The Unexpected Impact of Genetics on the Business World

Recent advances in genetic science are remarkable. In 2003 the first full human genome was sequenced after 13 years of work at a cost of over $3 billion. Today, the cost to sequence any individual’s entire genome is approaching $1,000. Genetic tests for specific genes linked to cancer and other diseases exist today and many more are being developed. We hear of a new era of “personalized medicine” in which drugs and therapies will be prescribed based on the individual patient’s specific genes.

All of this may seem to have little direct relevance to companies outside of biotechnology. However, the development of genetic knowledge and technology already has spawned new laws, regulations and patent uncertainties that impact almost all businesses in some way.

Privacy and Nondiscrimination. The federal Genetic Information Nondiscrimination Act of 2008 (GINA) represents the most comprehensive effort to date to regulate the use of genetic information. GINA initially only prohibited health insurers and group health plans from using genetic information to deny coverage or set payment rates. Another section, which just became effective in November 2009, affects all private and public employers with more than 15 employees.

GINA now prohibits discrimination against all employees and job applicants based on genetic information, prohibits the use of genetic information in making employment decisions, and strictly limits employer disclosure of genetic information. The EEOC anti-discrimination poster that is required to be displayed by all employers has been updated to include GINA.

A potential compliance trap in GINA is that it also restricts the collection of genetic information by employers. Genetic information includes not only actual genetic test results, but also family medical history that might show links to inheritable diseases. This has raised particular concern around wellness programs, and there is a limited regulatory exception for such employer programs if offered on a voluntary basis and if other specific requirements are met. The regulations are new and there is not yet any substantial enforcement history, so employers should exercise great caution in this area.

Health Care and Research. Health care providers are already very familiar with the Health Insurance Portability and Accountability Act (HIPAA) requirements of strict privacy protections for “individually identifiable health information,” which includes genetic information.

Medical researchers who work with genetic information are often subject to HIPAA and must also comply with the federal “Common Rule” which regulates human subject research. Genetic information has presented some unique regulatory issues for researchers because it can be more difficult to “de-identify” than other health information and it raises complex issues around obtaining the required informed consent of subjects.

Intellectual Property. Fundamental questions are currently unresolved concerning the protection of genetic-related intellectual property – especially patents. The legal and policy arguments about gene patents can be quickly summarized. On one hand, human genes can be considered “products of nature” which by law cannot be patented, and there also may be a basic moral objection to any individual or firm obtaining a patent (which is a legal monopoly) on a human gene. On the other hand, the Patent Office and courts have long allowed patents on genes that are isolated from their natural environment in the body. Gene patent advocates argue that no company will have the necessary economic incentive to develop lifesaving tests and treatments if the intellectual property the company creates—including isolated genes–cannot be protected.

The issue of whether isolated genes are patentable is before the federal courts in the Myriad case, which was organized by the ACLU to challenge Myriad Pharmaceutical’s patents on certain breast cancer susceptibility genes. On March 29, 2010 a US District Court granted summary judgment in favor of the ACLU side and invalidated the Myriad patents. This ruling will be appealed to the federal appeals court and the legal battle will continue, perhaps to the Supreme Court. A final ruling is still years away.

Meanwhile, there are other patent cases in the federal courts that may affect a number of businesses, including biotechnology. The Bilski case is at the Supreme Court and deals with the patentability of business methods – specifically, a method of hedging commodities risks. The decision in Bilski may have far-reaching consequences for patents on methods of analysis, data interpretation, and performing certain tasks.

On the regulatory side, an advisory committee to the Department of Health and Human Services has approved recommendations on gene patenting and licensing that have generated heated debate. Stay tuned to see if Congress can long avoid jumping in with new laws that will affect genetics-related intellectual property rights.

Editor’s Note: A slightly modified version of this column appeared last Friday in the Charlotte Business Journal.