By Andrew Zajac and Susan Decker - Fri Feb 17 06:01:01 GMT 2012

Enlarge image Genetic Medicine Advances Shadowed by Regulatory Issues

Gene-sequencing breakthroughs, spawning fast-growing, multibillion-dollar markets for drugs, software and medical tests, are also creating thorny issues over how to regulate commercial use of the human genetic code. Illustration: Rich Clement/Bloomberg

Gene-sequencing breakthroughs, spawning fast-growing, multibillion-dollar markets for drugs, software and medical tests, are also creating thorny issues over how to regulate commercial use of the human genetic code. Illustration: Rich Clement/Bloomberg

Gene-sequencing breakthroughs, spawning a fast-growing, multibillion-dollar market for drugs and medical tests, are also creating thorny questions over how to regulate commercial use of the human genetic code.

Health regulators are fashioning rules for bolstering oversight of laboratory-developed tests, including genetic analysis, that may show whether an individual is predisposed to certain diseases. Congress is determining whether patents on genetic material should be treated differently from other intellectual property.

The agencies, along with the U.S. Supreme Court in cases on genetic patents, are reviewing laws and policies enabling the use of genetic data to tailor treatment for each patient. The changing landscape affects companies including Quest Diagnostics Inc. (DGX), Roche Holding AG and Pfizer Inc. (PFE), the world’s biggest drugmaker.

“The industry is optimistic about the promise of the technology but concerned about challenges on the regulatory and legal fronts,” said Edward Reines, a patent attorney at Weil Gotshal & Manges LLP in Redwood Shores, California.

Genetic tests can indicate a patient’s susceptibility to conditions including breast and ovarian cancer, cystic fibrosis, Huntington’s disease or hemophilia -- and the most promising treatment. The tests alone account for as much as $6 billion in annual sales worldwide that may climb 15 percent a year, estimates Ross Muken, an analyst covering life sciences for Deutsche Bank Securities Inc.

Matching Patients, Products

The use of pairing drugs with diagnostics to help match patients with products rose almost six-fold from 2006 to 2011, according to the Personalized Medicine Coalition, a Washington- based nonprofit focused on educating the public and policy makers on medicine tailored to individuals.

The drugs involved include Pfizer’s Xalkori for a rare form of lung cancer and Basel, Switzerland-based Roche Holding’s Zelboraf for a life-threatening form of skin cancer. Both are accompanied by tests approved by the U.S. Food and Drug Administration to detect gene mutations.

The Supreme Court may say on Feb. 21 whether it will hear two cases capable of changing the landscape for biotechnology companies. In the first, New Brunswick, New Jersey-based Johnson & Johnson (JNJ) is asking the court to overturn a ruling that patent owners must clearly describe what they said they have invented in all patents. The second seeks a review of an appeals court decision upholding the patentability of DNA sequences isolated by Myriad Genetics Inc. (MYGN)

Cancer Risk

In the case involving Salt Lake City-based Myriad, the owner of a test for the hereditary risk of breast and ovarian cancer contends that researchers created a new compound eligible for patent protection by extracting the specific sequence from the long strand of DNA.

Opponents including Ellen Matloff, director of the Yale Cancer Genetic Counseling Program, say Myriad simply identified material that exists in nature.

“We’re all born with these genes,” said Matloff, a plaintiff in the Myriad case. “They didn’t create them. They don’t deserve a patent.”

Patents on individual DNA molecules including Myriad’s are becoming “increasingly irrelevant” because the latest platforms sequence genes en masse to avoid the need to isolate a particular DNA molecule -- and potentially infringe a patent, said James Evans, a professor of genetics and medicine at the University of North Carolina at Chapel Hill.

‘A Disaster’

Evans said he’s more concerned about claims to patent a mental process, such as finding an association between genes and disease risk. The high court is considering the types of diagnostics tests eligible for legal protection.

“What I think would be a disaster would be if the courts were overly permissive,” Evans said. Some patents are “abstract mental processes, and as such not patentable.”

The U.S. Patent and Trademark Office is conducting a Congress-mandated study related to genetic testing and whether special provisions should be created to ensure access to second opinions on tests covered by patents. The first of two hearings was held yesterday, and a report is due in June.

“These are really intense and difficult questions,” said Brenda Jarrell, a patent lawyer with Choate, Hall & Stewart in Boston who specializes in biotechnology. “It’s clearly good to have incentives for companies, institutes or anyone to learn more about the genetic basis of disease and treatments.”

Patent Options

The patent office probably will consider three options: setting more stringent requirements to obtain diagnostic patents, subjecting such patents to shorter terms than normal patents, or requiring patent owners to license their technology to competing labs, Jarrell said.

Patents aren’t the stumbling block to availability, said Hans Sauer, associate general counsel for the Washington-based Biotechnology Industry Organization, said at the hearing.

“One has to strain quite hard to trace existing problems with patient access and utilization of genetic tests back to patents,” said Sauer, who called insurance issues the greatest hindrance.

The patent agency’s historical position that no special rules exist for individual technologies conflicts with social and public policy issues surrounding health care, said Antigone Peyton, a patent lawyer with Cloudigy Law PLLC, of Alexandria, Virginia.

“There’s this intensely personal aspect that you have with diagnostic tests that you don’t have with something like the iPhone,” said Peyton, who co-authored a study on how patents affect access to genetic tests. “There are certain diagnostic patents that have been used to impede the kind of progress we could achieve. But that’s the price we pay by giving rewards to those who innovate.”

FDA Plan

Another source of concern for parts of the genetic medicine field is an FDA plan to oversee lab-developed tests. The policy covers genetic analysis and may affect as many as 30,000 laboratories, according to David Mongillo, former vice president for policy and medical affairs at the Washington-based American Clinical Laboratory Association.

The new, still-unspecified regulatory protocol would apply to tests made by large companies, such as Madison, New Jersey- based Quest and Burlington, North Carolina-based Laboratory Corp. of America Holdings, as well as diagnostics from smaller individual labs.

Regulation Concern

The lab industry says it’s already sufficiently regulated by the Centers for Medicare and Medicaid Services under the Clinical Laboratory Improvement Amendments. Mongillo is concerned that FDA oversight will slow innovation.

“This whole area of genetic and molecular medicine is advancing so rapidly,” Mongillo said. “What these labs can do is rapidly incorporate that new information into the laboratory- developed tests and improve it or better target a patient.” FDA approval still takes time “and the patient suffers,” he said.

It’s bad tests that are causing patients to suffer, said Jeffrey Shuren, director of FDA’s medical device review center.

“We’ve seen plenty of lab-developed tests that are inaccurate,” Shuren told the House Energy and Commerce health subcommittee on Feb. 15.

Some labs copy other companies’ FDA-approved tests, he said, and “who knows if they’re actually any good? You may have tests that are directing patients to get drugs that they shouldn’t, or not get drugs that they should, and that’s a disaster.”

To contact the reporters on this story: Andrew Zajac in Washington at azajac@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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Patents on Genetic Data Raise Legal Questions on Rights to DNA

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