: problem or solution?” Nature Biotechnology, Vol. 30(6): 498-500. Consistent with the biomedical model, many innovators have relied on patents and the temporary monopoly patents provide to recoup the cost of innovation, but the appropriateness of this model is being challenged. Whether are not patents covering diagnostic medical tests support or spurn innovation was considered in the U.S. Supreme Court’s Mayo Collaborative Services v. Prometheus, Inc., decision, (see our March 20th post) and is currently under review by the U.S. Patent and Trademark Office (see our January 25th post). The issue also is central to the ACLU’s challenge to the patenting of isolated DNA now before the Federal Circuit in the Association for Molecular Pathology v. Myriad Genetics et al. or the ”gene patenting case” recently sent back to the Federal Circuit for reconsideration in light of the U.S. Supreme Court’s Mayo decision (see our March 26th post.) Patents for this technology are argued to be unnecessary as the cost of providing the tests are low and could prevent clinical scientists in hospital laboratories from developing and offering their services.

A Missed Opportunity

The co-authors suggest that whatever judgments are made against gene patents, the debate thus far has missed an opportunity to consider the wider issue of diagnostic patents and their role in innovation. The conclusions drawn by the co-authors were informed by a seminar convened in London in 2010 by the Human Genetics Commission, whose membership included hospital staff, diagnostic and pharmaceutical firms, research funders, lawyers and ethicists. The co-authors also note that the context of the debate differs between Europe and the United States. However, several important points are raised by the co-authors that are relevant to the ongoing debate in the United States.

Changing Regulations

For too long, the co-authors note, the gene-patenting debate has been framed by an innovation model that assumes low regulatory barriers to market entry and an easy path to market and clinical adoption. Recent evidence suggests that low-cost and therefore easy market entry is no longer the norm. Test developers are now being asked to provide more evidence, not less, and more quickly, and conventional business models do not support large-scale trials of the utility of new biomarkers. In addition, as noted in our January 24th post, the U.S. Food and Drug Administration will begin regulating laboratory developed tests offered as companion diagnostics.

The SACGHS Report

The Secretary’s Advisory Committee on Genetics, Health, and Society (SACGHS) for the U.S. Department of Health and Human Services has often been cited by those who oppose the patenting of this technology. The SACGHS committee concluded that the exclusivity provided by patents or licenses had not been necessary to ensure that tests were developed and made available to patients. What is lost in the discussion but noted by Hopkins and Hogarth is that the evidence informing the SACGHS report and conclusion was mainly limited to tests for the diagnosis of rare genetic disorders. Tests related to, for example, infectious agents and drug metabolism were neglected in the SACGHS analysis. The co-authors report that the approach SACGHS took on framing the issues and evidence split their committee, with dissenters writing that the burden of regulatory compliance and the need for clinical utility were pushing up R & D costs for test development. IP was therefore required to incentivize companies to invest in this technology.

Who Will Pay for Personalized Medicine?

The co-authors also argue that extensive evidence is necessary for a biomarker’s acceptance by drug regulators and health care providers. Such evidence includes, for example, that the biomarker accurately and reliably identifies the target population. If the biomarker is tied to a drug under development by a pharmaceutical company, the drug company has the economic incentive to fund the necessary research.  IP can serve additional strategic roles – stakeholders such as diagnostic developers, pharmaceutical companies and regulators are increasingly eager to control who provides diagnostic tests in the future, because safe, speedy and effective prescription of drugs will depend on reliable diagnostics. However, if the test is not tied to the company’s drug, incentives to fund the development of the diagnostic are less obvious. Hopkins and Hogarth cite the case of Roche’s AmpliChip CYP450 as an example of a test that has been approved by the FDA but not widely adopted because follow-up studies to establish its clinical utility were not completed. Although Roche shepherded the test through the FDA, it did not invest in the necessary clinical studies demanded for wide-spread adoption of the technology. The co-authors note that Roche holds no patents or exclusive licenses on the genes encoding CYP450 and that therefore any investment it makes in building the clinical evidence would also benefit rival companies who have entered the CYP450 market or are preparing to do so.

No Easy Answers

Hopkins and Hogarth provide no simple solution to the question of what should be done to ensure that well-validated diagnostics are made available to patients. They encourage continued public debate by all stakeholders to address the contentious issues that surround funding of research and development to generate evidence on the safe and effective use of diagnostics with clinical utility. In concluding this informative report, the co-authors argue that one point is clear: supporting innovation in the diagnostics sector while ensuring patient access to valuable new tests will require different strategies for different circumstances. Even previously controversial options, such at patented diagnostics and exclusive licenses that restrict market entrants, may have a part to play.

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