NEW YORK – Ten years ago today, the US Supreme Court deemed that gene sequences, even when isolated from the body, are products of nature that aren’t eligible for patents.
A decade later, industry players aren’t of one mind as to whether the outcome of that and other recent patent eligibility Supreme Court cases have been beneficial for genetic testing and precision medicine innovation. Many point to the immense growth in the genetic testing industry and the steady stream of precision medicines to argue that these decisions have spurred healthy competition and eased patient access in ways that otherwise wouldn’t have been possible. Others in the molecular diagnostics and biotech industries say these decisions have made them more uncertain about which of their products are patent eligible and which patents are enforceable, and that this is diminishing investment. And while no one seems to be saying they want to go back to a time when it was possible to broadly patent genes, some are supporting a bill that would allow isolated gene sequences to be patent eligible again.
In 2009, the American Civil Liberties Union and the Public Patent Foundation filed a lawsuit on behalf of cancer patients, pathologists, and genetics experts, charging that patent claims held by Myriad Genetics on two genes, BRCA1 and BRCA2, were unconstitutional and invalid under US patent law because they’re products of nature. Title 35, Section 101 of the US patent law allows patents for any new and useful process, machine, article of manufacture, or composition of matter, or any improvements to these inventions, but the courts have maintained that the basic tools of scientific research — laws of nature, natural phenomena, and abstract ideas — cannot be patented.
On June 13, 2013, the Supreme Court unanimously decided in Association for Molecular Pathology v Myriad Genetics, that the discovery of naturally occurring gene sequences and their cleavage and isolation from other genetic material in the body aren’t patent-worthy inventive activities. However, the court held that gene sequences altered by synthetic processes to create molecules that don’t exist in nature, like complementary DNA, are patent eligible.
The decision invalidated Myriad’s broadest patent claims on isolated forms of BRCA1/2 genes, which the company had been wielding since 1996 to monopolize testing for mutations that increase the risk of breast, ovarian, and other cancers in carriers. Within hours of the court’s ruling, competing labs announced they were launching genetic tests that gauged BRCA1/2 mutations. But the court’s decision impacted much more than Myriad’s patents on these two genes. The decision came at a time when the cost of sequencing was rapidly declining and the field was already moving from single-gene tests to multi-gene panels aided by next-generation sequencing; after the decision, the genetic testing industry grew at breakneck speed.
From 2015 to 2022, health technology firm Concert Genetics estimated that the number of genetic tests on the market grew from 66,000 to 175,000; multi-gene panels grew from nearly 6,900 to 11,600 in that time. The price of testing has gone from around $4,000 — Myriad’s list price for assessing just BRCA1/2 back in 2013 when it was the only commercial test provider — to some labs today charging patients an out-of-pocket price of a few hundred dollars for tests that gauge a panel of disease-associated genes.
“The field of molecular pathology has flourished since 2013,” said Eric Konnick, a pathologist and chair of the professional relations committee at AMP, one of the groups that sued Myriad. This growth “would not be possible if companies, universities, or other institutions held patents that gave them testing monopolies on gene sequences.”
“The state of innovation in genetic testing is very high and has indeed democratized access to a degree unimaginable a decade ago,” Invitae Chief Medical Officer Robert Nussbaum said. He noted how, “unencumbered by unnecessary patents” post-Myriad, genetic research has marched on uncovering new gene-disease relationships, and multi-gene panels, whole-exome and whole-genome sequencing tests and polygenic risk scores are increasingly available.
Several thousand labs and institutions, even Myriad, are sharing data on genetic variants in public databases like ClinVar, leading to improvements in variant classification, and Nussbaum noted that there have been positive advancements in standardization of NGS methods and result reporting. The US Food and Drug Administration continues to approve more molecularly targeted drugs, autologous CAR T-cell therapies, and gene therapies for rare diseases, all of which have developed out of the life sciences fields’ growing understanding of the genomic underpinnings of disease.
Nussbaum and others pointed out that because researchers in China sequenced the SARS-CoV-2 viral genome and released the data, it allowed labs and drugmakers around the world to quickly develop COVID-19 tests and critical vaccines. “If naturally occurring products such as the COVID-19 viral genome sequence had been patent eligible, the rapid development of diagnostic testing using the viral genome sequence would likely not have happened,” Nussbaum said.
