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Innovation Boom or Bust? Industry Gauges Impact of SCOTUS Ruling on Gene Patents

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Industry reactions to the US Supreme Court's decision to invalidate patents on isolated gene sequences were immediate and ranged from elation to disappointment. However, the true impact of the ruling on drug and diagnostics developers will take some time to unfold, and there are differing expectations among industry observers and players regarding that impact.

In the immediate aftermath of the ruling, researchers, labs, and test developers agree on a few basic points. First, as a result of the court's decision to invalidate Myriad Genetics' patents on isolated BRCA1 and BRCA2 gene sequences, a number of similarly constructed patent claims awarded by the US Patent and Trademark Office will have to be re-evaluated. Second, labs, researchers, and test developers looking to patent gene-derived products will have to construct much more specific patent claims describing novel applications of a gene-disease association. Third, as competitors quickly launch tests analyzing previously patent protected gene markers while patent re-examinations are taking place, there may be uncertainty in the market place as to when these labs truly have freedom to operate or when they are infringing.

Noting that the Supreme Court upheld Myriad's claims on complementary DNA, analyst William Quirk at the investment firm Piper Jaffrey wrote in a note that the use of cDNA is “unavoidable” in current diagnostic methodology and as such, many would-be competitors would likely infringe Myriad's existing cDNA patents. Quirk characterized announcements from several labs that they would launch BRCA testing services after the court's ruling as “unwanted noise” for Myriad, stating that the company “will win any IP suit and/or see little fundamental impact.”

On the contrary, several directors of commercial and academic labs that PGx Reporter spoke to are sure that Myriad's cDNA IP can be easily worked around so that competing tests will not infringe those patents. In authoring the Supreme Court's decision on Myriad's patents, Justice Clarence Thomas left open the possibility that although cDNA passed the patent eligibility test under Section 101, it may not pass muster under Section 102 or 103, which require a patent-eligible invention to be novel and non-obvious.

Robert Cook-Deegan, director of Duke University's Center for Genome Ethics, Law & Policy, predicted that it is unlikely that Myriad or any other lab will go after competitors at this point. “The odds of [Myriad] suing are low; the odds of them suing and winning are lower still,” Cook-Deegan said. “The odds of them suing and … the American Civil Liberties Union,” which brought the case against Myriad, “and patient groups doing nothing are nil. The game has changed.”

What industry players disagree on is the extent to which this ruling will impact the life sciences space, and whether the effect of the decision will be largely good for future medical innovation or make it more challenging to launch novel products. There are some 4,000 so-called gene patents that the USPTO has granted over a period of some 30 years, but estimates vary as to how many of these are directed at isolated gene sequences that will now be invalidated.

Many in the industry have pointed out that other than Myriad, there are only a handful of companies that depend on broad patents on diagnostic methods and isolated genes to establish a monopoly in various testing markets. As such, the Supreme Court's ruling on gene patents may not have the sweeping impact that some fear.

Ultimately, it still remains to be seen whether the court's decision will be a boon for medical diagnostics spurring competition, lowering prices, and limiting sole-source tests like Myriad's BRACAnalysis, or whether this will spook the investment community from backing innovative tests. There are arguments on both sides.

On the one hand, many labs and test developers view this latest decision on gene patents as one that will spur competition in medical diagnostics. “The quality of testing will improve given a free market,” Heidi Rehm, chief laboratory director of the Laboratory for Molecular Medicine at Partners HealthCare Center for Personalized Genetic Medicine, told PGx Reporter. Instead of a market where the ability to offer a genetic test at all is determined by how many patents the lab exclusively controls, labs will have to “compete on the quality of their tests, their service to customers, turnaround time for results, quality of the interpretation, how well interpreted the data is, and how easy the reports are to understand,” she said.

For example, Rehm's lab is planning on launching a genetic test on Long QT syndrome. The University of Utah exclusively licensed a number of gene patents for Long QT syndrome to DNA Sciences in the late 1990s, and those patents are now held by Transgenomic, which obtained them though acquisition.

On the other hand, industry observers fear that the decision perhaps will give investors little reason to back the development of novel tests if there is no guarantee that they can recoup their funding during a period of patent exclusivity. Particularly in the realm of advanced diagnostics methods, such as next-generation sequencing, Tim Worrall, a partner at the law firm Dorsey & Whitney and a patent expert, acknowledged that the Supreme Court's decision on gene patents may fuel innovation but wondered how labs will keep competitors from copying novel products.

