CIRM Legislation: A Cash Cow or Bum Steer?

Legislation to ensure that California garners a decent return on its $6 billion investment in embryonic stem cell research has hit a roadblock and faces a critical hearing on Thursday.

The measure is SB771 by Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley. Kuehl is chair of the Senate Health Committee and Runner is the No. 2 GOP leader in the Senate.

The bill has been shunted into a "suspense" file, along with many others, because the chair of the Senate Appropriations Committee, Tom Torlakson, D-Concord, is uncertain whether the measure would generate more revenue than would the regulations of the California stem cell agency itself.

If the measure is not removed from the suspense file, it will be placed on hold for this year and is not likely to be brought up again until January.

Discussions have been underway between Kuehl, Torlakson, Senate President Pro Tem Don Perata, D-Oakland , and Senate Majority Leader Gloria Romero, D- Los Angeles, about the fate of the bill. Kuehl and Runner are contending that it is impossible to make revenue comparisons between the bill and CIRM regulations because the regulations are not in final form. They also argue that arguments by the biotech industry concerning the adverse impact of the bill are highly speculative. Industry is also not fond of CIRM's rules.

Although the Kuehl bill is up for a nominal public vote, without a nod from the Senate leadership, the bill is not likely to be removed from the suspense file.

The staff of the Appropriations Committee has prepared an interesting analysis of SB771 that indicates that the measure would generate $56 million more for the state over a given period than would CIRM's regulations. Here are some excerpts:

"Based on a direct comparison of state revenues generated under SB 771 and under the CIRM regulations, SB 771 would produce more revenue than the CIRM regulations. In a ten year projection of a sample project modeled under three scenarios (a licensed invention, a low success royalty, and a high success royalty) with an $8 billion public investment, SB 771 would have produced $183.5 million compared to $127.7 million under the CIRM proposed regulations.

"The California Institute for Regenerative Medicine believes that the sample comparison above is misleading, that financial market forces, the interests of private research companies, and the unique nature of cellular therapies will produce disincentives which will substantially reduce the projected returns of 771."

The analysis said it reviewed economic studies of potential Prop. 71 returns although it did not cite them by name. It said the studies projected royalties to the state of between $160 million and $1.1 billion.

Earlier this month, an item appeared on the Internet that bears on the biotech industry position that anything that promises to inhibit returns on stem cell products (such as SB771) will discourage research. In an item called "What Price Innovation?," Merrill Goozner, director of the Integrity in Science Project at the Center for Science in the Public Interest, wrote about industry arguments that Democratic national health care reform plans would choke medical research. Goozner said:

"Is there any evidence to suggest that the pace of significant medical breakthroughs can be associated with higher drug industry sales, profits, profit margins or, perhaps most significantly, R&D expenditures? Or, put another way, given the past decade's very high rates of sales growth, profit growth and R&D expenditure growth, how does one explain the steady downward decline (trend line; there is, of course, year-to-year variation) in the number of significant new drugs emerging from industry labs?"