According to a US Government Accountability Office report, from February 2020 to December 2021, the FDA received around 3,400 requests for emergency use authorization of COVID-19 tests, averaging 150 requests per month. Konnick cited the statistics as a measure of innovation during the pandemic and echoed the sentiment that had someone patented the SARS-CoV-2 viral genomic sequence, the US likely wouldn’t have the testing capacity it did over the last three years.
In contrast, David Spetzler, president and CSO at molecular testing company Caris Life Sciences, doesn’t believe the number of genetic tests on the market is a good indicator of innovation post-Myriad because likely most of the marketed tests are gauging biomarkers everyone knows about. “There is no innovation in a new test that detects KRAS or EGFR. Maybe you can do it faster or cheaper, but the clinical utility of that is already well known and well established,” he said.
Caris offers whole-exome and whole-transcriptome sequencing, as well as two artificial intelligence-powered molecular signatures that identify the tumor of origin and predict whether a metastatic colorectal cancer patient will respond to chemotherapy. After the Supreme Court’s decision in Myriad and other patent eligibility cases, Spetzler said Caris has had some of its most important patents invalidated. Based on the belief that advancing the science will be more beneficial than trying to keep it secret, Spetzler said Caris shares a lot of data with collaborators and the scientific community, but it’s not uncommon for diagnostic companies to keep secret key details about their technologies. “That’s a direct consequence of the fact that it’s now virtually impossible to protect [diagnostic innovations],” he said.
Impact on investment
Spetzler is not alone in his concerns. In public comments and in surveys, patent reviewers, intellectual property lawyers advising companies, and technology transfer offices within academic institutions charged with licensing inventions to industry have said that Myriad and recent landmark cases, particularly Mayo Collaborative Services v Prometheus Labs and Alice Corporation v CLS Bank International, have made it much harder to patent molecular diagnostics that rely on laws of nature or abstract ideas and to enforce granted patents.
The year before the Supreme Court’s decision on gene patents, the court held in Mayo that claimed steps in dosing thiopurine drugs based on their concentrations in the body relied on a natural law that wasn’t patent eligible. In Alice, decided the year after Myriad in 2014, the court found that patent claims on a computer-based electronic method of assessing “settlement risk” were patent-ineligible abstract ideas and elaborated on the Mayo decision to advance a two-step patent eligibility test: first, determine if the claimed invention is directed at a patent-ineligible concept, and second, determine if the claims transform the law of nature, natural phenomena, or abstract idea into a patent-eligible application.
One legal expert, University of Michigan’s Rebecca Eisenberg, concluded that after these decisions, “diagnostic applications are not patent eligible.” In 2019, several judges on the Court of Appeals for the Federal Circuit wrote that, “since Mayo, we have held every single diagnostic claim in every case before us ineligible.” For example, one case that has really worried some in the diagnostics space is Ariosa Diagnostics v Sequenom, in which the Federal Circuit in 2015 invalidated the foundational patent for noninvasive prenatal testing in ruling that claims on methods of obtaining a sample from a pregnant woman and sequencing cell-free fetal DNA were patent ineligible.
Those that claim molecular diagnostics are not patent eligible due to recent court decisions are wrong, said Stan Lapidus, founder and former CEO of Exact Sciences, which sells the stool DNA-based colorectal cancer screening test Cologuard. “I have many patents that were issued for combinations of markers and novel methods to measure small amounts of things. Those are inventions, and they remain patentable,” said Lapidus, who chairs the boards of multiple molecular diagnostics companies and holds 37 US patents.
Even if patents can still be gotten on molecular tests, some industry players say they’re facing more uncertainty as to whether the courts will uphold US Patent and Trademark Office-granted patents when they try to enforce them, especially after Mayo. Spetzler said that Caris had a patent granted in around 2006 covering molecular profiling of multiple genes “across different therapeutic indices where it wasn’t expected.” When Caris tried to enforce the patent in 2017, the courts dismissed it. “It’s not hard to get a patent, but … you’d have to reveal exactly what you’re doing and then have that be enforceable,” he said. “That’s where there’s so much opacity that you lose a lot. And it takes years and years.”