“Next-gen sequencing technologies will not have to worry about whether they will owe royalties to a DNA probe patent owner,” Worrall said. “This may result in more innovation, [but] it does not answer the question of how to protect the new innovation, which is important for development and investment.”

Room to innovate

In Association for Molecular Pathology et al.v. Myriad, the Supreme Court last week ruled that Myriad's patents on isolated BRCA1/2 gene fragments are products of nature and didn't meet the standard for patent eligibility under 35 USC Section 101 (see related story, in this issue .) The court found, however, that Myriad's claims on complementary DNA were patent eligible and further emphasized that the ruling doesn't restrict companies from patenting novel diagnostic method claims, new applications of knowledge about BRCA1/2 genes, or DNA that has had the order of the naturally occurring nucleotides altered.

Shortly after this ruling, the USPTO issued a preliminary guidance instructing its patent examiners to “reject product claims drawn solely to naturally occurring nucleic acids or fragments,” whether they are isolated from the body or not. The USPTO said it would issue further guidance to examiners on “the role isolation plays” in patent claims on genes after reviewing more closely the court's ruling.

At the same time, a number of labs – including GeneDx, Gene by Gene, Ambry Genetics, Pathway Genomics, and the University of Washington – said they would launch BRCA testing for hereditary breast and ovarian cancer.

Myriad maintained, meanwhile, that its business remains strong with 24 enforceable patents and more than 500 still valid claims around its BRACAnalysis test for gauging BRCA1/2 mutations linked to risk of hereditary breast and ovarian cancer. In writing the court's decision, Justice Thomas noted that Myriad holds a number of unchallenged method claims that apply knowledge about the association between BRCA alternations and cancer.

However, experts PGx Reporter spoke to feel that diagnostic developers' ability to broadly patent diagnostic methods were already significantly proscribed by an earlier Supreme Court decision in Mayo v. Prometheus. In that case, the court struck down Prometheus' patent claims on methods of determining metabolite levels in the body to dose thiopurine drugs for stomach disorders. In this decision, the Supreme Court emphasized that "an application of a law of nature … to a known structure or process may [deserve] patent protection," but in order to transform a law of nature into something worthy of a patent, the applicant "must do more than simply state the law of nature while adding the words 'apply it'” (PGx Reporter 3/21/2012).

As such, noting the cumulative impact of the court's decision in both AMP v. Myriad and Mayo v. Prometheus, labs eager to provide testing for genes they were previously restricted from performing due to patents and exclusive licenses believe they have more room to compete.

Noting that the Supreme Court ruling in AMP v. Myriad wasn't a clear cut win for labs since cDNA claims were found valid under Section 101, Harvard's Rehm has been talking to patent experts to figure out which tests her molecular medicine lab can launch that it previously could not due to IP issues.

“We do feel [the court's decision] has significantly opened our opportunities and reduced the likelihood of infringement on a number of patents,” said Rehm. “We do intend to pursue testing in areas that we had not pursued before because of patents. And that's not just Myriad's patents, but patents exclusively licensed by other laboratories … that we had not delved into but we may pursue now.”

Lawyers from the ACLU and the Public Patent Foundation, representing healthcare providers, researchers, and patients in AMP v. USPTO had often said that instead of Myriad, the case could have just as easily been brought against Athena, now a subsidiary of Quest Diagnostics, since the company held broad patents on gene sequences and diagnostics methods, the kind which are likely deemed invalid now.

A spokesperson for Quest told PGx Reporter that the impact of the court's decision on its business is limited and maintained that the company doesn't rely too heavily on claims on isolated gene sequences. “The Myriad case focused on gene patents, while most of Quest's intellectual property is not gene-based and Athena's intellectual property is generally method-based,” the spokesperson said. “The court’s decision likely will not significantly impact the overall intellectual property estate and strategy of Quest.”

Duke's Cook-Deegan noted that while the majority of Athena's diagnostics may be method claims and did not cover isolated gene sequences, those method claims are likely vulnerable after the Supreme Court's ruling in Mayo v. Prometheus.

“It's true that AMP v. Myriad is not all that relevant. But Mayo is,” Cook-Deegan said. “Athena's game is up, too. I think it's perhaps good they are part of a larger diagnostic company that seems less prone to aggressive patent enforcement tactics.”

