CIRM Rejects Grant Applications in Wake of Director Conflicts

The California stem cell agency, already under fire because of one conflict-of-interest flap, today dumped 10 applications for grants of up to $3 million annually as the result of additional violations of its conflict of interest policy by members of its board of directors.

The announcement followed a report in the San Francisco Chronicle (see below) this morning that disclosed the problems with grant applications from UC San Francisco, UC San Diego, UCLA and the University of Southern California.

The newspaper said that applications from those institutions included letters of support from the deans of those schools who also sit on the board of directors for the $3 billion program. Members of the board of directors are barred from attempting to influence a decision regarding a grant.

CIRM's announcement did not mention conflicts of interests. Nor did it mention the names of the schools, which may submit more than one application on behalf of their researchers. It also did not indicate whether more institutions than the four were involved.

The problems are connected to an $85 million faculty award program aimed at supporting top-flight, young researchers for several years. CIRM said that with the rejection of the 10 applications, the size of the program could shrink by about $15 million. Awards are scheduled to be approved by directors next week in Los Angeles.

Interim CIRM President Richard Murphy said that "checks and balances" at CIRM detected the problem. According to the Chronicle, CIRM staffers identified the conflicts. Murphy said the problem was the result of an "innocent misunderstanding."

CIRM Chairman Robert Klein said steps will be taken to prevent a recurrence of similar problems. They include more review of applications prior to issuance, special guidance to board directors and "specific guidance on access to counsel" concerning applications.

Klein, an attorney, was involved in the earlier conflict problem involving the Burnham Institute. He advised John Reed, a CIRM director and president of the Burnham, to write a letter in August lobbying CIRM staff to overturn a negative decision on a grant to Burnham. The case has attracted international attention online in scientific journals and has generated a call for an investigation by the California Fair Political Practices Commission.

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, said CIRM made the right decision in rejecting the 10 applications. But he said in a news release:

"The only way to fix this is complete transparency. People have a right to know which board members still don’t understand conflict of interest rules."

Simpson continued:

"It’s simple: stem cell board members cannot take part in any way in grants to their institutions. The board is not some old-boys’ club for the benefit of the state’s universities. They are public officials and stewards of the public interest. Perhaps a few of these deans need to enroll in Ethics 101 at their universities and get the basics down."

Both Simpson and California's top fiscal officer, state Controller John Chiang, have called for the FPPC investigation in the Burnham case.

The Chronicle said that applications for the faculty award grants required a letter of support signed by the dean of the medical school or the departmental chair.

In addition to the four schools identified by the Chronicle, other institutions have top academic officials, including deans, represented on CIRM's board. They include Stanford, UC Davis and UC Irvine. CIRM refuses to disclose the names of institutions that apply for grants on the grounds that those rejected might be embarrassed.

However, it is reasonable to assume that at least one of those three schools applied for the faculty award program and did not submit a letter that would be a conflict of interest.

In response to a question from the California Stem Cell Report, Simpson said,

"They need to make clear what institutions and board members are involved. And they need use the words "conflict of interest violation. Even if they don't do that, the (CIRM news) release was gobbledygook."

Murphy, also in response to questions, said that all 10 applications were eliminated for the same reason. He said,

"ICOC members and CIRM staff are, like all government officials, aware of and sensitive to conflict of interest concerns. This is precisely why CIRM has acted so cautiously in this case. The concerns about the submissions in response to the new faculty (awards)arose out of an innocent misunderstanding of what was allowable in terms of the sign off of institutional support letters by ICOC members."

Jesse Reynolds of the Center for Genetics and Society, writing on the organization's blog Biopolitical Times, said, the Burnham conflict case and today's suggest "a board culture that does not take conflicts of interest seriously. The picture seems even sharper in light of CIRM board members' personal financial interests in companies that are invested in stem cell research, documented in a CGS report in April 2005."

Reynolds continued,

"This meddling is symptomatic of the deep flaws of Proposition 71, which created CIRM. It mandates that the CIRM board be dominated by high-ranking representatives of the institutions vying to maximize their slice of the public funding pie. These developments should stimulate the California legislature to alter the law to reform the board structure, and more."

No Improper Influence: CIRM Defends 'No Actual Conflicts' Claim

Earlier this month the California Stem Cell Report  published an item that said:

“In the wake of recent considerable criticism concerning conflicts of interest at the $3 billion California stem cell agency, its leaders have taken to saying 'no actual conflicts' have been found at the agency.

“That assertion is simply not true.”

We asked the stem cell agency if it would like to respond and said that its response would be carried verbatim. The agency's comments are below. Our take on the response follows the CIRM comments, which were authored by Kevin McCormack, the agency's senior director for public communications and patient advocate outreach.

In David Jensen’s recent blog about the stem cell agency he claims to “debunk” claims that there have been no actual conflicts in CIRM’s funding decisions saying “the agency has a long history of problems involving conflicts of interest, 'actual' and otherwise.” In fact, in the cases cited by Mr. Jensen, show 'otherwise' is the appropriate word here because as we’ll show CIRM’s conflict procedures worked and the funding decisions were not affected by any improper influence.

Let’s take it case by case, looking at each instance of a “conflict” cited by Mr. Jensen.

John Reed

In 2007, John Reed, a member of the stem cell agency’s Governing Board, contacted staff in his capacity as the president of the Burnham Institute after the Board approved a SEED grant award to a Burnham investigator. Dr. Reed did not participate in the Board’s decision to approve the award and played no role in that decision. All he did was send a letter to CIRM staff after the Board meeting to provide factual information in response to technical questions raised by CIRM staff concerning the investigator’s eligibility for an award. Those questions ultimately led staff to reject the grant. Because the Board had already made the decision to award the grant, it did not occur to Dr. Reed that the conflict rules would prevent him from contacting staff to provide relevant information. And why would it? The decision was made so there was nothing to influence. After CIRM staff received Dr. Reed’s letter, they informed Dr. Reed that he must refrain from participating in any way in CIRM's consideration of the Burnham grant. In addition, CIRM staff did not consider the letter in conducting their administrative review of the Burnham grant and their determination that the investigator was not eligible did not change. The FPPC determined that, although Dr. Reed’s conduct raised ethical concerns, he had not violated conflict of interest laws because he attempted to influence a decision that had already been made. Furthermore, Dr. Reed’s conduct did not affect a CIRM funding decision because the grant was rejected by CIRM staff.

New Faculty Awards

When a candidate applies for a CIRM New Faculty Award it is standard practice for them to include a letter of support from the institution where they hope to be working. In December 2007, during a review of applications for New Faculty Awards, CIRM staff discovered that ten applications were accompanied by letters of institutional support signed by members of the Board. This was due to a miscommunication by staff, a poorly drafted memo to Board members leading them to think it was OK to sign the letters of institutional support. The error was discovered before the Board considered any of the applications. CIRM staff determined that the letters could be perceived to create a conflict of interest and so, to avoid even the appearance of a conflict, CIRM staff disqualified the ten applications. As a result, the applications were not presented to the Board for its consideration, thereby avoiding any potential for a conflict of interest in a funding decision.

