DTC Gene Tests, Tax Reform in the News

2017 is starting to wind down as evidenced by the resurgence of holiday-themed music and Christmas jingle-riddled television commercials, but Washington is nonetheless making good use of these last few weeks of the year. In one of the more significant regulatory concessions in recent memory, the FDA said it will use a more streamlined approach to direct-to-consumer genetic tests, but the current state of tax reform seems headed for game-stopping controversy unless significant concessions are made.

‘Precert’ the New Approach to DTC Gene Risk Tests

The notion of pre-certification, or “precert,” has gained a lot of momentum at the FDA this year. First, the FDA said in July it would use a precert program for some moderate-risk digital health applications, and now the agency is making use of that same concept in connection with direct-to-consumer genetic tests that disclose the customer’s risk for diseases. The announcement affirms yet again that the agency has adopted a much less militant approach to its regulation of the life sciences under the new leadership.

Readers will remember the controversy over DTC marketing of such tests shortly after Margaret Hamburg took the commissioner’s chair in 2009, which led to a warning letter to several makers of these DTC genetic propensity tests. The agency wrote a warning letter to 23andMe of Mountain View, Calif., in 2010 about this kind of activity, but even two years ago, the FDA was still trying to keep a lid on such activity as indicated by a Sept. 21, 2015 warning letter to Pathway Genomics Inc. of San Diego for the company’s marketing of its Cancer Intercept test.

FDA commissioner Scott Gottlieb said in a statement that these tests do carry some risk, but he also cited the need to devise a regulatory regime that avoids strangling innovation in technological spaces that move at a more rapid pace than the agency can hope to match. Gottlieb made reference to a de novo filing for the 25-hydroxyvitamin D test system by AB Sciex LLC of Redwood City, Calif., but the FDA also announced it had approved a de novo application by 23andMe for the company’s Personal Genome Service (PGS) test on the same day the agency announced the precert program.

The net effect is certainly a positive change for makers of these tests, but any allegations that a false negative cost a consumer their life will undoubtedly spark a severe case of whiplash, at least on Capitol Hill. The real test in this scenario is how the FDA would respond to such criticism.

Tax Reform Gains Momentum

The push for corporate tax reform is heating up on Capitol Hill, and both the House and the Senate have legislation in the works. While neither proposal seems to include a repeal of the medical device tax, both versions eliminate at least some of the credit for orphan drug development, a move that seems certain to drive resistance among drug makers and patient groups alike.

The House Ways and Means Committee passed its tax reform vote on Nov. 9 in a party-line vote, perhaps a predictor of how this issue will play out on both sides of the Capitol. Section 3401 of the Tax Cuts and Jobs Act of 2017 completely eradicates the tax credit for clinical testing for orphan drugs, which the authors of the legislation say will save the taxpayer roughly $54 billion over 10 years.

The Senate took a less stringent but more convoluted approach, with the net result that drug makers will lose $30 billion in tax credits over 10 years. At least one patient group, the American Cancer Society Cancer Action Network, voiced its opposition to several features of the House bill, stating that the majority of cancer drugs qualify for orphan drug status “at some point in their lifecycle.” The group also said a study conducted in 2015 suggested that elimination of the orphan drug tax credit “would be to decrease orphan drug development by one third.”

The issue of the device tax is not necessarily dead despite the failure of both chambers to include a repeal in their respective bills. Much of the conversation about a device tax repeal seems to revolve around the reauthorization of the Children’s Health Insurance Program, which must be completed by Dec. 31. Ways and Means chairman Kevin Brady lent credence to that expectation, stating recently that temporary relief from the device tax will arrive via an unidentified legislative vehicle “before the end of the year.”