In 2020, Johnathon Liddicoat at King’s College London and colleagues conducted around three dozen interviews with industry executives, managers at tech-transfer offices, and patent drafters and found that the uncertainty around patent eligibility stemmed largely from Mayo than from Myriad. Three tech-transfer offices cited Mayo as the reason for not developing a test, and one firm nixed plans to acquire a test, while another decided to launch a lab-developed test instead of an in vitro diagnostic kit to keep the technical specifications of the tests “hidden from view.” And while Liddicoat and colleagues tracked greater interest in using trade secrets to protect diagnostics IP, they found little evidence that companies were doing this widely.
Recognizing that patents are a key consideration in attracting private investment, David Taylor, a professor at Southern Methodist University’s Dedman School of Law, surveyed 475 venture capital and private equity investors on how the Supreme Court’s rulings have impacted their funding behavior. The survey results showed that 74 percent of investors agreed that patent eligibility is an important consideration when deciding whether to invest in a technology, and around 60 precent agreed that they’d be less likely to invest if patent eligibility questions make patents unavailable or difficult to obtain. While the survey suggested that investors consider patent eligibility most readily when deciding to invest in the pharma, biotech, and medical device industries, the data also showed that this isn’t the most important consideration.
Mike Pellini, managing partner at healthcare and technology-focused venture capital fund Section 32 and former CEO of cancer genomic profiling company Foundation Medicine, noted that while the diagnostic industry patent landscape does have “some impact” on investors, “VCs will continue to invest in truly innovative and impactful diagnostic approaches, as long as the company’s management team has the experience and strategy necessary to move the testing into the clinic.” Lapidus listed “sustainability of IP” as the third consideration for investors, behind a product’s addressable market size and its clinical value in reducing mortality, improving outcomes, and lowering costs.
And yet, according to a difference-in-difference analysis, a statistical technique commonly used to assess the impact of policies, VC investment in diagnostic technologies four years after the Mayo decision was estimated to be $9.3 billion lower than it would have been had the court not decided how it did. To conduct the analysis published in Washington and Lee Law Review last year, Sasha Hoyt, a patent attorney at Finnegan, Henderson, Farabow, Garrett, and Dunner, considered PricewaterhouseCoopers’ data on VC investment in diagnostic technologies versus all other areas of investment for a four-year period before and after the Mayo decision. The limitations of the analysis, she wrote, is that it did not directly account for possible confounding factors like “the state of the economy, productivity, poverty levels, and international affairs.”
In contrast, Nussbaum noted that FactSet financial data show a threefold to fourfold increase in the six or seven years after Myriad. Former Invitae CEO Sean George has also cited data that venture capital investment in the pharma and biotech sectors increased from $6.21 billion in 2013 to $17.72 billion in 2018. Whether investment increased “as much as it would have without Myriad is unknown, and, I believe, [is] unknowable since VC investment reflects many factors, as Hoyt admits in the limitations section of her paper,” Nussbaum said, asserting that the “capricious and undependable” reimbursement environment for genetic tests is a much more important consideration for investors.
Since the Myriad decision, payor spending has increased in step with greater availability of genetic tests. Since the US Department of Health and Human Services’ Office of Inspector General began tracking Medicare Part B spending on lab tests in 2014, genetic testing expenditures have more than tripled. In 2021, the Medicare program spent $1.9 billion on genetic tests compared to $1.2 billion in 2020, and $1.5 billion before the pandemic in 2019. Commercial insurers, also seeing higher spending on genetic tests, have put in place prior-authorization schemes and engaged lab benefit managers to control what they consider to be medically unnecessary spending.
Still, the diagnostics industry often laments that 70 percent of healthcare decisions are made using their tests, and yet diagnostics comprise only 2 percent to 3 percent of healthcare costs. Insurers are too quick to call genetic tests “experimental and investigational” and deny coverage, Nussbaum said, even when there’s support for their use in the literature, guidelines, and among doctors.
