HHS Assault on Gene Patents and Diagnostic Methods

By Gene Quinn
October 8, 2009

UPDATED: 7:19pm on 10/8/2009

Today the Task Force on IP and Genetic Testing submitted its Final Draft Report (titled Final Draft Report on Gene Patents and Licensing Practices and Their Impact on Patient Access to Genetic Tests) to the Secretary’s Advisory Committee on Genetics, Health, and Society (SACGHS). SACGHS, in turn, voted to accept the recommendations, which will be passed on to Secretary Sebelius, Secretary for Health and Human Services. In this report the Committee comes to the shocking and surprisingly unfounded conclusion that “patents do not serve as powerful incentives for genetics research in the diagnostic arena, disclosure of gene-disease associations, or development of genetic tests.” This will no doubt be music to the ears of the many anti-patent advocates out there, but what makes this report, its recommendations and conclusions so bizarre is that the report itself provides facts and evidence that supports the completely opposite conclusion. To this extent it seems as if the conclusion was reached through some kind of political agenda in spite of the facts, or perhaps the report was originally written to come to a different conclusion and then was hijacked.  In any event, strap your boots on, the Committee is advising that the Secretary for Health and Human Services recommend to Congress the creation of an exemption from patent infringement liability for: (1) infringement of patent claims on genes for anyone making, using, ordering, offering for sale, or selling a test developed under the patent for patient care purposes; and (2) those who use patent-protected genes in the pursuit of research.  So gene patents would become like medical process patents; you can get them, just not enforce them.

Here are some of the juicy and alarming details from the report, which I have seen, but which I understand is not being made publicly available for reasons I do not understand. What follows is a direct quote from the report:

The findings from the case studies, literature review, and public comments suggest that, although patents offer an incentive to companies to conduct research and develop genetic diagnostics, exclusive rights are not needed to advance the development of most genetic tests for patient care that are provided in the academic setting. It is worth noting that the case studies largely did not focus on the multiplex, multiple-condition predictive genetic tests that are expected to develop more frequently in the future. While these tests will likely be more expensive to develop, patent claims on genes are unlikely to stimulate investment needed to create these tests given that such patents would protect only a component of a multiplex test. Indeed, because multiplex tests involve multiple genes, patents on individual gene molecules may create a patent thicket—a prospect discussed more fully in a later section.

The Committee based this conclusion on a number of specific findings made during the course of the study:

• Most academic scientists appear to be principally driven to carry out research not by the prospect of obtaining a patent but rather by a mix of motives, including the desire to advance scientific and medical understanding, the desire to be successful in their careers, the desire to develop treatments for disease, and the desire to earn the esteem of their colleagues.

• The main factor driving the development of genetic tests in the academic setting is clinical need.

• Patents are not needed to give scientists an incentive to disclose gene-disease associations.

• Patents do motivate some investors to fund genetics research for the purpose of ultimately developing diagnostics or therapeutics. Patents also motivate some investors to fund efforts to develop a genetic discovery into a diagnostic test kit or testing service, although factors other than patents also influence this decision. Patents on genes associated with a rare disease may discourage investment to develop a genetic test for that disease.

• The case studies show that those researchers who did not pursue patenting were willing and able to invest in developing genetic tests soon after their discovery, despite the threat that “free riders” could then offer competing testing services.

• Development costs generally do not appear to pose a significant barrier for creating new diagnostic testing services. When a gene sequence and disease association is reported, diagnostic testing services quickly arise to meet clinical need without the need for patent incentives. If the patent incentive were necessary for the test to develop, the patent holder would be the only test provider upon entering the market; instead, the patent holder or exclusive licensee typically enters a market already populated by other test developers and providers, which are then shut down through enforcement of the patent rights—a phenomenon referred to as “clearing the market.”

• Although patented discoveries described in the case studies were also developed into tests, the fact that unpatented genetic discoveries were routinely developed into clinical genetic testing services suggests that patents are not needed for development of genetic tests.

• Patents likely play a more important role in the development of genetic test kits. There are greater regulatory hurdles that must be overcome for test kits than for testing services. Public comments suggested the possibility that the exclusive rights provided by patents make companies willing to invest the time and money needed to achieve regulatory approval for test kits.

