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Decoding the Use of Gene Patents

Friday, May 15, 2009

In good news, the U.S. Patent and Trademark Office has resisted researchers' overreaching in their patenting of genes, and researchers’ work is seldom compromised by patents.

The New York Times ran a story on May 13 about a lawsuit brought by a breast cancer patient and several co-plaintiffs against Myriad Genetics, a biotech firm that owns a patent to a diagnostic test for the BRCA-1 and BRCA-2 genes (not mentioned by name in the story), which are involved in a particularly dangerous form of breast and ovarian cancer. These kinds of cancers rarely respond to targeted biotech treatments such as Herceptin, so the BRCA test can help inform treatment and encourage use of preventive measures. The lawsuit apparently originated from the lead plaintiff’s discovery that this rather expensive test (about $3,000) is offered only by Myriad and must be performed on their premises in Salt Lake City, Utah because Myriad owns not only a patent for the test but also for the BRCA genes themselves. The plaintiffs think the U.S. Patent and Trademark Office (PTO) grievously erred when it granted these patents and, in fact, has erred in granting any gene patents at all. One of the academic researchers and co-plaintiffs was quoted to the effect that gene patents like this one not only increase medical costs but impede academic research.

The Times story, which I suspect was better balanced than many of the news stories soon to follow, noted that a 2006 report from the National Academy of Sciences found little evidence that gene patents had adversely affected research. As you might expect, there is more to this story, although the bottom line is consistent with the academy’s report rather than with the tenor of the Times article as a whole. Human genes can be patented, but not simply by decoding a snippet of DNA and sending a sequence of the letters A, G, C, and T to the PTO. You have to isolate and purify the gene segment in a way that does not occur in nature, and you have to establish some sort of concrete use—“utility” is the standard word—in order to satisfy PTO standards. Gene patents were extremely controversial when the PTO started awarding them (more details are available in a book published by American Enterprise Institute resident scholar Claude Barfield and me). The PTO prevailed against considerable academic and political opposition, however, and eventually the European Union followed suit. A little-appreciated part of this story is that a lot of these patents have been filed not by private firms but by universities on behalf of their researchers. As it happens, some of the BRCA patents are actually co-owned by Myriad’s neighbor, the University of Utah (see this Nature editorial).

There are really two complaints about gene patents. One is that when a gene patent gives a seller a monopoly over a product, that product will be sold at monopoly prices, which can be much higher than the competitive price—and moreover, as the plaintiff in the gene patent litigation noticed, that single seller can restrict how a diagnostic is used in addition to how it is priced. Of course, that is what we expect with patented products, and like most economists I support the granting of patents and their consequent pricing power as a tool to foster innovation.

There is another possible problem with gene patents, however: they could get in the way of research. As an academic plaintiff noted in the Times story, research often involves sifting through all sorts of genetic details including ones that happen to have been patented by someone else. One potentially disastrous scenario is a “patent thicket” in which research is hemmed in by the possibility of bumping into all sorts of patents, such as those the researcher never knew existed. Hundreds or thousands of patent infringement suits could ensue with their legendary costs and delay. In theory, elaborate patent pools could forestall this problem but that would be costly, too, in terms of patent searches and multi-party negotiations.

It turns out that researchers seldom worry about what is patented and what is not. Moreover, litigation has been amazingly rare.

A number of interested parties including the National Academy of Sciences sought to explore these problems. On the whole, the news is very good. The NAS has twice commissioned surveys led by John Walsh, a well-qualified expert, and both times, little evidence emerged that research laboratories were hemmed in by gene patents (summarized in the same NAS report cited earlier). It turns out that researchers seldom worry about what is patented and what is not. Moreover, litigation has been amazingly rare. That was documented in a 2008 article in Science magazine, which found that only six lawsuits had been filed in connection with gene-patented diagnostics and all had been dismissed or settled, apparently with negligible impact on scholarly research. Just two months ago, the journal Nature, Britain’s version of Science (or the other way around, the Brits could justifiably claim), published two articles and an editorial on gene patents. The title of one of those articles, “The Phantom Menace of Gene Patents” is a pretty good summary of the latest findings. The other article concluded that “prices of patented and exclusively licensed tests are not dramatically or consistently higher than those of tests without a monopoly”a very different scenario from that suggested by the Myriad lawsuit. An accompanying editorial, which emphasized academic gene patenting and was entitled “Property Rights,” concluded that “dire predictions that patents will cripple genetics research should be viewed with skepticism on both sides of the Atlantic.”

This is not to say there have been no problems at all. But the PTO has resisted parties’ over-reaching, such as by attempting to file thousands of gene patents simultaneously with scant attention to “utility.” And there is much to be said for broad licensing of gene patents and diagnostics based upon them. On the whole, though, gene patents are turning out to work more or less the way patents are supposed to work and have been working for a couple of centuries and more. The research process, and ultimately patients, are the beneficiaries.

John E. Calfee is a resident scholar at the American Enterprise Institute.

FURTHER READING: Calfee recently wrote “Tough Challenges at the FDA,” on how Obama’s Food and Drug Administration commissioner should avoid actions that make the drug development process more costly and inefficient, and “A Troubling Supreme Judgment” on the Supreme Court’s decision in Wyeth v. Levine.

Image by Darren Wamboldt/Bergman Group.

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