John Sladek

In 2011, while preparing the public summary for Basic Biology III applications, CIRM staff discovered that Dr. John Sladek was one of several co-authors on scientific publications with a researcher who was listed as a consultant on a CIRM grant application. This is a technical violation of the Grants Working Group (“GWG”) conflict policy, which prohibits a member of the GWG from participating in the review of an application if the member has co-authored papers with a salaried investigator listed on a CIRM application within a three year window. It should be noted, however, that Dr. Sladek’s participation in the review of the application would not have constituted a conflict of interest under state conflict of interest laws because Dr. Sladek did not have a financial interest in the application. In addition, the amount of funding involved – approximately $3,000 of salary per year for three years, less than one percent of the total award – was not material, and Dr. Sladek did not stand to receive any financial benefit from the application. Finally, Dr. Sladek’s participation in the review did not affect the outcome because the application was not recommended, or approved, for funding.

The three instances cited by Mr. Jensen share two common features. First, CIRM staff identified the potential for a conflict before any funding decision was made. Second, CIRM’s funding decisions were not affected by any improper influence.

Ted Love

Mr. Jensen also cites the service of Dr. Ted Love, a member of the Board who volunteered his time to assist CIRM in offering his scientific and medical expertise, as evidence of a conflict of interest. Although Mr. Jensen insinuates that Dr. Love’s service constituted a conflict of interest, he does not cite any facts, except Dr. Love’s “deep connections to the biomedical industry.” But the fact that Dr. Love has experience in the biotech industry does not constitute a conflict of interest, and as a member of the Board and as a volunteer to CIRM, Dr. Love abided by CIRM’s conflict of interest policies.

In the past Mr. Jensen has criticized the stem cell agency for its lack of connections and engagement with industry. In this case he criticizes us precisely because of our connection and engagement with someone who has industry experience.

Venture Capital Firm

Mr. Jensen also suggests that a conflict of interest arose from the fact that “iPierian,Inc., whose major investors [a venture capital firm] contributed nearly $6 million to the ballot measure that created the stem cell agency, has received $7.1 million in awards from the agency.” While it is true that Proposition 71 involved a multi-million dollar campaign, the funding for the campaign came primarily from individuals who had a family member who suffered from a chronic disease or injury, including individuals associated with a venture capital firm. The firm itself did not contribute to the campaign, nor did the campaign accept contributions from biotechnology or pharmaceutical companies. Furthermore, the venture capital firm did not invest in a CIRM grantee; rather, it invested in a different company which subsequently merged with yet another company to form an entity that later applied for, and was awarded a CIRM grant.

Stem Cells, Inc.

Mr. Jensen cites CIRM’s award to Stem Cells, Inc. as another source of a conflict. In support of this claim, Mr. Jensen’s references Bob Klein’s support of the award, as well as the fact that Irv Weissman, PhD, appeared in an ad for Proposition 71 in 2004. However, neither Mr. Klein’s support for the award nor Dr. Weissman’s support for Proposition 71 constitutes a conflict of interest. First, Mr. Klein, like any member of the public, has the right to express his views to the Board. The state’s revolving door laws do not apply to a former member of the Board who, like Mr. Klein, is not compensated for making an appearance. As for Dr. Weissman’s support for Proposition 71, nothing in state law prohibits a member of the public from seeking CIRM funding even though he supported the measure during the campaign. In fact, it would be reasonable to expect that most stem cell scientists in California (and elsewhere) supported Proposition 71. Disqualifying individuals from receiving funding because they supported the law would leave few, if any, eligible applicants.

Allegation of Conflict at Board Meeting

As further evidence of an “actual conflict”, Mr. Jensen cites another instance in 2008 in which a representative of a for-profit applicant publicly complained at a Board meeting that a member of the GWG had a conflict of interest “from a business perspective.” As provided for by CIRM’s regulations, the applicant had filed an appeal, claiming that the reviewer had a conflict of interest because he had a financial relationship with another company that was not an applicant for CIRM funding. CIRM’s legal counsel reviewed the appeal and determined that there was no conflict of interest under CIRM’s policy.

Saira Ramasastry and Laurence Elias

Mr. Jensen cites two instances in which CIRM’s hired consultants in support of his claim that CIRM has “actual conflicts of interest.” In 2010, CIRM retained a partner at Life Sciences Advisory, LLC, Saira Ramasastry, to assist CIRM’s External Advisory Panel, which completed its work in December 2010. In 2012, Sangamo BioSciences, Inc., nominated Ms. Ramasastry to serve on its Board of Directors. Although Ms. Ramasastry continued to provide some consulting services to CIRM through fiscal year 2011-12, none of her work for CIRM involved Sangamo or any CIRM program in which it was involved. Ms. Ramasastry’s services on behalf of CIRM did not create any conflict of interest. The same is true of the second instance cited by Mr. Jensen. In 2010, CIRM hired Dr. Laurence Elias, a former Geron employee and an accomplished clinical development professional, to provide CIRM with technical and regulatory input to ensure that the clinical elements of an RFA were technically complete and accurate. The concept for RFA had already been approved and as such Dr. Elias was not in any position to influence the overall scope or structure, nor did he have any role in evaluating applications. CIRM staff and Dr. Elias complied with all conflict of interest requirements. Neither contract led to an “actual conflict of interest”.

Diane Winokur

Mr. Jensen’s laundry list of “conflicts” also includes a reference to the recent appointment of Diane Winokur to serve on CIRM’s Board. Mr. Jensen quotes a representative of the ALS Association who said that Ms. Winokur will be “a tremendous asset in moving the ALS research field forward through CIRM funding." Of all the insinuations made in his blog this is perhaps the cheapest shot, taking aim at a woman who has dedicated her life to fighting a deadly disease, one that claimed the lives of her two sons. Mr. Jensen knows very well that the ALS Association does not speak for Ms. Winokur or CIRM and while we expect that Ms. Winokur will bring her expertise as an advocate for people suffering from ALS to the Board, she, like all members of CIRM’s Board, represents all Californians, not just those suffering from a particular disease. Ms. Winokur’s appointment does not create a conflict of interest.

Press Releases

Finally, Mr. Jensen cites a Board debate from 2006 involving a requirement in CIRM’s intellectual property regulations regarding press releases. Under Health and Safety Code section 125290.30(g)(1)(C), the discussion of standards does not create a conflict of interest, and the Board’s debate was enriched by the participation of members who brought their expertise and experience to bear.

Mr. Jensen says that one of the reasons why the IOM did not report any instances of conflict of interest in its report is that it did not look for any conflicts of “inappropriate behavior,” But Mr. Jensen was present in the public hearing at UC Irvine in April of 2012 when the IOM panel asked Stuart Drown, Executive Director of the Little Hoover Commission that also looked into allegations of conflict of interest at CIRM, if he could cite any actual instances. Mr. Drown said he could not. Nor did Mr. Jensen offer any when it was his turn to talk.

