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Why the Biotech Industry Is Rejoicing Over the End of Gene Patents

As it turns out, biotech firms don’t really want to own your DNA after all.
Photo via Wikimedia Commons

On the surface, last week’s Supreme Court ruling that human genes cannot be patented looked like a huge blow to the biotech industry, which collectively holds thousands of patents on isolated DNA sequences and has a vested commercial interest in protecting these intellectual property rights. But as it turns out, biotech firms don’t really want to own your DNA after all.

To get a sense of the broad scope of gene patenting, consider this: Since 1984, the US Patent and Trademark Office has issued around 40,000 patents related to human genes, covering around 20 percent of the human genome, according to a 2005 study in Science. A more recent estimate, published in March in Genome Medicine, found that as many as 41 percent of of the human genome has actually been claimed by at least one patent.

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Thursday’s Supreme Court ruling would appear to challenge these claims. The court ruled unanimously that patents on raw DNA—the natural DNA found in the human body—were invalid, while upholding patent protections for modified genetic material, including complementary DNA, or cDNA, which is synthetically created. Moreover, the ruling applied to all gene patents, not just those on human DNA.

But in a surprise twist, the NASDAQ index for biotech companies—and the stock price for Myriad Genetics, whose patents were at the center of the Supreme Court case—actually rose after Thursday’s ruling. Although both have fallen slightly since, it looks like biotech investors are pretty happy about how the court came down on the gene patent issue.

According to an analysis on gene patents published last month in Nature Biotechnology, the number of patents on raw, or natural, DNA has been steadily declining since 1999, while other types of gene patents—including patents on synthetic DNA and on methods of diagnosing DNA—have been rising. Between 2000 and 2010, the percentage of gene patents that claimed human DNA sequences has declined from 58 percent to 19 percent, while the percentage of gene patents that claimed synthetic DNA has risen from 14 percent to nearly 40 percent, a trend that researchers attribute to the realization among biotech companies that its hard to profit off of patents on raw DNA. In other words, it doesn’t really matter who owns a gene—it’s what that they do with it that counts.

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“What the Supreme Court did do was create a clear distinction between what they consider natural genomic sequences, and cDNA, or complementary DNA, which is synthetic, but basically mirrors the sequences found in nature—the Supreme Court says you can patent that kind of stuff,” said Greg Graff, a Colorado State University professor who co-authored the Nature Biotechnology study. “That's what gave the biotech industry more of a shot in the arm, because most of the commercial products tend to hinge on these synthetic concepts.”

“The patents on raw genetic data were never the most valuable patents to begin with,” Graff added. While, hypothetically, the Supreme Court ruling could affect small biotech companies whose main assets are their intellectual property rights on raw DNA, without some additional innovation—a way to modify that DNA or a method of diagnosing the sequence—those companies probably didn’t have much value in the first place.

"They drew a line in the sand between genomic and cDNA. Industries will adapt fairly rapidly."

That’s not to say that the Supreme Court ruling isn’t going to shake things up in the biotech industry. In the realm of diagnostics, the ruling is likely to promote more competition for genetic testing, breaking up the monopolies that companies like Myriad had over testing for genetic mutations, and, theoretically at least, lead to more competitive pricing for these types of tests.

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Myriad, for example, had the patent on BRCA1 and BRCA2, two genes associated with breast and ovarian cancers, and thus had a monopoly on testing for these genes. In the wake of the Supreme Court’s ruling, Bio-Reference Laboratories and Quest Diagnostics, two Myriad competitors, have already announced plans to offer BRCA1/2 testing before the end of the year.

And the BRCAs aren’t the only disease genes that have been patented by pharmaceutical companies. The patent on the polymorphisms associated with Parkinson's disease, for example, is held by 23andMe, a Silicon Valley-based biotech company. Magainin Pharmaceuticals, in Pennsylvania, holds several patents on genes related to asthma and allergies. Bio-Rad, a California pharmaceuticals company, has patents on the gene for hemochromatosis, a mutation that causes the body to absorb too much iron from food. Athena Diagnostics, in Massachusetts, has the patent on mutations linked to Charcot-Marie-Tooth disease, an inherited neurological disease that causes loss of muscle and touch sensations.

Other patents exist for genes identified with colon cancer, cystic fibrosis, late-onset Alzheimers, spinal muscular atrophy, and others. In most cases, patent owners have granted licenses to laboratories that perform tests on these diseases. Bio-Rad, for example, reportedly charges a royalty of more than $20 per hemochromatosis test, according to the National Institutes of Health. Theoretically, the Supreme Court ruling will lower these costs as other genetic testing becomes available.

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The more significant ramifications of the Supreme Court ruling will be for companies like Myriad, who have used their patent to hold a monopoly on genetic testing. Other companies that could be affected include Athena Diagnostics, which has monopolized testing on some neurological disorders, and the Miami Children’s Hospital, which has restricted testing for Canavan disease, a degenerative nerve disorder that occurs in infants.

Overall, Thursday’s ruling will likely open the doors for innovation in the field of diagnostics, giving firms and researchers the opportunity to find new ways of using DNA data—a development that biotech investors, at least, appear to see as a net positive for the industry. Moreover, the Supreme Court’s decision to uphold patents for synthetic DNA and the processes by which DNA data is used means that the most valuable intellectual property for biotech firms  will remain protected.

“There are questions about how much effect this ruling will have, even on Myriad,” Graff said. “Only 19 of their patents contained the kind of claim that was being challenged. But as a company, they have hundreds and hundreds of patents. They've also got a whole bunch of business strategy protections around the kit. Clinical data that supports the efficacy of their technology — they've got a lot of advantages that keep them as the leader in the BRCA diagnostic.”

Beyond human gene patents, Thursday’s ruling was also welcome news for the agricultural biotech industries, including GMO giants like DuPont Pioneer and Monsanto, which are among the top 25 assignees of gene patents.

“Given the general ethos of the anti-GMO position, this should be an overall pleasing result,” Graff said. But, he added, gene patent claims filed by agribusiness companies usually just use the raw DNA patent as a jumping off point, and then go on to cover all of the proprietary modifications down to the actual plant that contains the modified DNA.

“[The ruling] reinforces what has already been in practice, and adds some more certainty to the entire industry,” Graff said. “I would suspect that we are going to see some follow-up cases, but they did a good job of rendering a decision that seemed fairly clear. They drew a line in the sand between genomic and cDNA. Industries will adapt fairly rapidly.”