Pharmacogenomics Reporter has a fascinating article (subscription only, I think) on the impact of individual gene patents granted by the US patenting system on the future of personal genomics. Essentially, the issue for companies conducting genome-wide analysis (including SNP chips or whole-genome sequencing) is that setting up licensing deals for each individual gene makes business complex and expensive – potentially discouraging investment in the field.
On their website, personal genomics company Navigenics explains the problem:
For example, if we obtain licenses from third parties to 10 patents, each covering the use of one SNP included in our service, and each subject to a royalty of between 1 percent and 5 percent of our net sales of the service, we would be required to pay between 10 percent and 50 percent of our net sales revenue — just for gene patent licenses! [my emphasis]
The PGx Reporter article lays out the strategies being employed by various companies to deal with the problem. For instance, Navigenics has come up with its own “universal royalty model” that divides up the amount it pays for licenses according to this formula:
This approach caps the total licensing fees payable by the company to 5% of its net sales revenue from the licensed service.
The article also interviews Jorge Conde, CEO of whole-genome sequencing provider Knome. Conde takes the opportunity to define the service his company provides in as unambiguous a fashion as possible:
“Patent pools [would] … lower the transaction costs and simplify licensing especially for companies that are doing comprehensive analysis and not doing clinical diagnostics,” [...] “If a personal genomics firm wants to include an IP-protected association just for screening processes, not for diagnostic or for clinical purposes, [there should] be a central marketplace or a clearing area…”
“I think it would be beneficial to differentiate between companies that [use the] IP for clinical and diagnostic purposes and companies that want to use the associations for general screening purposes.” [my emphasis]
There’s no subtlety here: Conde wants to clearly differentiate personal genomics companies like Knome from “clinical” or “diagnostic” genetic testing.
That’s a mighty fine (if not non-existent) line to tread, but it’s one that all personal genomics companies have been walking very, very carefully ever since the field emerged barely a year ago. On the one hand, they want to sell their product as something relevant to consumers’ health; but on the other, the looming hand of regulators means they are desperate to avoid branding themselves as selling medical diagnostic tests. That makes for a balancing act that is either entertaining or enraging, depending on your perspective.
The only company in the personal genomics space that seems happy with the patenting status quo is deCODEme – but that’s hardly a surprise, given the number of gene patents owned by the company’s mothership, deCODE Genetics. deCODE’s central role in modern disease genetics is the major selling point deCODEme pushes to differentiate itself from its jazzier rival 23andMe, and the PGx Reporter article suggests that this may prove to be a successful strategy:
Over the past year, [deCODE] has launched clinical diagnostics for myocardial infarction, glaucoma, atrial fibrillation, type 2 diabetes, and breast and prostate cancer. The SNPs associated with these diseases, many of them discovered by Decode, are screened under the DecodeMe service.
However, the patents for these SNP associations have not yet issued in the US. When they do, the company expects to have an advantage over competing personalized genomics firms.
How much of an advantage that provides is yet to be seen – indeed, it seems to be an open question whether deCODE will even survive the winter, given its dwindling capital reserves and the precarious state of the Icelandic economy. The strategy might even backfire if it undermines deCODEme’s ability to play the “not really medicine” card to regulators.
So, what is to be done about the gene patenting system? PGx Reporter notes that a US government committee has released a preliminary report on the topic, which considers a range of measures to fix the looming problems:
[The committee] is currently considering whether to propose a ban patenting gene/disease associations; restrict DNA sequence patents entirely or limit them based on specific use or for diagnostic purposes only; modify the Patent Act to restrict the ability of individuals to sue companies for patent infringement if they blocked access to a genetic diagnostic; and exempt from patent infringement litigation doctors and researchers using genetic tests.
The US government clearly needs to act soon to resolve the uncertainty swirling around the young field of personal genomics, but there’s surprisingly little urgency about the committee’s progress: despite working on the report since 2004, the committee will only be releasing its draft for public comment next February and it won’t be until the end of 2009 that the final version is submitted. As the industry (and consumers) wait to see how regulations will change, technology marches on – there’s little doubt that Knome won’t be alone in the large-scale sequencing space for much longer.
So, with regulatory changes on the horizon, a financial crisis limiting consumer spending on luxury goods, emerging competition and an explosion in sequencing technology, the consumer genomics industry looks set for a tumultuous 2009.