The view from the California Stem Cell Report:

Generally speaking, CIRM's response about “actual” conflicts of interests is a reiteration of what the California Stem Cell Report carried at the time of each incident and does not add much new to the discussion of the issues. All of the agency's earlier responses could be found in the links in the “debunking” piece. Additionally the agency confuses what are clearly actual conflicts with other instances that could involve either actual or perceived conflicts, which the IOM noted can be as deadly as the real thing. However, in the most egregious cases involving Reed and later the five medical school deans, the agency would like the public to believe that these were not serious matters because the staff detected and caught the conflicts before the grants were made.

That is like saying a burglar who was caught in the act before he escaped with his booty committed no offense.

The acts were committed by members of the CIRM board, and they were violations of conflict of interest standards. In the case of the five deans, that is why the agency voided 10 applications totaling $31 million from their five institutions. If there had been no actual conflict of interest, that would not have been necessary.

As for blaming the staff for “miscommunications,” the applications that the five deans signed were quite clear and offered them the option of having another person at their institution sign the grant proposal. Other deans on the board did not sign applications in the same round. Those applications were then handled in the normal fashion. One might ask how in the world could the head of a medical school who was also serving on the CIRM board NOT recognize a conflict of interest when asked to sign a request for cash from the board on which he served?

Regarding John Reed and his conflict of interest violation, both he and then CIRM Chairman Robert Klein have acknowledged Reed's actions were wrong. Klein, an attorney who directed the writing of the 10,000-word measure that created CIRM, advised Reed to contact CIRM staff to lobby on behalf of a grant that was approved by the board but was about to be denied by staff.(See here, here and here.)

CIRM's response contends that Reed's 6 ½ page letter was nothing more than “factual” information dealing with technical matters. That is hardly the case. In fact, Reed explicitly “emphasized” (Reed's word) that failing to comply with his letter would damage the future of the stem cell agency. Denial of the grant, he said, “will surely discourage clinical researchers from participating in the CIRM mission to advance stem cell therapies.”   

Reed's action was inappropriate, and the California Fair Political Practices Commission warned Reed about his actions. The journal Nature reported,

“California’s Fair Political Practices Commission (FPCC) decided that Burnham Institute President violated conflict-of-interest rules by writing a letter to the California Institute of Regenerative Medicine appealing a decision that an affiliate of his institute was ineligible for funding.”

The California Stem Cell Report's “debunking” piece went beyond "actual" conflicts to describe other instances where conflicts emerged. Readers can go back to the original links for all the details, but the cases of StemCells, Inc., and iPierian, Inc., are worth reviewing again. Both cases involve fund-raising efforts that ran into millions of dollars for the ballot measure campaign that created CIRM. The campaign was run by Bob Klein who later became the agency's first chairman, serving for six years and becoming something of a hallowed figure in stem cell circles. One of the principal jobs of a campaign manager is to raise the millions needed to run a successful statewide election campaign in California. It is common for members of the public to believe that major campaign contributors are rewarded later for their contributions. Whether that was the case in these instances, the reader must decide for himself or herself. But the appearance is less than salubrious for an agency that claims to have never seen an actual conflict of interest as it has handed out $32,000 an hour, 24 hours a day, seven days a week during the last six years.

The facts are that about 90 percent of the $1.7 billion awarded by the CIRM board has gone to institutions tied to present and past members of its governing board. The agency, however, does work hard to be sure legal conflicts do not arise during board action on grant applications, using a voting procedure that is so convoluted that the actual vote on nearly all applications is not even announced at board meetings. Sometimes the procedure means that only a handful of governing board members can participate in debate or vote. In the case of the five medical school deans, as the board struggled to deal with the fallout in 2007, only eight of the 29 members of the board could participate in the discussion because the rest had conflicts.

As for CIRM's comments about “insinuations” and “cheap shots” by the California Stem Cell Report, we naturally differ with that characterization. The case in point involved what the chief scientist for a patient advocate group said she expected as the result of a recent appointment to the board. The scientist's remarks were offered as example of the type of expectation and entitlement that can arise when governing board members must be picked from specific constituencies, as is the case with all 29 CIRM board members.

And as for my testimony at the IOM hearing last April, here is a link to my statement, which includes a discussion of conflicts of interest.  

California To Give $85 Million to 25 Researchers

The California stem cell agency meets next Wednesday in Los Angeles to give away $85 million to as many as 25 stem cell researchers at rates of up to $3 million a year each.

The five-year "faculty award" program is aimed at drawing the best and brightest into stem cell research in California and not just embryonic stem cell research. Arlene Chiu, CIRM's former top scientist, said earlier this year,

"These grants are designed to encourage newly independent investigators to pursue bold and innovative studies across the full range of stem cell types – human and animal, embryonic and adult. We will consider providing successful applicants salary and research funding for up to five years, ensuring that they have stable, secure financial support as they begin their independent scientific careers."

Applications for the grants came from researchers at 28 organizations. Eleven University of California and California State University campuses are represented. (The California State University system is separate from UC). Four private universities submitted applications. Thirteen non-profit research institutions also applied. However, none of the names of the institutions or the individuals were publicly released, in keeping with CIRM's policy of secrecy on grant applications.

The faculty program is the main item on the agenda for next week's meeting, but other noteworthy items are including. Some details of what is to be considered are currently available on CIRM's web site, well in advance of the meeting. Sometimes the agency has been remiss in providing information in a timely fashion, but the early posting of information is essential if the agency is to engage the public and keep its constituencies and backers truly informed.

Here is a quick run-down on the agenda and the status of the supporting information:

--Grants administration policy for grants to private businesses – key item for the private sector – Draft of policy posted

--Boost in compensation for scientists reviewing grants from $500 daily to $2,000 per meeting, regardless of the number of days – background posted along with short bios on new scientific members of the Grants Working Group, which is the group that reviews research applications

--$300,000 annual conference program to be controlled by the CIRM president – background posted

--Research standards – background posted on "consent calendar" item

The following items have no background posted on CIRM's web site at the time of this writing, five business days prior to the meeting:

--$85 million faculty award program

--Additional funding for $227 million lab grant program to be awarded next year

--Compensation and relocation allowance for incoming president Alan Trounson

--Intellectual property policy for grants to businesses – This is a major item for the private sector.

--Changes in CIRM's internal governance policy and review of CIRM's organization chart – This is likely to concern the sometimes tenditious past relationships involving the president and chairman of CIRM, creating a new structure aimed at keeping Trounson and stem cell Chairman Robert Klein happy. It could also involve allocation of additional staff to Klein, which he has been seeking for some months.

(Editor's note: An earlier version of this post was garbled. An earlier version also incorrectly reported that the increase in reviewers' honorariums would be to $2,000 per day instead of per meeting.)

