To put the economics of gene patenting under the microscope, IP Australia recently commissioned The Centre for International Economics (CIE), a private economic consultancy, to conduct an analysis of the economic impact of ‘isolated human gene patents’ in Australia. The analysis and subsequent report were approached from several perspectives seeking to understand:

  • the financial arrangements associated with this type of patent activity (e.g. royalties received by institutions, research funding, research collaboration),
  • the role of patents in bringing new medicines and diagnostics to market,
  • the overall economic value to Australia of patents on genes,
  • the cost to Australian consumers and society (e.g. the cost of higher prices for these types of biologic therapies),
  • the impact of first inventions compared to follow on inventions, and
  • a stocktake of isolated human gene patents in Australia.

The overarching question to which an answer was sought was whether or not gene patents are an incentive or disincentive to research in Australia.

CIE undertook an extensive review of the existing literature and commentaries in the field, consulted with relevant stakeholders, and extracted patent data from IP Australia’s patent database, in order to provide both qualitative and quantitative analysis.

What is a ‘gene patent’?

The sheer complexity and scope of what constitutes an ‘isolated human gene patent’ required detailed consideration, and accordingly gene patents, were broken down into a number of sub-groups, each of which is discussed and assessed in depth in the report.

However, in order to conclude the analysis, the report settled on a definition of an ‘isolated human gene patent’ as follows:

‘Isolated human gene sequence patents are the subset of total gene sequence patents that include at least one claim to an isolated human gene sequence. These claims could be to:

  • An isolated full or partial length gene sequence (i.e. that encodes a human protein or a portion/fragment of a full length sequence that could be used as probe or primer, respectively); and
  • A modified isolated human gene sequence (i.e. a sequence that has been altered over its naturally occurring counterpart, including those altered sequences that could encode for an altered protein with improved properties over the wild type/native protein).’

Even this definition proved to be too broad in the context of the report - so ‘modified full or partial human gene sequence patents’ were not included in the final analysis. In this respect the report clearly has some limitations in its consideration of the ‘total’ economic impact of gene patents.

Findings

Based on the above definition the report estimates that at least 3700 ‘isolated gene patents’ have been filed in Australia, with around 1400 being filed before the completion of the Human Genome Project in 2003. Despite these relatively large numbers it is estimated that only 450 ‘isolated human gene’ patents are currently in force in Australia, with very few being held by Australian entities (4.8%).

Notwithstanding the relatively small number of active patents, based on publicly available data CIE conducted an economic analysis to assess the estimated monetary return from these patents, e.g. royalties and license fees, to Australian entities - primarily universities and medical research institutes. While the dollar values are modest: in the order of $1.1 to $2.6 million, CIE was able to derive some general findings on the economic value of these types of patents.

Based on its analysis, albeit with clear limitations, CIE made four key findings:

  1. The measurable economic impact associated with isolated human gene patents, such as royalties and fee income, is limited.
  2. Despite there being limited measurable economic impact, there has, over the last ten years, been a tripling in gross expenditure on medical and health sciences R&D in Australia. The report considers this to be the real value of these types of patent, namely ‘incentivising’ innovation.
  3. There has been a significant reduction in patent activity in Australia directed at ‘isolated human genes’ since the completion of the Human Genome Project (2003).
  4. Most patent activity is this technical field is now directed at modified gene sequences and methods of use.

Despite some degree of public hysteria over the perception that human genes are owned by private companies, given how many genes actually make up the human genome the findings of this report suggest otherwise. Rather, based on this empirical economic analysis, there appears to be an upside from human gene patenting based on its ability to drive innovation, which leads to improved health outcomes, and a net positive effect on the overall economy.