While the Myriad decision opened up the genetic testing market and lowered costs for patients, Nussbaum observed that diagnostics companies have had to shoulder those cost reductions amid insurers’ ongoing reticence to pay for the value genetic tests provide to patient care. “Diagnostic testing companies are being inadequately compensated, primarily because the percentage of tests that are reimbursed is too low and not because prices are not jacked up high enough by exclusivity based on gene patenting,” he said.
In addition to reimbursement, Pellini cited regulation as the other significant consideration for investors. Whether FDA will regulate lab-developed tests has been an uncertainty hanging over the genetic testing industry for several decades. Legislators revived legislation in March to try once again to bring all diagnostics under FDA oversight, though its prospects in a divided Congress are unclear. The FDA may also try to promulgate regulation through the rule-making process, a move that the lab industry could challenge in court.
Calls for legislative change
Critics of the Supreme Court’s decisions have countered that the current state of patent eligibility limits industry’s ability to secure VC funds that enable the clinical utility studies necessary for reimbursement. Spurred by the Hoyt and Taylor analyses, they’ve intensified calls for legislative reform of Section 101.
After circulating a draft bill and holding a series of hearings in 2019, Senator Thom Tillis (R-NC) last summer introduced the Patent Eligibility Restoration Act. He stated that it has become necessary to “restore patent eligibility” for inventions across many fields, including precision medicine, because the Supreme Court’s recent rulings have led to “inconsistent case decisions, uncertainty in innovation and investment communities, and unpredictable business outcomes.”
During the 2019 Senate Judiciary Committee hearings, groups like the Biotechnology Industry Organization, the American Bar Association, and American Intellectual Property Law Association spoke in support of Section 101 legislative reform, as did several drug and test makers.
Peter O’Neill, executive director of Cleveland Clinic Innovations, the tech transfer office of the medical center, told the committee that when it sued True Health Diagnostics for infringing its patents for a test that gauged levels of the inflammation biomarker myeloperoxidase to diagnose cardiovascular disease, an Ohio district court invalidated several patents citing the Supreme Court’s Mayo and Alice rulings, and a Federal Circuit appeal was unsuccessful. Even though Cleveland Clinic redrafted its method claims according to new USPTO guidance and secured additional patents, when it sued True Health once more for infringement, a Virginia district court still found the patents ineligible, and the Federal Circuit rejected an appeal, stating, “While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance.”
Caris’ Spetzler also expressed concern that under the current patent regime, the firm’s IP on machine learning-derived gene signature tests were at risk of being challenged in court as patent ineligible natural laws, allowing competitors to release copycat products once technical details are published or submitted during regulatory review. “Such copying reduces the incentives to invest in advances in precision medicine and therefore inhibits our ability to improve patient care and reduce healthcare costs,” Spetzler told the committee.
Drugmaker Regeneron testified that it is using its genetics expertise to develop drugs and gene signatures for predicting treatment response and has filed 36 patent applications on its genetic innovations. At the time of the hearing, the firm said some of these patents had been rejected and it expected nearly all of them would be found patent ineligible.
The patent rejections haven’t kept Regeneron from sharing genetic data with the scientific community, however. A Regeneron spokesperson said the firm had sequenced more than 2 million individuals to date and is sharing the data through the UK Biobank as well as providing researchers open access to its proprietary tools for analyzing large genetic datasets. “We … know there are many actionable findings to be made — far too many for one organization,” the spokesperson said.
In contrast, Invitae and the ACLU testified against amending Section 101, and more than 160 organizations including well-known molecular testing firms Sema4, GeneDx, and Ambry, and 80 biomedical scientists, signed a letter opposing the draft bill.
The introduced bill, which Senator Chris Coons (D-DE) subsequently co-sponsored last year, would amend the patent law and “enumerate a specific but extensive list of excluded subject matter.” For example, although the bill excludes unmodified human genes as they exist in the body and unmodified natural materials as they exist in nature from being patented, it specifies that if human genes and natural materials are isolated, purified, enriched, or altered by human activity, they can be patented.
Sandra Park, an ACLU attorney who led efforts to challenge Myriad’s patents, believes this bill would go way beyond reversing the Supreme Court’s determination that isolated gene sequences aren’t patent eligible. “What’s really disturbing is that … this is really bringing us to a completely different world where natural materials, all of them, become patent eligible because there will always be an argument that they have been altered in some way, however insignificant,” Park said.