Names of Faculty Award Recipients

Here is a link to the CIRM news release on the names and the institutions of the faculty award recipients. http://www.cirm.ca.gov/press/pdf/2007/12-12-07.pdf

CIRM Plan: $85 Million Split Among 25 Stem Cell Researchers

Polish up your resumes, folks. The California stem cell institute is preparing to give away $3 million a year or so to 25 promising, "young" researchers and physician-scientists. The money could be awarded as early as next winter.

The concept for the five-year program was approved by CIRM's Oversight Committee earlier this month. It is aimed at drawing the best and brightest into stem cell research in California -- and not just embryonic stem cell research.

The $85 million proposal encountered virtually no opposition at the Oversight Committee meeting. However, it did shed some light on issues related to have and have-not institutions, quality of grant recipients and spreading the CIRM wealth geographically around the state.

Arlene Chiu, interim chief scientific officer for CIRM, presented the concept to the ICOC. She told the board:

"Independent scientists at this early stage in their careers are very vulnerable...because they face a number of challenges: Tight federal funding pressures to get data and results out quickly, to publish papers, and demonstrate productivity and the potential of their work. They also must get grants to support their fledgling labs. And last, and certainly not least, physician-scientists often have to have clinical service as well. Faced with these challenges, plus the restrictions and uncertainties imposed by the presidential policy on human embryonic stem cells, it's not surprising that many new faculty are discouraged, feel discouraged from rushing into this new field."

Under the plan, the awards would go to persons who hold fulltime, faculty-level positions at academic or non-profit institutions in California and who are "young," meaning in the early stages of their careers. Academic institutions with a medical school could submit four applications in support of new Ph.D.'s and two new physician-scientist faculty members. Institutions without a medical school would be limited to two applications. The grants would go for research, salaries and possibly educational loans. They are akin to Pioneer grants awarded by the National Institutes of Health.

Chiu said the cap on the applications from each institution was needed to keep the total number from become unmanageable given the problems of processing them with CIRM's small staff. Ed Penhoet, vice chairman of the ICOC, said the total could hit 600 or 700 without a cap. He said he was more concerned about the load on grant reviewers, who come from out-of-state.

Philip Pizzo, dean of the the School of Medicine at Stanford, and others advocated no institutional cap on applications. Pizzo said,

"This is a very big award that you're putting forth, that it's best to have the very most outstanding individuals."

Later he said,

"I'll say this carefully, and I hope no one will be offended. I think we must have a very high standard. The tendency that we've had recently is we're trying to spread things around, and I think it's good. We should do that, but we should have a high bar on these grants and not simply come in and say,well, we need to have many more of them to sort of prime the seat. I think that would be going in the wrong direction."

David Baltimore, former president of Caltech and a Nobel Laureate, replied,

"There are only 25 grants. If four of those grants were given to one institution, that would be probably scandalous. For six grants to be given to one institution would certainly be scandalous when it's such a limited resource for the state."

Also speaking for limits on each institution were Oversight Committee Chair Robert Klein, Claire Pomeroy, dean of the School of Medicine at UC Davis, and patient advocates Jeff Sheehy and Sherry Lansing, a former Hollywood film executive. .

At one point, Oswald Steward, chair and director of the Reeve, Irvine Research Center at UC Irvine, supported Pizzo as did Duane Roth, chairman and CEO of Alliance Pharmaceutical Corp., who said he favored stringent criteria for the awards.

The discussion of the faculty award program reflected some of the questions recently rippling through CIRM. Do the big, well-established programs continue to receive generous grants? How much should go to institutions without the reputations and facilities that UC San Francisco and Stanford have? Should the location of institutions be a consideration? Does spreading the money around mean that unworthy science is being funded? Does it dilute funding for what is very expensive research, a question raised by Penhoet, who said,

"I just wanted to caution against trying to cut the budgets and spread it around over more people. This is a disease most prevalent at the National Science Foundation. You end up with lots of people with not enough money to do anything important. So I think we're better off to choose the very best people and fund them well rather than try to spread the money further. This research is expensive. Salaries are high, all of these things. It takes a lot of money to do modern cell biology and microbiology."

The questions of sharing the wealth have surfaced particularly during recent sessions of the Facilities group, which is developing criteria for a $200 million research lab construction program. The issues are likely to surface anew on July 12 when that group actually writes the specifics.

As for the faculty awards, Chiu will bring back more specifics to the ICOC in August. Review of applications, which she estimates could come from as many as 35 institutions, is tentatively scheduled for this fall. Approval of grants could come during the holiday season. Consider them a Christmas bonus.

Fifty-nine Scientists Reach for CIRM's Golden Ring

The odds do not appear to be too bad in the California stem cell agency's new and generous $85 million faculty award program. It could make 25 stem cell researchers quite happy this holiday season.

Fifty-nine persons filed letters of intent to apply for the awards that could run as high as $3 million annually. CIRM could give out as many as 25 grants, if it decides it has that many worthy candidates. That, of course, means one out of 2.36 applicants could be funded.

The scientists come from 29 California institutions, whose names were not immediately disclosed. We have asked for the names of the institutions and will carry CIRM's response when it is forthcoming.

CIRM's press release today said,

"New Faculty Awards will fund the research of promising M.D. and Ph.D. scientists in their early years as independent lead investigators and faculty members. They are intended to develop a new generation of clinical and scientific leaders in stem cell research.

"While previous CIRM research grants focused on human embryonic stem cell research, the New Faculty Awards will support research across the full range of stem cell types – human and animal, adult and embryonic."

The schedule calls for the awards to be approved at the board's December meeting. The deadline for applications is Aug. 30 but those who did not file letters of intent are out of luck. Between now and then, the applications will be reviewed behind closed doors by a group of out-of-state scientists and some members of the CIRM Oversight Committee, who have filed public economic disclosure statements. However, the scientists involved in the review do not have to file public statements. They file secret economic disclosure statements with CIRM. Their private statements are also aimed at identifying potential professional conflicts.

CIRM Stingy with Info on Matters Before Directors This Week

With less than three business days left before Thursday's meeting of the directors of the $3 billion stem cell agency, CIRM has not yet produced details for the public on three significant matters that are to be considered.

The agency's failure to provide the information for the biotech industry, researchers, patient advocates, policy makers and the public via the directors' agenda is not a onetime event. It is part of a pattern -- a de facto policy -- that reflects poorly on CIRM. Withholding information about board matters effectively stifles participation by the public and discourages coverage by the media.  It also fails to meet the pledge of CIRM Chairman Robert Klein to adhere to the highest standards of openness and transparency.

However, more information on two items is now available. One involves a $6.6 million, visiting faculty program. Another deals with selection of grant reviewers, something of a sorepoint within the biotech industry.

The CIRM faculty plan states:

"The CIRM Visiting Faculty Award will operate through supplemental awards to existing CIRM-funded research grants, all of which have been peer reviewed and approved by the ICOC. The funds will enable a sabbatical researcher (Visiting Scientist) to work on an existing CIRM-funded research project for 6-12 months. The supplemental CIRM funds will cover up to 50% of the Visiting Scientist's salary and fringe benefits costs, with the remainder being paid by the Visiting Scientist’s home institution."