In fact, Quest, one of the largest clinical labs in the US, is planning to take advantage of the Supreme Court's ruling on gene patents by launching new tests, including genetic tests that gauge BRCA alterations. “We expect [the court's decision] will open opportunities for Quest to develop new testing services,” the spokesperson said, adding that the company is “very interested” in offering a BRCA testing service and intends to validate and offer such as service later this year.

However, labs that tussled with Athena before it was acquired by Quest two years ago are quite eager to offer tests for previously patent-protected biomarkers. Athena had in the past stopped diagnostics firm GeneDx from performing certain tests and had made it difficult for the lab to conduct testing for non-patented genes in the same region as its patented genes.

According to Sherri Bale, GeneDx's managing director, Athena asked GeneDx in 2006 to stop conducting testing for mutations linked to a rare genetic disorder, called keratitis–ichthyosis–deafness syndrome. Mutations associated with keratitis–ichthyosis–deafness fall in the same region as a mutation for hereditary hearing loss to which Athena held an exclusive license, and by sequencing the region, GeneDx would pick up that mutation.

Eventually, GeneDx had to agree that if in testing for mutations for keratitis–ichthyosis–deafness it found Athena's hearing loss mutation for a patient, it would refund the money for the performed test and direct the doctor to Athena for testing without revealing that a deleterious mutation had been found (PGx Reporter 1/16/2013).

“It is my belief, and [that of] everybody I’ve spoken to, that the genes on Athena’s menu will now be available for anyone to develop and offer testing,” Bale told PGx Reporter by e-mail. “It is pretty simple to 'work around' methods patents if they are based on primers/probes, conditions, and comparisons to reference sequences.”

Most importantly, for Rehm, the Supreme Court's decision on gene patents eliminates sole-source tests and opens up the market for innovation by incentivizing labs to continue to improve the quality of their testing services. Ten years ago, Rehm's lab at Partners was the only place patients could get genetic testing for cardiomyopathy, but then a decision was made to grant non-exclusive license to other labs. “When we did that and other labs developed tests, it pushed us to innovate more quickly and increase our content, lower the price, and reduce turnaround time,” Rehm said.

Although Myriad's patent position may have enabled it to garner the most market experience with BRCA testing and amass a vast database of BRCA1/2 variants, mutations in these two genes aren't the only ones conferring risk for hereditary breast and ovarian cancer. There are a number of alterations in other genes that are important for breast and ovarian cancer risk, “but [Myriad] has had no real motivation to innovate in their testing area, improve its clinical sensitivity, when they have no competition,” Rehm said.

It may be that right now other labs don't have as much experience with BRCA testing, but “the truth is that there are many mutations that are still not understood by Myriad,” she said, adding that increased competition among labs and public data sharing might spur greater understanding of rare markers.

A new environment

For Dan Burk, law professor at the University of California, Irvine, the cumulative effect of the Supreme Court's decision first in Mayo v. Prometheus and then in AMP v. Myriad has amounted to “a bad couple of years for medical diagnostics.” Prometheus Labs is still “reeling” from the invalidation of its patents in Mayo v. Prometheus, Burk said.

If researchers and patients were worried about monopolistic practices among diagnostics firms, Burk believes the best solution would have been to forgo the legal route, maintain gene-related products as patentable, but have Congress create a “strong” research exemption like that which exists in the EU and in Canada.

BIO, the trade group for the biotechnology industry, issued a statement following the Supreme Court's invalidation of gene patents noting that the ruling could cause confusion and hinder US innovation in the global marketplace. "The US is now the only developed country to take such a restrictive view of patent eligibility, signaling an unjustified indifference towards our global economic and scientific leadership in the life sciences,” Bio stated.

The group has characterized the view that gene patents hinder innovation as a myth and has cited as a counter example Amgen's patent claims on isolated DNA molecules encoding the protein erythropoietin, which underlie its best-selling anemia drug Epogen.

“The bottom line is that patents are meant to encourage disclosure. So, with no patent option, Myriad and other firms will tend to keep genetic information as trade secrets,” Burk said. “The perverse outcome of removing [isolated] DNA patents is that there may be less transparency for researchers and others.”

Indeed, Myriad has conducted around one million BRACAnalysis tests in the nearly two decades that the company has enjoyed a monopoly in the BRCA testing space. All that data on common and rare BRCA variants associated with cancer is stored in a proprietary database, which stands to give Myriad a major advantage against competitors (see related story, in this issue). By Myriad's own analysis, it has the lowered its rate of variants of unknown significance from around 13 percent of test results a decade ago to 3 percent last year (PGx Reporter 6/27/2012).