• While the Committee did not identify any specific testing services or test kits that required the patent incentive to be developed, it may be that some test kits and novel testing services would not be developed without patents.

• If regulatory oversight of genetic tests evolves toward requiring costly independent review before marketing, patent protection may be needed for companies to be willing to risk resources in satisfying the regulatory requirements.

It seems that there is a lot of wishful thinking and conclusions drawn that contradict the findings.  How can patents play an important role, but not be important or necessary? How can patents provide motivation to some investors to fund genetics research for the purpose of ultimately developing diagnostics or therapeutics, but not be warranted?  How can a report like this completely and totally (by its own admission) ignore multiplex, multiple-condition predictive genetic tests that are expected to develop more frequently in the future?  Furthermore the report even indicates that these tests will be expensive to develop, but patents will not be necessary to stimulate investment needed?  A lot of hope is being placed on the altruism of academics and their ability to research, develop, implement, deploy and conduct testing.  What experience has shown since the enactment of Bayh-Dole legislation is that academics and research scientists are very good at discovering and engaging in science for the sake of science, but that from discovery to market there is a lot of uncertainty that requires commercial enterprises to undertake feasibility and scaling research and development, which requires capital investment.  This report completely ignores the reality of the pure, government funded science and acts like through some mystical black magic pure science will translate into widespread and deployed testing, diagnostics and treatments.  What is missing from the report is any discussion regarding how that will happen.

The conclusions reached in the report are enormously difficult to understand given that in significant places finding and conclusions seem contrary to the overall conclusions and recommendations of the report.  By way of example, this conclusion seems to completely undercut the position presented:

For the most part, patents covering genetic tests and related licensing practices do not appear to be causing wide or lasting barriers to patient access. However, the case studies and public comments documented several situations in which patient access to genetic tests has been impeded for segments of the population—especially indigent patients—when these tests are offered by an exclusive provider or a limited number of providers, a practice directly enabled by current patenting and licensing practices.

So let me get this right, Congress should exempt from patent infringement liability those who make, use order, offer for sale, or sell a test a patented genetic test, but patents are not creating barriers to patient access?  Someone is going to have to explain that to me very slowly I’m afraid, because every time I read this it seems clear that this finding suggests the exact opposite of what is being suggested.  I guess the rationale is that patents are so inherently evil that even though they cause no problems those who infringe should not have to pay.

But what about the indigent patients?  Right, indigent patients, or said another way those without money, are unable to access patented genetic testing.  But how is that any different than saying indigent people are unable to afford the latest patented pharmaceutical?  It isn’t any different, and that is the point.  Those who cannot afford health care should be given the same health care as those who can, or those who have insurance.  The fact that it will be rationed for everyone is of no consequence, at least everyone will be in the same boat, right?  But moving forward with this line of thinking why not say that patents are completely unjustified and we should throw away the entire patent system.  After, Apple Computer has a whole lot of patents on the iPod and various accessories, and that raises the cost so those without money cannot enjoy the pleasures of a portable MP3 player.  Never mind that there is NO evidence to suggest patents bar access.  They simply should not exist.

Wait a minute, perhaps we are on to something here!  Maybe what we should do is simply conclude that patents are unjustified across the board.  I mean if the pharmaceutical companies and biotechnology companies, which tend to be largely right-leaning are causing problems then why not also acknowledge that the left-leaning high-tech companies that are strong Obama supporters are similarly skewing the playing field?  Why don’t we just level the playing field, throw out all patents and let India, China, Hong Kong and Taiwan import whatever electronics devices they want regardless of patents.  Obviously this has no chance to happen because while politicians are more than happy to play fast and loose with innovation policy if it pleases their base they are not about to take out and shoot their high-tech supporters.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 15 Comments comments.

  1. Adam October 9, 2009 10:17 am

    I haven’t seen the report, but from the parts you quote, it acknowledges that there are pros and cons to patents when it comes to genetic testing, and after weighing them, it recommends acting against gene patents. For example, in the second section you quote, it says that usually there are no access problems, but a number of situations were raised where it is a problem, which caused them concern. Patents are not universally good or bad, they are a tool that has benefits and drawbacks, many of which are not clear-cut or obvious. A fair analysis will reflect this complicated state. This shouldn’t confuse you, it should reassure you that the authors of the report are attempting an even-handed approach.