Applications would be submitted by the recipient of an existing research grant – who would be known as the "host scientist." The proposal envisions up to 30 awards with decisions on awards being made by CIRM staff.

Also before directors are eight proposed new alternate scientific members of the grants review group. None appear to have significant biotech industry experience. The agency has drawn fire from industry for its lack of grant reviewers who have a business background. CIRM's own external review panel said last fall,

"The majority of granting processes are designed on academic models. These processes do not necessarily fit the needs or timelines of industry and/or the realities of managing industry projects. Granting processes and funding criteria could be clarified and streamlined from an industry perspective and timelines for decision-making could be aligned with industry norms."

Regarding the review's sweeping recommendations themselves, CIRM President Alan Trounson said in early December that he would report on how they should be implemented. His report is not on the board's agenda for this month. The next CIRM board meeting is scheduled for March 9-10.

As for the previously mentioned three agenda items lacking information, one is a proposal to subsidize trips to Toronto in June for perhaps hundreds of persons to attend an international stem cell conference. The proposal contains no cost estimate nor does it indicate how many persons would be involved. We calculated a very rough estimate of $3,000 a person, depending on a number of variables. This may be worthwhile effort. We are inclined to think there is considerable value for scientists at such meetings. But so far CIRM has failed to do even a poor job of making the case for the subsidy program.

Another item needs much more explanation about why it is being considered this week. Only 22 words are devoted to it on the agenda although it is an unusual exception to the normal grant approval process. The item concerns an application for $4 million by Fred Gage of the Salk Institute in the early translational round. Decisions on that round were made last October by CIRM directors. Scientific reviewers did not approve the Gage application for funding, but it was set aside by the directors for additional consideration.

This week's agenda provides no hint concerning that background and no clue about why the application is still around. Its history can be unearthed from CIRM documents, although virtually all ordinary users of the CIRM web site would find the task daunting if not impossible. Here is a brief synopsis of the story:

At the Oct. 21, 2010, CIRM board meeting, CIRM Director Joan Samuelson, a patient advocate for Parkinson's and who also is living with the disease, moved to have directors override the negative decision by reviewers. During the discussion at the October meeting, CIRM Director Jeff Sheehy, also a patient advocate and member of the grants review committee, said in support,

"One of the key factors that was very motivating was the stature of the scientist and paucity of people working in Parkinson's in California. Eminent neurologists within the room said we campaigned (in 2004 for Prop. 71) -- we had Michael J. Fox on TV -- we talked about Parkinson's as a target. But one of the problems in our ability to fund this in California is that there's a lack of a sufficient number of outstanding Parkinson's (researchers) -- other diseases are more or better represented, at least this is what is stated, and the opportunity to get this particular eminent scientist into this arena was a value in and of itself."

The discussion at the October board meeting went beyond the specific grant and into procedures of the board and the grant review process, including discussion how of exceptions are made.

Ultimately the board asked CIRM President Trounson to look into the grant and report back on his views.

Researchers, patient advocates and others interested in CIRM funding would be well-advised to read the discussion, which covers about 17 pages of the transcript beginning on p. 144. Also of interest at the Thursday meeting concerning funding is an appeal by a Stanford researcher, Stefan Heller, in the tools and technology round that is before directors.

The third matter that is shy of information involves changes in the agency's biotech loan program and its payback provisions. We wrote earlier about what those might involve. Our take can be found here.

Strong Interest in $41 Million CIRM Faculty Award Program

The California stem cell agency's effort to boost "young" researchers with grants of up to $2 million has attracted 55 letters of intent, nearly as many as the first round of program last year.

The faculty awards are designed to develop relatively young and promising researchers and particularly physician-scientists at a critical stage in their careers – providing them with salary and research funding for three to five years.

The $41 million grant program comes on top of a similar program last year that drew 59 letters of intent. Ultimately, the agency gave away only $54 million to 22 researchers out of the $85 million allotted in 2007. The grants were curtailed because five CIRM directors violated the agency's conflict-of-interest policies by writing letters on behalf of applicants from their institutions.

CIRM said the letters resulted from an "innocent misunderstanding." CIRM disqualified the 10 applications involved. The directors involved suffered no CIRM penalty, although some reportedly took steps to ease the economic or professional pain of applicants who were affected.

In December, CIRM directors ordered up a second round of faculty awards in order to give another chance to applicants disqualified last year because of their deans' conflict violations.

The names of the institutions and researchers submitting letters of intent this month were not disclosed by CIRM, which keeps them secret. Only the winning applicants names are released and then only after they are approved for funding.

In response to a query, Don Gibbons, chief communications officer for CIRM, released the number of intent letters and said 31 institutions were represented. He did not provide a breakdown for numbers from academic institutions and nonprofit research organizations.

CIRM has directed applicants in the second round not to disclose whether they competed in the first. Disclosing such information in this round could mean disqualification of the applicant.

Grant reviewers, however, are not likely to have too much trouble identifying applicants who are making their second run – unless their latest applications are totally different than the first or the reviewers' memories are faulty.

Fourteen grants are expected to be approved this summer following a closed-door review of the applications by the same CIRM panel that reviewed the first round of the grants. Scientists on that panel do not have to publicly disclose their financial or professional interests. Instead their disclosures are made privately to CIRM.

The application deadline is April 3, although no one can apply unless a letter of intent has already been sent.

$59 Million Bonanza For California Stem Cell Researchers

Twenty-three California scientists hit it big today when the California stem cell agency awarded them grants that totaled as much as $3.2 million each.

In all, directors of the agency gave away $59 million in its second round of Faculty Awards, which are designed to support "young" researchers and develop more talent in the area of human embryonic stem cell research,.

The grants will support the recipients for as long as five years. They come at a time when competition for grants at the federal level is increasingly competitive. In a news release, CIRM Chairman Robert Klein noted that the average age of a researcher receiving his first grant from the National Institutes of Health is 43. Presumably, today's CIRM recipients are younger, but the agency did not specify their average age in its news release, which contains the names of the recipients and their institutions.

Grant reviewers decided 20 grants were unequivocally worth funding. Directors added three more from the second tier of applications, which reviewers say are worth approving if funds are available. Nine more grants remain in that category and will be considered at next month's directors meeting. A final vote will also be held then on the 22 applications not recommended for funding by reviewers. Fifty-four applications were received.

Today's grants come on top of a similar round approved last December. CIRM gave away $54 million then to 22 scientists. However, that round was tainted by conflict of interest violations by some CIRM directors, that caused the agency to reject 10 applications. Directors then decided to go ahead with another round of Faculty Award grants.

Initially CIRM budgeted $41 million for 14 recipients in the latest round of Faculty Awards. CIRM did not explain the rationale for increasing the program in its news release today.

(Editor's note: This item originally contained a sentence noting that CIRM's original press release said there were 55 applications although internally the numbers totalled 54. We queried CIRM about the matter. CIRM said that 55 was a mistake and that only 54 applications were received.)

