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In Calif., Outsourcing Genotyping Services to Licensed Lab May Not Equal Compliance

California healthcare regulators are not satisfied by direct-to-consumer genetic testing companies that claim they are in compliance with state laws because they outsource their genomic analysis work to clinical labs licensed in the state.
Earlier this month, Navigenics, 23andMe, and Decode Genetic's DecodeMe business unit were among 13 personal genomics companies that received cease-and-desist letters from the California Department of Public Health claiming they violate state law because they are unlicensed and because they offer tests directly to consumers without a physician’s order (see related article, in this issue).
On the former charge, the warning letters state that “in order to be granted a California clinical laboratory license, in addition to meeting all other licensure requirements, [companies] must provide satisfactory validation documentation to verify the test performance specifications of all genetic tests.”
Furthermore, California regulators consider Navigenics’, 23andMe’s, and DecodeMe's genetic tests to be moderate- to high-complexity tests, and to market such tests in California, companies must obtain a clinical laboratory license under the Clinical Laboratory Improvement Amendment.
“No clinical laboratory license shall be issued by the department unless the clinical laboratory and its personnel meet the CLIA requirement for laboratories performing tests or examinations classified as moderate or high complexity, or both,” according to California law.
However, Navigenics and 23andMe claim they are compliant with the law because the genome scans their services require are conducted by independent laboratories that are CLIA-certified in the state.
Affymetrix performs genotyping for Navigenics' service. The Santa Clara-based microarray company did not receive a similar warning letter from California. By comparison, 23andMe's genotyping is performed by chief Affy rival Illumina, which for similar reasons was not warned by California regulators.
“We believe we are in compliance with California law and are continuing to operate in California at this time,” a 23andMe spokesperson told Pharmacogenomics Reporter. “Our testing is conducted in an independent CLIA-certified laboratory and we utilize the services of a California licensed physician.”

“It is important to point out that we do our own genotyping internally and therefore have not assumed, as some others have, that subcontracting to a licensed laboratory for the genotyping automatically achieves compliance.”

Similarly, a Navigenics spokesperson told Pharmacogenomics Reporter the following in an e-mail: “Navigenics believes it is in full compliance with California law and will be submitting details of its service to the Laboratory Field Services Unit. All of Navigenics tests are 1) performed in a CLIA-certified lab in the state of California and 2) ordered and reviewed by a California-licensed physician.”
However, whether these personal genomics firms are actually doing their own testing or not, “from the state's perspective, may not make much difference,” Peter Kazon, a lawyer for the Washington, DC-based law firm Alston Bird who specializes in representing genetic testing firms, told Pharmacogenomics Reporter this week.
The letters therefore suggest that California regulators hold personal genomics services accountable despite the fact that they outsource the heart of their service to qualified and licensed third parties.
Decode Genetics, which launched a personal genomics service last year that competes with Navigenics and 23andMe's services, received a warning letter from California regulators, but claims it is awaiting a license from the state and does not market its service to Golden State residents.
Furthermore, the company’s DTC genetic testing service, called DecodeMe, has tried to set itself apart from its competitors by using its own labs to perform the genotyping.
“Regarding the California state license for diagnostics, it is important to point out that we do our own genotyping internally and therefore have not assumed, as some others have, that subcontracting to a licensed laboratory for the genotyping automatically achieves compliance,” Decode co-founder Jeff Gulcher told Pharmacogenomics Reporter this week.
Although the company operates its own laboratory, the genome scans for DecodeMe use the Illumina 1M beadchip.
“Despite being CLIA-compliant we do not yet have a license for California,” Gulcher said. “Once we have a license we will market our tests to physicians, who are required by California state law to order the tests for their patients,” Gulcher said, adding that the company's application for licensure has been submitted to state regulators for 11 months but it has yet to receive a response.
When the company does launch DecodeMe in California, the state's restriction on DTC genetic testing will not impact the company's finances, Gulcher claimed, since physician-ordered tests that gauge patients predisposition for specific diseases comprise “the largest part of [its] diagnostics business.”
Doctor in the House
Since California requires that a physician order laboratory tests, one key point of contention is whether orders for genetic testing are actually coming from a California-licensed physician.
Although both Navigenics and 23andMe claim that they use California-licensed physicians in their testing service, California regulators appear to be questioning to what extent the physician is really involved in the ordering process, Kazon noted. 
Navigenics has said that in addition to employing a physician, the company also has a team of genetic counselors to help customers understand their test results.
Both companies have said they intend to work with California regulators to meet any requirements necessary to operate in the state.
According to Kazon, establishing the necessary clinical and analytical validation requirements may be the murkiest part for these companies in setting up shop in various states.
“The most difficult issue here may be what type of validation is necessary for the laboratories to offer” its tests, Kazon said. “That is a really new issue, and one that has not been greatly discussed or considered by regulators.”

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