If this bill passes as written, Robert Cook-Deegan, a professor at Arizona State University’s School for the Future of Innovation in Society, doubts it would breed more Myriad-type genetic testing monopolies. More likely, he thinks there would be a profusion of claims on disease-associated gene variants, methods, and other “discoveries” that would require licenses. This could create more complexity and expense for molecular testing companies, he noted, since attempts at forming patent pools or setting licensing standards have failed in the space.
“I suspect the main consequence would be money for lawyers and the USPTO to grant patents, followed by litigation and complex negotiations about who gets the money from genetic testing,” he said. “And accordingly, increased test prices [would] reward stockholders, pay the lawyers, and foment markedly higher transaction costs.”
“It is not in the best interests of patients and public health to have thousands of patents and licensing agreements that enmesh genomic-scale analysis in logistically and financially onerous patent and licensing thickets that interfere with interpreting and reporting medically relevant harmful variants across a patient’s genome,” Nussbaum said. “If this is what Section 101 reform entails, it would cripple the role of clinical molecular genetics in patient care.”
Meanwhile, those supporting Section 101 reform have maintained they don’t want to patent naturally occurring genes. “Anyone should be able to measure any gene,” Spetzler said. “What should be patentable and where the invention lies is in taking that information and turning it into knowledge … [such as] identifying a new drug association. … That piece where you’re turning information into knowledge, that is invention.”
Some supporters of the bill have argued that the proposed changes to Section 101 wouldn’t necessarily allow more natural products to be patented, since those claims would still have to clear the other sections of the patent law that require claims are novel and non-obvious. It’s a better use of the USPTO’s resources to apply Section 101 to screen out overly broad patents, in Park view, because reviewers will have to exhaustively search what’s already out there to determine if a claimed invention is novel or non-obvious.
Ultimately, she believes this bill opens the door so wide as to what is patent eligible that it’s difficult to predict how people might exploit it. For example, the fear that companies would use patents to restrict the ability to develop critical tests and medicines during a public health emergency isn’t hypothetical. During the severe acute respiratory syndrome (SARS) outbreak in 2003, drugmakers, researchers, and foreign governments were trying to file patents on the genetic sequence of the virus, until the US Centers for Disease Control and Prevention stepped in and applied for patents to keep the technology widely available to researchers and industry.
“There might be some assumption by the patent bar that [applicants] will police themselves, but there’s no limit on that,” Park said. “If the patent office receives applications that meet all the technical criteria, they will be obligated to grant them.”
The ACLU has been in touch with certain sectors of the Biden administration that are tracking how the Tillis/Coons bill progresses. Tillis’ staff did not respond to requests for comment for this article, however, stakeholders are expecting the senator to reintroduce the bill this legislative session.
Looking back, it seems crazy to Lapidus that the USPTO had granted thousands of broad patents for gene discoveries, many of which were paid for by taxpayers. “The original idea that genes could be patented was beyond nuts,” and “it hurt mankind,” he said. “It was like saying, … ‘Oh, I grew up in a desert, but I found the ocean.'” The patent system doesn’t exist for discoveries, he asserted, it’s for inventions.
Myriad CEO Paul Diaz agrees. “I fall squarely on the position that we need to enable science and discovery,” he said. “The Supreme Court, I believe, ruled correctly that genes found in nature should not be patented.”
The diagnostics landscape looks very different a decade since Myriad, but perhaps the most surprising evolution has been inside Myriad. After the Supreme Court case, Myriad came out swinging. It sued competitors that launched BRCA1/2 tests, refused to submit variant classifications from its vast repository to public databases as data-sharing efforts were taking off, and criticized the quality of public variant databases like ClinVar.
In August 2020, Myriad simultaneously announced Diaz as CEO and that Q4 revenues had declined 57 percent year over year. At that point, revenues had been declining for several quarters. “We were like a melting ice cube, losing market share [in hereditary cancer testing] for years and years,” Diaz said. The prior year, the firm had to pay $9.1 million to resolve allegations that it improperly billed Medicare for its hereditary cancer test. The company’s reputation was in tatters.