CIRM Directors Meet to Mull More Faculty Awards, Mega Millions for Labs

Coming up in the middle of this month is the $263 million California stem cell lab construction bonanza, but some other items are also up for consideration by directors of the state's stem cell agency.

CIRM has posted the agenda for the two-day session beginning Jan. 16. Besides the largest round of grants in CIRM history, the Oversight Committee is scheduled to take up a proposal to "make whole" -- sort of -- the 10 scientists who suffered as a result of breaches of CIRM's conflict of interest policy by the deans of their medical schools.

No details are yet available on the posted agenda, but CIRM plans to offer a new round of faculty award grants. Initial discussions indicated that it would be open to all (with qualifications)– not just the those who were dumped from last month's $54 million round.

Also on the agenda are compensation changes, travel policy and new plans for conferences and meetings. Some of those will mean increased spending, although no details are yet available on the CIRM website.

As for the "Mega Millions Jackpot" – whoops, that is another California state program -- for lab construction, if CIRM holds to past practice, sometime between now and Jan. 16, we should see the postings on the public summaries of the grant reviews for 12 institutions that were anointed earlier. Given the complexity of the proposals and staff turnover at CIRM, we would expect to see the summaries later rather than earlier, which would make it difficult for the public or other interested parties to review them and prepare comments for the Oversight Committee meeting.

California Stem Cell Agency Hands Out $41 Million

The California stem cell agency has awarded $32 million to researchers to help them devise technology to overcome obstacles to development of stem cell therapies, part of $41 mllion in spending approved today.

In approving 19 tools and technology grants, CIRM directors rejected four appeals of negative recommendations from reviewers. That included a petition by Stanford researcher Stefan Heller that raised a number of policy questions that went beyond purely scientific issues. A fifth rejected application by Martin G. Martin of UCLA was sent back to the grant review group for additional consideration including new information.

According to CIRM's news release, three businesses and seven institutions were among the recipients. some of which received more than one grant. The businesses are Gamma Medica-Ideas, Inc. of Northridge, Ca., $1.5 million; GMR Epigenetics of Palo Alto, Ca., $1.5 million, and Fluidigm Corp. of South San Francisco, $1.9 million. The biotech industry has complained about receiving short shrift on their applications for CIRM cash.

CIRM directors also created a $6.6 million visiting faculty program. According to the agency,

"The CIRM Visiting Faculty Award will operate through supplemental awards to existing CIRM-funded research grants, all of which have been peer reviewed and approved by the ICOC. The funds will enable a sabbatical researcher (Visiting Scientist) to work on an existing CIRM-funded research project for 6-12 months. The supplemental CIRM funds will cover up to 50% of the Visiting Scientist's salary and fringe benefits costs, with the remainder being paid by the Visiting Scientist’s home institution."

Applications will be submitted by the recipient of an existing research grant – who would be known as the "host scientist." The proposal envisions up to 30 awards with decisions on awards being made by CIRM staff.

Directors also approved a $2 million grant to Fred Gage of the Salk Institute in the early translational round. The application, which deals with Parkinson's Disease, originally totalled nearly $4 million when directors considered it last October. Scientific reviewers initially did not approve the Gage application for funding, but it was set aside by the directors for additional consideration. CIRM staff and a representative of the review group negotiated the scaling back of the grant size.

Additionally approved was a $250,000 program to subsidize attendance for about 80 recipients of CIRM training grants and 40 patient advocates at an international stem cell conference in Toronto in June. The program was originally proposed at $200,000 but was boosted to $250,000 by directors.

Background From Legislative Hearing

The following material was supplied by the office of California State Sen. Deborah Ortiz as part of the hearings March 9 into the California stem cell agency.

“Implementation of Proposition 71, the California Stem Cell
Research and Cures Initiative”
Background Paper
Overview of Proposition 71

Proposition 71, the California Stem Cell Research and Cures Act approved by voters in November, 2004, provides $3 billion in general obligation bonds to provide funding for stem cell research and research facilities in California. This measure establishes the California Institute for Regenerative Medicine (Institute) to award grants and loans for stem cell research and research facilities.
The Institute is governed by a 29-member Independent Citizen's Oversight Committee (ICOC), comprised of representatives of specified University of California campuses, other public or private California universities, nonprofit academic and medical research institutions, companies with expertise in developing medical therapies, and disease research advocacy groups. The Governor, Lieutenant Governor, Treasurer, Controller, Speaker of the Assembly, President pro Tempore of the Senate, and certain University of California Chancellors all made appointments to the ICOC and the ICOC conducted its first meeting in December, 2004.
Proposition 71 authorizes the state to sell $3 billion in general obligation bonds, and limits bond sales to no more than $350 million per year. The measure states its intent that the bonds be sold during a ten-year period. The measure provides that for the first five years, repayment of the principal is postponed and interest on the debt is to be repaid using bond proceeds rather than the General Fund revenues. The funds authorized for the Institute are continuously appropriated without regard to fiscal year.
The Institute is eligible to receive a $3 million start-up loan from the state General Fund for initial administrative and implementation costs. The Institute must repay the General Fund loan using the proceeds from the sale of bonds authorized under this measure.

Priority for Research Funding

Priority for research grant funding under Proposition 71 is given to stem cell research that meets the Institute's criteria and is unlikely to receive federal funding. In certain cases, funding can also be provided for research that does not meet these criteria. The Institute may not fund research on human reproductive cloning.
Up to 10 percent of the funds available for grants and loans is available to be used to develop scientific and medical research facilities for nonprofit entities within the first five years of the implementation of the measure.

Benefits from Licenses, Patents and Royalties

The ICOC is required to establish standards requiring that all grants and loans be subject to agreements allowing the state to financially benefit from licenses, patents, and royalties and resulting from the research activities funded under the measure.

Right to Conduct Stem Cell Research

Consistent with current statute, this measure makes conducting stem cell research a state constitutional right.

Public Reporting and Accountability Measures

The initiative requires the ICOC to issue an annual report setting forth its activities, grants awarded, grants in progress, research accomplishments, and future program directions. The ICOC must also commission an annual independent financial audit of its activities from a certified pubic accounting firm, which shall be provided to the State Controller, who shall review the audit and annually issue a public report of that review. The Controller must establish a Citizen’s Financial Accountability Oversight Committee chaired by the State Controller to review the annual financial audit, the State Controller’s report and evaluation of that audit, and the financial practices of the Institute.

ICOC Working Groups

The initiative establishes three working groups to make recommendations to the ICOC:
The Scientific and Medical Research Funding Working Group, the purpose of which is to recommend to the ICOC criteria, standards, and requirements for reviewing research applications; review grant and loan applications and make recommendations to the ICOC for the award of research, therapy development, and clinical trials grants and loans. The initiative directs that the working group recommend its first grant awards within 60 days of the issuance of interim standards for funding applications by the ICOC.
The Scientific and Medical Accountability Standards Working Group, the purpose of which is to recommend to the ICOC scientific, medical, and ethical standards for medical research and clinical trials, including standards for safe and ethical procedures for obtaining materials and cells for research and for appropriate treatment of human subjects in medical research. The initiative also directs this working group to make recommendations to the ICOC for oversight of funded research.
The Scientific and Medical Research Facilities Working Group, which is to make recommendations to the ICOC on requirements and standards for applications for and awards of grants and loans for buildings, building leases, and capital equipment. The initiative requires that all funded facilities and equipment be located in California and further requires that all grantees be non-profit entities. Finally, the initiative requires that each grantee secure matching funds equal to at least 20 percent of the award.