    But at the end of the day, despite acknowledging that there are some benefits to patents in this area, they made a judgment against them. This is how decision making works in the real world. You may disagree with the conclusion of the report, or even the particulars of how they came to it, but it sounds like you’re suggesting you can’t be against something just because you recognize it has some benefits.

  2. Gene Quinn October 9, 2009 10:55 am

    Adam-

    Yes, the report says there are no access problems caused by patents except perhaps for indigent people. Unless Congress changes the law though to order those providing testing to do so for free for indigent people then the access problem will persist. Therefore, it is intellectually dishonest to say that patents are the problem. The report quite clearly comes to the completely opposite conclusion.

    -Gene

  3. Adam October 9, 2009 11:07 am

    Gene,

    The section you quoted says that the access problems are specifically due to the tests being “offered by an exclusive provider or a limited number of providers, a practice directly enabled by current patenting and licensing practices”. This seems to contradict your assertion that the problems are not patent related. Is there other evidence in the report that this statement is not true, and patents are not the problem?

  4. OldTimer October 9, 2009 12:06 pm

    I don’t have adequate time to read this lengthy post, so I can’t comment intelligently on its contents right now. But I will make the following observation: The Obama administration has made no secret of the fact that it intends to nationalize our health care system. It would do so directly and immediately if it were politically possible. Since that is not politically possible the administration will take an incremental approach, reforming the system in a manner which will crowd out private insurance companies. Over time, we’ll end up in the same place.

    In an economic sense, patents transfer wealth from consumers to producers through higher profit margins on patented products/services. Under a national health care system the government becomes the ultimate consumer of health care, since it foots the bill. Hence, in order to keep costs down patents on medical products, pharmaceuticals, biologics, etc., must be limited. Medical patents will come under extreme pressure in the future. Welcome to the U.S.S.A.

    There is, by the way, a substantial body of literature demonstrating that the high profit margins available in the U.S. market, and only in the U.S. market, drive pharmaceutical R&D across the globe. Investors will not fund the R&D necessary to bring a pharmaceutical product to market if U.S. patent protection and FDA approval are unlikely. This literature has been studiously ignored in the current debate.

  5. Noise above Law October 9, 2009 12:28 pm

    OldTimer,

    I hear your truth, and the truth hurts.

  6. Gene Quinn October 9, 2009 12:51 pm

    Adam-

    The section I quote quite clearly concludes:

    “patents covering genetic tests and related licensing practices do not appear to be causing wide or lasting barriers to patient access.”

    A single provider has nothing to do with denying access. When there is a single provider of a test appropriate specimen’s are collected and sent to the provider, who conducts the test and returns the results. So it is simply inaccurate to say that a patent has anything to do with access even in a single provider situation. The ACLU didn’t even allege that in their frivolous lawsuit. They want another provider to be able to conduct the test again to confirm results. So it boils down to access being denied to indigent people who couldn’t otherwise afford the test even if there were multiple providers.

    -Gene

  7. Adam October 9, 2009 2:34 pm

    Gene,

    You missed “For the most part” in your last quote, which is significant.

    Regardless, the point is that the report found that some people, who would otherwise be able to receive the treatments, are not able to, exactly and specifically because of exclusive providers. You say they wouldn’t have access anyway, but that is in direct contradiction to the claims of the report: “access to genetic tests has been impeded […] when these tests are offered by an exclusive provider or a limited number of providers.” The report states that it’s the exclusivity impedes access.

    I’m not sure why you keep insisting that exclusivity isn’t restricting access. Are you suggesting the writers of the report made it up? Or are you saying the explanation doesn’t match the data?

  8. Gene Quinn October 9, 2009 2:54 pm

    Adam-

    We are never going to agree. I will just point out that the report does not say what you say it says, and if and when HHS ever decided to make this report public (which they are refusing to do… I wonder why?) everyone will see that the report is internally inconsistent throughout. You simply cannot conclude that patents do not impede access – therefore patents impede access.

