Sunday, April 3, 2011

Heidi Williams: IP on Genes

How does intellectual property protection for human genes influence the development of products based on these genes? A few weeks ago, Heidi Williams (NBER fellow and incoming MIT econ prof) presented to the Yale Law School Information Society Project about her empirical study of this topic: Intellectual Property Rights and Innovation: Evidence from the Human Genome.

Williams looked at the race to sequence the human genome between the Human Genome Project, whose genes were freely available, and Celera, whose genes were protected through contractual restrictions on redistribution and licenses for commercial uses. (So Williams was not looking at gene patents, but her results may have implications for the gene patent controversy and Myriad case.) Celera's IP protection only lasted until the gene was re-sequenced by the Human Genome Project, which meant a maximum of two years of protection, ending in 2003. To my knowledge, this is the first paper to look at the impact of open access not just on publications, but also on commercial products. The results are very interesting:
Celera's IP led to economically and statistically significant reductions in subsequent scientific research and product development outcomes. Celera genes have had 35 percent fewer publications since 2001 . . . . In terms of product development, Celera genes are 1.5 percentage points less likely to be used in a currently available genetic test (relative to a mean of 3 percent). The panel estimates suggest similarly-sized reductions, on the order of 30 percent. . . . Taken together, these results suggest Celera's short-term IP had persistent negative effects on subsequent innovation relative to a counterfactual of Celera genes having always been in the public domain. . . . [T]he cross-section estimates measure more persistent effects and suggest that Celera genes have not "caught up" by the end of my data in 2009 to ex ante similar genes that were always in the public domain.
What can we conclude from these results? Williams cautions that she "is not evaluating the overall welfare effects of Celera's entry into the effort to sequence the human genome," which likely increased the pace of genome research. But she suggests that "an alternative institutional mechanism [such as Kremer's patent buyout mechanism] may have had social benefits relative to Celera’s chosen form of IP." Her results also suggest that the "commercialization theory" of patents (arguing that exclusive patent rights are necessary to give a company the incentive to commercialize an invention) may not be applicable for genetic products (for a quick overview of this theory, see p. 1731 here).

Williams's paper has far more nuance than this brief summary conveys, so those interested in all the empirical details should download her paper. This was one of the most clever empirical studies I have seen, and even though Williams is an economist, not a lawyer, I'm sure it will generate many citations in the IP law literature.

1 comment:

  1. A reader emailed me with this thoughtful comment, which he was having trouble adding to this post: "I guess you somewhere take into account the value of the product produced? Namely, if one wants to develop a diagnostic test that is a relatively low value addition to scientific research and is cheap to develop if the mutation is already known, it may have great value for a patient, but the societal value is relatively low. On the other hand, if one is going to develop this gene as a drug in and of itself (erythropoetin for example) the development cost is extremely high, the regulatory cost and risk are even higher, and the value to the patient and society are much higher than for a diagnostic test. This latter extremely high value use will not happen in a 'no IP' world as the developments costs are much too high for any company to take on the risk of development. If we have no IP and we can have lots of diagnostic testing, unfortunately we will also have few if any biotech based drugs to treat the disease you now know you have."

    I agree that there is a big difference between diagnostic tests and biotech-based drugs—I make this distinction in Section I.D of Access to Bio-Knowledge: From Gene Patents to Biomedical Materials, in which I argue that attempts to ban all patents on DNA sequences are misguided. I should also perhaps have been clearer in this blog post that Heidi Williams is only talking about the impact of Celera's IP on genetic tests—she is not looking at other products like biopharmaceuticals.