Staffing of Institute and ICOC

Proposition 71 provides for the selection of a Chairperson and Vice Chairperson, whose duties are to lead the 29-member ICOC. At its first meeting in December, 2004, the appointed ICOC members selected Robert Klein, II, Chairperson of the Yes on 71 campaign, as its Chairperson, and Ed Penhoet, a biotechnology and foundation leader, as its Vice Chair.
According to Proposition 71, the duties of the Chair of the ICOC are to manage the ICOC agenda and work flow, and to supervise all annual reports and public accountability requirements, to interface with the California Legislature, Congress, and the public, to lead negotiations for intellectual property agreements, policies, and contract terms. The Chair also serves as a member of the Scientific and Medical Accountability Standards Working Group and the Scientific and Medical Research Facilities Working Group, and also as an ex-officio member of the Scientific and Medical Research Funding Working Group.
The duties of the Vice Chair are to support the Chair in all of his/her duties and to carry out the Chair’s duties in his/herabsence.
Proposition 71 also authorizes the ICOC to approve up to 50 full time staff positions for the Institute, including a President. According to the initiative, the President’s duties are to serve as the chief executive of the Institute, recruit scientific and medical staff, serve on the working groups, and to oversee necessary staff work to support the ICOC in evaluating and acting on recommendations from the working groups on grants, loans, facilities, and standards. The ICOC recently appointed Zach Hall, a veteran neuroscientist, medical school administrator, and biotechnology entrepreneur, as interim President of the Institute, and has commenced a formal search process to find a permanent President.
Proposition 71 provides that notwithstanding provisions of the Government Code, the ICOC shall set compensation for the Chairperson, Vice Chairperson, President, and staff of the Institute within the range of compensation levels for executive officers and scientific, medical, technical, and administrative staff of medical schools within the University of California system and non-profit academic and research institutions.

Proposition 71 Amendment Provisions

The initiative provides that it may be amended in furtherance of the purposes of the initiative by a bill introduced and passed no earlier than the third full calendar year following adoption of the initiative by 70 percent of the membership of both houses of the Legislature.

Fiscal Effects of Proposition 71

According to the Legislative Analyst, if the $3 billion in bonds authorized by this measure were repaid over a 30-year period at an average interest rate of 5.25 percent, the cost to the General Fund would be approximately $6 billion to pay off both the principal ($3 billion) and interest ($3 billion). The average payment for principal and interest will be approximately $200 million per year.
The initiative would allow the state to receive payments from licenses, patents, and royalties resulting from the research funded by the Institute. The amount of revenues the state would receive from those types of arrangements is unknown but could be significant. The amount of revenue from these sources would depend on the nature of the research funded by the Institute and the exact terms of any agreements for sharing of revenues resulting from that research. To the extent that the measure attracts additional federal or private funding of research or results in expansion of the state’s biomedical industries, it would also produce other economic benefits. To the extent that the measure results in reductions in the cost of health care, it would also result in economic benefits for the state.

Issues Raised Concerning Implementation of Proposition 71
Lawsuits Challenging Validity of Proposition 71

On February 22, 2005 two lawsuits were filed with the California Supreme Court seeking to halt the new stem cell research program. The first, filed by a group calling itself the Californians for Public Accountability and Ethical Science, contends that Proposition 71 violates the single subject rule for propositions by allowing funding for both embryonic and other types of stem cell research. It also claims the initiative violates conflict of interest laws by requiring members of the ICOC to come from universities, research institutions, disease advocacy groups, or biotechnology companies that could have an interest in the research being funded.
The second suit, filed by the groups People’s Advocate and the National Tax Limitation Foundation, claims that Proposition 71 violates the California Constitution by giving the ICOC power to spend state dollars without oversight from the Legislature or executive branch. Life Legal Defense Foundation, a legal organization that opposes embryonic stem cell research, is also supporting the legal challenge.

Criteria for Grants

A petition recently filed with the ICOC by Dr. Phillip Lee, a former US Assistant Secretary for Health and Human Services, and Charles Halpern, a public interest attorney, asks that the ICOC consider no grants or loans until grant guidelines are adopted by the ICOC, and potential applicants have been given an opportunity to prepare applications and to apply. According to the petition, such guidelines should specify selection criteria, the substantive scope of the grant program (e.g. whether all grants must be for embryonic stem cell research), the size of the grants being considered, matching requirements (if any), and the availability of grants for capital projects. In addition, no grants or loans will be considered until guidelines are in place which assure that the financial interest of the state and its taxpayers are specified and protected.
The Committees may wish to ask what formal criteria or guidelines the ICOC has adopted, or is likely to adopt, reflecting its priorities for research and facility funding, and when those criteria and guidelines are expected to be put in place.

Salaries of ICOC Officers and Institute Staff

Proposition 71 requires the ICOC to set compensation for the ICOC Chairperson and Vice Chairperson, Institute President and other officers, and the scientific, medical, technical, and administrative staff of the Institute within the range of compensation levels for executive officers and scientific, medical, technical, and administrative staff of medical schools with the University of California and nonprofit academic and research institutions.
The petition recently filed by Dr. Phillip Lee and Charles Halpern asks the ICOC to ensure that no employee or officer of the ICOC or the Institute shall receive a salary higher then the highest paid Institute Director at the National Institutes of Health (NIH) ($290,000), and that no employee, other than the Chair, Vice-Chair, and President, shall receive a salary higher than the Secretary of Health and Human Services of the state of California ($131,000). The petition further asks that all hiring shall be done through an open process, with jobs posted so as to attract candidates from minority groups, women, and disadvantaged communities.
The Committees may wish to ask whether pegging salaries for ICOC and Institute staff to the University of California and private research institutes is a reasonable guideline and whether the size and prestige of Proposition 71’s research program may enable the ICOC and Institute to attract top scientific and administrative talent without paying the highest salaries.

