A Thanksgiving Tradition: 23andMe Repackages Product, Raises Prices
Last November, just before Thanksgiving, 23andMe, the most popular provider of direct-to-consumer (DTC) genetic testing products, announced a new product and pricing model. The company took its most popular product—a $399 all-in-one genotyping service—and split it into two separate products, an “Ancestry Edition” and a “Health Edition.” It also raised prices, with the complete package jumping from $399 to $499.
This November, just before Thanskgiving, 23andMe announced it was undoing most of last November’s changes, eliminating the separate ancestry and health editions and offering, once again, a single product. Not reversed: the price increase.
A Rationale for Raising Prices. The combined product remains priced at $499, although it now requires a 1 year subscription to 23andMe’s (previously optional) Personal Genome Service (PGS). The PGS, which debuted in September, provides customers with access to regular scientific updates and product features for $5 per month. The changes make the effective list price for 23andMe’s service $559, although the company has run frequent $99 sales, and there are rumors that another one is imminent.
23andMe has not yet publicly discussed the reason behind the price increase, although several individuals, including CeCe Moore of Your Genetic Genealogist, have reported that the company recently upgraded its genotyping platform (and that there will be an $89 upgrade option for existing customers). [Update: 23andMe has confirmed the upgrade, and Daniel MacArthur of Genetic Future discusses the pros and cons (mostly pros) of the company’s new Illumina chip.]
23andMe’s new hardware, and the resources involved in analyzing a growing number of genetic variations and associated traits, may well explain the minor price increase. Keep in mind that, despite the rush for the $1,000 genome, cheaper genetic data does not necessarily mean cheaper genetic analyses. More available data means there is also more data to interpret, so even as the cost of obtaining personalized genetic data falls, the cost of making sense of those data may not immediately follow suit.
A Temporary Combination? But what about the company’s decision to recombine its products? Last year, when 23andMe split its health and ancestry products—a move which mimicked the strategy of its DTC competitor Pathway Genomics—I applauded the decision. At the time, the regulatory environment for DTC genetic testing was highly uncertain. While some form of regulation at some point seemed likely, it was unclear where regulation would come from or what shape it would take. (See “The Past, Present and Future of DTC Genetic Testing Regulation” for more detail.)
As I wrote at the time, employing separate commercial products to distinguish “educational or recreational uses of genetic data (such as genealogy) from clinical or medical uses (such as disease, pharmacogenetics or carrier testing)” seemed like a good way to provide commercial flexibility should future regulations discriminate between DTC products and services based on their intended use or likely risk.
Fast forward to today. In the past seven months alone, Pathway Genomics attempted to expand into Walgreens, only to draw the FDA’s immediate ire; the FDA sent letters to a host of DTC genetic testing companies, including 23andMe, warning that the companies were failing to comply with federal regulations; Congress held a public hearing to review a GAO-produced report on DTC genetic testing that cast the industry in an unfavorable light; and the FDA announced its intent to regulate all laboratory developed tests (LDTs), including DTC genetic tests, far more broadly and aggressively than ever before.
One important thing that hasn’t changed in the past year: the regulatory environment for DTC genetic testing remains as uncertain as ever. Still, as companies like 23andMe await the next move from the FDA, and perhaps from Congress as well, all indications are that a “risk-based application of oversight” is the most likely regulatory approach. Nobody yet knows what, exactly, that will entail, but products deemed by regulators to be lower risk are almost certain to receive less oversight both immediately and longer-term. Since 23andMe’s service involves examining genetic variants that are quite clearly low-risk (such as those used to identify genetic ancestry) and others that pose a higher potential risk (such as variants associated with drug metabolism or disease risk), recombining the health and ancestry products is a curious move.
At least from a regulatory perspective. But there is little reason to expect that clear or final regulations will be forthcoming from the FDA in the immediate future. With that in mind, 23andMe—which recently announced a new $22M round of venture funding led by Johnson & Johnson Development Corporation (and including existing investors New Enterprise Associates and Google Ventures)—may have simply decided not to allow regulatory prognostications to drive its commercial strategy.
Whatever 23andMe’s decision ultimately means from a regulatory perspective—and I would not be surprised to see separate products reemerge at some point in the company’s future—the real question is how its customers will take the news. While the price increase may be understandable to some, at $500+, the cost of a consumer genome scan would appear to be moving in the wrong direction for most consumers as the holiday shopping season approaches.