The Supreme Court’s June ruling on gene patents is already opening the market for BRCA testing and is largely seen as a positive for clinical laboratories that have been blocked from entering this testing space. In a highly anticipated, but largely expected decision, the Supreme Court unanimously decided that isolated genomic DNA (gDNA) is not eligible for patent protection. The decision in the case, Association for Molecular Pathology v. Myriad Genetics, authored by Justice Clarence Thomas, struck a middle ground with the court declaring isolated gDNA is an unaltered “product of nature” and thus unpatentable, but patents for complementary DNA (cDNA) are still allowable. While the National Society of Genetic Counselors estimates that approximately 20 percent of all human genes are patented, not all of these patents are enforced and some early patents have expired. Unlike Myriad Genetics (Salt Lake City) few other commercial entities have built a sizable, testing monopoly around a single, human gene patent and thus, many predict the decision will not have wide-reaching impact but will open up the BRCA testing market. Impact on Myriad Many predict that Myriad will maintain its market dominance in BRCA testing in the short term, even as other laboratories rush into testing of hereditary risk for breast and ovarian cancers. Despite losing its gene patent standing, Myriad still possesses several competitive advantages. First, the company argues it still possesses 23 patents and still has almost 500 claims around its BRCA1/2 testing franchise, including those related to primers, cDNA composition of matter, and method claims. Debate persists regarding how aggressively Myriad will pursue action against competing labs. But early indicators, including a suit filed July 9 against Ambry Genetics (Aliso Viejo, Calif.), demonstrate Myriad will take an aggressive stance. However, possibly most importantly, Myriad maintains a proprietary database that extensively catalogs variants of unknown significance (VUS) based upon its extensive testing history. “While the Supreme Court’s ruling has been welcomed enthusiastically by many, the Myriad case has been only a modest victory for the advocates of genetic-data sharing,” wrote Eleonore Pauwels, a science and technology innovation program researcher at the Woodrow Wilson International Center, in a June 18 op-ed in the New York Times. “In reality, gene patents were only one part of the problem. A more vexing, and still pressing, issue is how companies withhold genetic data as a trade secret.” Analysts agree that Myriad’s proprietary database not only affects the quality of results interpretation for patients, but it can also aid the company in protecting its dominant market position as new laboratories enter the market. “We believe that Myriad’s BRCA1/2 germline mutation/phenotypic database, underlying software classification algorithms, and ability to test for large genomic rearrangements and incremental markers related to hereditary breast and ovarian cancer . . . represent meaningful competitive advantages,” writes Amanda Murphy, an analyst at William Blair & Co., in a research note. Murphy estimates Myriad’s database has 16,000 mutations versus the 1,000 in the public database, translating to Myriad’s ability to identify the mutation and the associated breast cancer risk 98 percent of the time. Given that competing labs will initially rely on variants listed in public databases, Murphy’s analysis estimates that competing labs may have mutations classified as having an unknown clinical significance 30 percent to 50 percent of the time. Some anticipate that with high rates of VUS, reflex testing may need to be sent to Myriad anyway. At a VUS rate of 20 percent, Murphy says, competing tests would have to be priced below $2,500. “In the near term, at least, the market will pit Myriad’s advantage of having a huge proprietary database built on its period of monopoly against firms promoting medical progress through data access and open science,” write Arti Rai and Robert Cook-Deegan, M.D., from the Duke Institute for Genome Sciences & Policy (Durham, N.C.), in a perspective piece published online June 27 in Science. Broader Commercial Effects Despite hyped fear that prohibiting gene patents would disincent biotech companies from investing in genomic research and development, the Supreme Court’s decision is largely viewed as a positive development for independent clinical labs. Citing macro factors including Affordable Care Act, the aging population, and the effects of a more educated consumer resulting in patients taking a more active role in their health care, Charlie Miller, an analyst at Morningstar, expects BRCA testing volumes, in general, to be driven upward. Almost immediately after the Supreme Court’s decision, several laboratories announced they would begin offering genetic testing for breast and ovarian cancer risk, effectively ending Myriad’s monopoly. Laboratories have announced that as soon as the end of the summer they will begin offering BRCA testing, including GeneDx (subsidiary of Bio-Reference Laboratories; Gaithersburg, Md.), Ambry Genetics, DNATraits (division of Gene By Gene; Houston), Pathway Genomics (San Diego), and Quest Diagnostics (Madison, N.J.), as well as academic institutions including the University of Washington (Seattle) and Albert Einstein College of Medicine (New York City). While not all have announced pricing, DNATraits says it will offer BRCA testing for $995. “The gene patent decision clearly opens the door for a new market with potential benefits to revenue/volume and earnings,” writes Darren Lehrich, a Deutsche Bank analyst, in a research note. He cites Myriad’s 2012 revenues from BRCA testing of $405 million as a basis for sizing the opportunity. “Each of the large national labs have 10 percent to 12 percent market share of the U.S. clinical lab testing market, so the launch of a successful BRCA testing program could add 50-100 bps to revenue growth over time if their national market shares were commensurate in this arena.” But competing laboratories are not the only threat to Myriad’s BRCA gene testing franchise. Single-gene tests are phasing out anyway in favor of multigene panels that can be offered for the same price. In making its announcement of offering BRCA testing, GeneDx said BRCA analysis will be part of a comprehensive inherited cancers, 27-gene panel offered at a cost comparable to single-gene testing. “The Court’s opinion not only emboldens competitors that rely on traditional sequencing methods, but also reduces the fear of infringement among those that rely on whole-genome sequencing. Among the new entries are tests not just on BRCA1/2, but also multigene tests that will now include BRCA1/2,” write Rai and Cook-Deegan. Myriad itself has recognized this trend and in early May announced its plans to phase out its BRCA gene tests by the middle of 2015 and replace them with a new multi-hereditary 25-gene cancer panel called myRisk Hereditary Cancer. The price is expected to be similar to what the BRCA analysis costs now. “The most obvious impact of the decision may be increased access, reduced price, and perhaps most importantly, the emergence of multigene first-line genetic tests for inherited risk of breast and ovarian cancer—replacing the current multistep process of testing first for just two genes,” write Rai and Cook-Deegan. “Firms and university labs are beginning to compete on price. Myriad Genetics and other companies that have relied on gDNA patents for their service monopolies will likely have to compete on other grounds, such as turnaround time, quality of testing, clarity of clinical reports, sales force, and securing payment from insurers.”

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