Shortly before the Supreme Court's ruling on its gene patents underlying BRACAnalysis, Myriad announced plans to essentially migrate all its hereditary cancer tests to a next-generation sequencing panel by 2015. When that happens, Myriad will largely market BRACAnalysis as a companion test to pick out best responders to DNA-damaging cancer drugs, such as PARP inhibitors. The company has drug/diagnostic co-development deals with several drug firms, the most advanced of which is an arrangement with AstraZeneca to advance a companion test for its ovarian cancer treatment olaparib (PGx Reporter 6/5/2013).

Myriad doesn't expect the court ruling on gene patents will impact its companion diagnostic partnerships with pharma. “Those who have come to us for collaboration, there is a reason they've come to us,” Myriad spokesperson Ron Rogers said.

He noted that drug developers advancing a drug in a molecularly defined patient subset seek out diagnostic partners that can provide an established test, has commercialization capabilities, and can take the test through regulatory approval. “There's a lot going on with [the development of] companion diagnostics that outshine this case” focused on isolated gene sequence patents.

In earlier clinical trials involving olaparib, AstraZeneca used Foundation Medicine's next-generation sequencing platform to gauge somatic BRCA mutations in patient samples. However, AstraZeneca has said it will only use BRACAnalysis in the Phase III olaparib study to gauge germline mutations in study subjects. AstraZeneca did not respond to emailed questions for this article.

Some patent experts closely following the Supreme Court's ruling in AMP v. USPTO believe that the decision will have very limited impact on the biotech and pharmaceutical industry, particularly since the court ruled that cDNA passed the Section 101 test as it is synthesized in a lab. cDNA can be inserted into a cell to make it express a protein that it normally doesn't, and it is also necessary for recombinant DNA, which researchers create by combining genetic material from different sources. As such, cDNA will be useful in drug development and research.

But for drug developers advancing personalized drugs with the aid of companion tests, uncertainties may still exist from an investment standpoint, according to Dorsey and Whitney's Worrall. “The question is how and to what extent companies, and by extension their investors, can protect proprietary innovations,” he said. “If a personalized medicine company develops a diagnostic test that uses a specific probe or primer, and that technology has limited protection, then the likelihood of investment and product development diminishes.”

One way to operate in the post-gene patenting environment is to seek IP protection for a variety of novel applications of gene-disease associations. For example, Allen Roses, Jefferson-Pilot professor of neurobiology at Duke University and CEO at Zinfandel Pharmaceuticals, is working with Takeda Pharmaceuticals to investigate whether low doses of the diabetes drug Actos can delay Alzheimer's onset in people with a high risk of the disease based on age, clinical, and genetic factors.

In a Phase III study researchers will use an algorithm, factoring in normal subjects' clinical information and genotype combinations involving varying lengths of the TOMM40 rs10524523 poly-T polymorphism, to assess their risk of cognitive decline due to Alzheimer's. Those deemed to be at high risk of cognitive decline will be enrolled in the trial. Researchers involved in this effort have filed patents covering this method of determining a person's risk of developing Alzheimer's.

Previously, Roses led a research team in 1992 that identified APOE4 as a key susceptibility gene associated with late-onset Alzheimer's. Duke University held patents on methods of testing for APOE variants to gauge a person's risk of Alzheimer's, which it exclusively licensed to Athena. Some critics of gene patents have cited Duke's APOE patents as broadly describing an association between the variants and Alzheimer's risk and have asserted that the patents should be invalidated.

One of Duke's patents is now expired and the rest are slated to expire in coming months. Roses has previously said that in the mid-1990's, when APOE testing was first launched, many people misunderstood the association between APOE variants and Alzheimer's risk and wanted to use the marker to screen patients without signs and symptoms for the disease. The exclusive licenses on the methods for gauging APOE variants helped stave off inappropriate use of the test, Roses has maintained.

The genomic algorithm Roses' research team is now developing as a companion test for Actos is occurring at a time when genomically guided treatment strategies are somewhat better understood. Also, Roses has previously told PGx Reporter that the patents filed on this method don't describe a simple association between TOMM40 and Alzheimer's disease.

“I am confident that this represents more than patenting the sequence of a piece of DNA and meets several of the criteria … used by the Patent Office for consideration of a patent-eligible invention,” Roses said. “I would hope that future patent applications would be less based on uncertain and highly expansive claims, but will be strongly defined so that the art of medicine can progress through more focused diagnosis and prognosis, coupled with more focused therapy discovery and development.”

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