“The first year was a little rough and there were pockets of resistance. … There were people who thought that we were still doing the right thing,” Diaz said, recalling that he often felt like he was on an “apology tour” when he spoke to others in the field, and perception studies showed, that “everybody hates us.”
Ellen Matloff, president and CEO of the digital health firm My Gene Counsel, certainly had a rocky start with Myriad. In 1998, years before the ACLU corralled patients, researchers, and pathologists against gene patents, Myriad sent Yale Cancer Center a cease-and-desist letter for performing BRCA1/2 testing. All in-house testing came to a halt, and the test price went from the $1,600 that Yale charged to Myriad’s price: $2,400. “I watched the price of Myriad’s test go up, up, up, as the cost of the sequencing was going down, down, down,” said Matloff, who led Yale’s genetic counseling program then.
Matloff published papers, penned editorials, and gave talks about the need to do away with gene patents to increase competition, lower test prices, and improve patient access. Geneticists were seeing firsthand how gene patents impacted patient care, but when Matloff said to folks outside of this small community that genes shouldn’t be patented, she was met with aggression. “They told me I was wrong and that doing away with gene patents would stifle innovation,” she recalled.
Undeterred, Matloff tried, without success, to find a pro bono patent lawyer to take on Myriad herself. Eventually, she joined the ACLU in challenging Myriad’s patents, but she expected her side to lose, because that seemed to be the prevailing sentiment. The day of the Supreme Court decision, journalists asked how she thought the genetic testing space might change if it went her way. “I predicted that within three months of a decision, BRCA1/2 testing would be offered at more labs at a lower price, they’d test for large duplications and deletions and rearrangements, and they’d test for other genes,” Matloff said. “It actually happened within five hours of the decision, because the field had all been preparing and hoping for this decision.”
After the case, Myriad’s reputation continued to suffer, with many geneticists at healthcare institutions wanting nothing to do with the company, but Matloff is seeing sentiments starting to change, especially since Diaz joined the company.
Under Diaz, Myriad has been undergoing a “comprehensive transformation” that has involved selling off some tests, focusing the company’s pipeline, investing in technology to improve customer experience and better connect with patients and doctors, and championing equity and access for patients. “Coming out of the pandemic and as a person of color, we have a moral imperative to make sure that our healthcare system is working for everybody, not just people of European descent, and that includes the science,” said Diaz, who is of Cuban descent.
Toward that end, the company launched a breast cancer polygenic risk score for women of all ancestries and announced last year that the company would begin sharing data in ClinVar. The firm quietly deposited its first data in March.
These changes are helping improve the company’s reputation among patients and customers, Diaz said. Myriad’s business seems to be recovering, too. For two consecutive quarters, in Q4 2022 and Q1 of this year, Myriad’s revenues grew 11 percent and 10 percent, respectively, year over year. In the last quarter, hereditary cancer test volumes grew 32 percent year over year in the women’s health segment. Diaz is upbeat that Myriad will reach profitability by year end.
Looking ahead to the next decade, if genetic testing is to truly become integrated in healthcare, in Diaz’s view, the industry has more work to do in terms of improving patient access. While Myriad is working on new product launches, Diaz said he’s also focused on taking the company’s core products in hereditary cancer, prenatal, and pharmacogenomics to their full potential. “There are 23 million people that meet guidelines for hereditary cancer testing and we’re nowhere near being able to care for all these patients,” he said.
And if the industry wants to improve profitability, he said, companies must become more financially disciplined. They have to invest in clinical utility studies, lab automation, commercial platforms, and regulatory and reimbursement capabilities, he suggested.
As to the importance of patents, the Tillis/Coons bill, and Section 101 to the future of the genetic testing industry, Diaz said he’s not in the camp that thinks the Supreme Court’s patent eligibility cases have hindered innovation.
He said he hasn’t studied the bill closely, but his understanding is that it wouldn’t reverse the Myriad decision as some fear but would codify that naturally occurring genes cannot be patented and create protections around processes and methodologies for analyzing genes. If Tillis and Coons reintroduce the bill, he said he’ll study it more carefully. “I’m not saying that I wouldn’t like some more protection over our IP,” Diaz said. “But it’s not the most important thing at Myriad Genetics.”