    -Gene

  9. Adam October 9, 2009 4:11 pm

    I don’t understand why there’s confusion about what the report says, regardless of my personal views. I don’t think the language is vague or obtuse, but I guess we can disagree on it.

    I especially don’t think there shouldn’t even be any controversy over whether patents impede access. Hasn’t that always been obvious? It creates a monopoly, which means the market forces that keep prices down are removed, prices are higher than they otherwise would be, and fewer people can afford the products. Isn’t that what all of the people against pharma patents say all the time? Aren’t patented drugs always more expensive than generics and therefore affordable for fewer people?

    My impression was that you agreed that this is true, but thought pricing some people out of the market for a time was worth it, because we otherwise wouldn’t get the inventions in the first place. Am I wrong about that?

  10. Noise above Law October 9, 2009 5:45 pm

    Gene,

    A complimentary article can be found at:
    http://www.patentbaristas.com/archives/2009/10/09/nih-shocked-to-find-patents-work-as-expected/

  11. breadcrumbs October 10, 2009 7:55 am

    A complimentary position is taken at Patent Baristas:
    http://www.patentbaristas.com/archives/2009/10/09/nih-shocked-to-find-patents-work-as-expected/

  12. Supply October 10, 2009 9:06 am

    Wonderful discussion. It shows the absolute dichotomey of view, factual and emotional. Two points. First, patents are only one part of the incentive system that has helped put the USA at the forefront of innovation. It is an important part though. Second, innovation has a cost. It may be true that patented medicines are more expensive than generic, but they exist! The question to ask is whether they would without the US incentive system. One note on cost: In the US, we have relatively high cost for new therapeutics, but the lowest prices for generics. Elsewhere, generics are more expensive. So, for a short time, we pay for innovative new products so that in the long run we have inexpensive medicines that are constantly evolving. Seems like a reasonable tradeoff.

  13. Noise above Law October 10, 2009 1:32 pm

    Ha bread, you owe Me!

  14. Mike October 15, 2009 1:31 pm

    One thing everyone above missed (except the old timer looking forward to socialism) is that the patents help get from A) concept to B) product.

    UNIVERSITY
    Many universities develop the idea of a new product but very few make it to market. Look at the number of “products” owned by universities and then look at the number of “products” owned by start-up companies. Without patents there would be no venture capital, without venture capital there would be no start-ups, without start-ups there would be no new products.

    BIG PHARMA
    The current business model for major pharmaceuticals is to fund some university research, let a start-up do phase I and phase II testing, then purchase the start-up once a sellable product has been developed/approved.

    Anti-patent and anti-genetic sentiment has a lot of emotional appeal but very little basis in fact. The fact is that all new medicines whether initiated at a university or small company, were produced and developed to product because of patents. There would be no Phase I or Phase II research without patent protection. The reason for Bayh-Dole is because university research in the past did not lead to viable products without guaranteed patent protection. Look at all of the homeopathic treatments that have not gotten approval becuase there is absolutely NO patent incentive invest in testing.

    CONCLUSION
    Patents are absolutely required to produce FDA approved medicines.

  15. Mike October 15, 2009 1:34 pm

    One thing everyone above missed (except the old timer looking forward to socialism) is that the patents help get from A) concept to B) product.

    UNIVERSITY
    Many universities develop the beginning of a new product but very few make it to market. Look at the number of “products” owned by universities and then look at the number of “products” owned by start-up companies. Without patents there would be no venture capital, without venture capital there would be no start-ups, without start-ups there would be no new products.

    BIG PHARMA
    The current business model for major pharmaceuticals is to fund some university research, let a start-up do phase I and phase II testing, then purchase the start-up once a sellable product has been developed/approved.

    Anti-patent and anti-genetic sentiment has a lot of emotional appeal but very little basis in fact. The fact is that all new medicines whether initiated at a university or small company, were produced and developed to product because of the patents. There would be no Phase I or Phase II research without patent protection. The Bayh-Dole act was created because university research didn’t lead to FDA approved products without patent protection. Look at all of the homeopathic treatments that have not gotten approval becuase there is absolutely NO patent incentive invest in testing.

    CONCLUSION
    Patents are required to produce FDA approved medicine. Without patents we would all have equal access to nothing.