Invitae, the bold little company run by genomics veteran Randy Scott, today announced that it will offer any of its 1500 genetic tests to patients for $475 – so long as they don’t use health insurance to pay for it.
For tests that are going to be paid through a health insurer, the cost will be $950 if the insurer has made Invitae tests in network, and $1,500 if they are not.
“This has been a core part of our business strategy from day one,” Scott says. “The cost of DNA sequencing is coming down.”
Scott has been a major figure in the business of genomics. He ran Incyte Incyte when it was a competitor to Craig Venter’s Celera Genomics and Third Rock Ventures founder Mark Levin’s Millennium Pharmaceuticals in the race to build huge databases of genes, and after that he founded Genomic Health, whose breast cancer genetics tests, used to predict whether women will respond to chemotherapy.
The idea behind Invitae is that the plummeting cost of sequencing DNA using machines made by San Diego’s Illumina Illumina will make it profitable to sell genetic tests at a flat rate. All the tests must still be ordered through a doctor.
Scott says that the new prices are consistent with the company having a 50% gross margin as volumes increase. He argues that there are huge numbers of people who should opt for genetic tests who don’t get them. For instance, 50% of women with mutations in the BRCA genes that cause breast or ovarian cancer don’t have a family history of breast or ovarian cancer, and therefore don’t get tested.
But Scott admits to another motivation, too. Two months ago Color Genomics, a startup backed by Khosla Ventures and Formation 8, announced that it would market a BRCA test that costs $249, also eschewing working with health insurers.
“We believe this is an exciting time in the space,” says Scott. “It’s very competitive. People ask us, were you planning this anyway or was it drive by Color? And we say yes and yes. We’re actually excited to have other competitors in the space that are driving along similar themes because I think the goal is that lower pricing is going to open up entirely new markets.”
The big question for these companies: Are there really enough people who want genetic tests who can’t get them to make up for these cuts in prices with bigger volumes? We’re about to find out.