Open Meeting Issues

Proposition 71 applies the Bagley Keene Open Meeting Act to the meetings of the ICOC and requires the ICOC to award all grants, loans, and contracts in public meetings, as well as all governance, scientific, medical, and regulatory standards. The initiative allows the ICOC to conduct closed sessions as permitted by the Bagley Keene Act, as well as to consider:
Matters involving information relating to patients or medical subjects, disclosure of which would compromise personal privacy.
Matters involving confidential intellectual property or work products of various kinds.
Matters involving pre-publication, confidential scientific research or data.
Matters involving personnel matters.
The initiative provides that the California Public Records Act applies to all records of the ICOC, except as otherwise provided in the Act, and generally exempts the above items as well.
The initiative provides that the working groups are not subject to open meeting laws, but provides that records the working groups submit as part of their recommendations to the ICOC shall be subject to the Public Records Act.
The petition recently filed with the ICOC by Dr. Phillip Lee and Charles Halpern asks the ICOC to subject the medical standards and research facilities working groups to open meeting and public records laws, with exceptions as allowed by those laws. It further asks the ICOC to require the grants review working group to comply with the Bagley Keene Act and Public Records Act, with further exemptions as deemed appropriate by the ICOC in order to permit closed meetings when necessary to assure that scientific peer review, as that term is defined in NIH Sec. 5501.109(b)(7), is thorough and effective.
SB 18 (Ortiz) states the intent of the Legislature that all meetings of Proposition 71 working groups be subject to the Bagley-Keene Open Meeting Act.
The Committees may wish to ask why Proposition 71 exempts its working groups from open meeting laws and whether the ICOC intends to override those provisions of Proposition 71.
The Committees may also wish to ask, in cases where deliberations of the ICOC and its working groups are conducted in closed session, what record of decisionmaking will be accessible to the public to enable public participation in decisions of the ICOC and its working groups.

Conflict of Interest Issues

The initiative applies the Political Reform Act to the Institute staff and members of the ICOC, with certain clarifications. It specifically allows a member of the ICOC to participate in a decision to approve or award a grant, loan, or contract to a non-profit entity in the same field as his or her employer. It also allows an ICOC member to participate in awarding a grant, loan, or contract for purposes of research involving a disease from which the member or an immediate family member suffers from or which the member has an interest in as a representative of a disease advocacy organization.
The initiative also provides that service as a member of the ICOC shall not be deemed incompatible with service as a faculty member or administrator of the University of California, representative or employee of a disease advocacy organization, a nonprofit academic research institution, or a life science commercial entity.
Government Code Section 1090 prohibits various public officers and employees from making any contracts in their official capacity in which these individuals have a financial interest. Proposition 71 provides that Section 1090 does not apply to any grant, loan, or contract made by the ICOC unless the grant, loan, or contract directly relates to services to be provided by a member of the ICOC or financially benefits the member; and the member fails to recuse himself or herself from participating in the decision involving the grant, loan, or contract.
The initiative provides that because the working groups are purely advisory and have no final decisionmaking authority, their members are not subject to the Political Reform Act and do not have to file statements of economic interest under that Act (Form 700s). Instead, it makes working group members subject to conflict of interest rules to be adopted by the ICOC, which shall be based on standards applicable to members of scientific review committees of the NIH.
Existing NIH rules concerning conflicts of interest require reviewers of grant applications to sign a one-page form certifying that they have no conflicts of interest with the applications, to identify any applications with which they do have a conflict of interest, and to pledge to recuse themselves from their review. The rules require such reviewers to additionally certify after they have reviewed applications that they did not participate in the evaluation of any application or proposal in which they had a conflict of interest. The NIH rules state that a conflict of interest exists when a reviewer or a close relative or professional associate of the reviewer has a financial or other interest in an application that is likely to bias the reviewer’s evaluation of the application. The rules further state that a reviewer shall have a real conflict of interest if he or she or a close relative or associate has received or could receive a direct financial benefit of any amount deriving from the application; has received or could receive a financial benefit from the applicant institution or principal investigator that exceeds $10,000 per year, including honoraria, fees, stock, or other financial benefit; or has any other interest that is likely to bias the review of the application. The latter can include any professional or close personal relationship with the any member of the research team presenting the application.
The rules further provide that a reviewer who is a salaried employee or is negotiating employment with the applicant institution is deemed to have a conflict of interest with regard to any application from that institution, with exceptions.
Dr. Phillip Lee and Charles Halpern recently filed a petition with the ICOC proposing among other things that all paid executives and staff of the Institute and ICOC adhere to rules similar to those recently issued by the NIH. The petition additionally asks the ICOC to subject its three working groups to the Political Reform Act and asks that specific conflict of interest standards be adopted by the ICOC before any members are appointed.

Recently Adopted NIH Rules Concerning Conflicts of Interest

The Secretary of Health and Human Services recently promulgated interim final rules governing conflicts of interest by employees of federal agencies including the NIH. The rules generally cover relationships between employees and designated entities that are affected by NIH decisions in the areas of employment, financial holdings, and receipt of gifts. The rules do not apply to scientists who serve on NIH grant review panels or to outside researchers who apply for NIH grants. The rules came after congressional investigators found that more than 100 NIH employees had not disclosed relationships they had with pharmaceutical and biotechnology companies, in violation of government ethics rules.
For all NIH employees, compensated or uncompensated employment, including consulting and advisory or other board service, and compensated teaching, speaking, writing, or editing, is now prohibited with or for the following entities:
Substantially affected organizations (defined to include biotechnology.pharmaceutical, medical device companies, and others with similar interests).
Hospitals, clinics, health maintenance organizations, or other health care providers.
Health insurers.
Health, science, or health research-related trade organizations, professional associations, or consumer or advocacy groups.
Educational institutions or non-profit independent research institutes that are or recently were NIH funding applicants, grantees, or contractors.
Under the new rules, NIH employees who file public or confidential financial disclosure reports are prohibited from acquiring or holding financial interests, such as stock, in biotechnology, pharmaceutical, and medical device companies and other entities involved in the research, development, or manufacture of medical devices, equipment, preparations, treatments, or products. All other employees (i.e., those who do not file either of these reports) are subject to a $15,000 cap on holdings in such companies.
Senior employees may not receive gifts with an aggregate market value of more than $200 that are an award given because of their official position or from a prohibited source. Other employees having official responsibility for matters involving the donor (even if not personally involved) may not receive the gifts with an aggregate market value of more than $200 that are an award given from such a donor. Employees generally may receive awards from outside sources that are nothing more than plaques or trophies of little intrinsic value and free attendance and food at the event in which the employee is honored.
SB 18 (Ortiz) states the intent of the Legislature that the ICOC ensure that requirements for reporting of economic interests for ICOC members and Institute staff be commensurate with those required of public officials as defined under the Political Reform Act. SB 18 also states intent that requirements for disclosure of economic interests and public access to economic interest statements for Proposition 71 working groups meet or exceed those required of peer review groups convened by the National Academies of Science.
ACR 1 (Negrete-McLeod) urges the ICOC to develop, prior to the award of loans, grants, and contracts for stem cell research and facilities, robust conflict of interest standards for its members and its working group members and to report to the Legislature on or before April 1, 2005 on its implementation of the resolution.
In July, 2004, a US government ethics office demanded that federal agencies more fully comply with rules requiring experts who serve on advisory panels to declare potential conflicts of interest. In March, 2004, the US General Accounting Office found that two-thirds of scientists and other specialists who serve on advisory panels fail to complete financial conflict of interest forms and in some cases are given special titles to exempt them from requirements to declare conflicts of interest.
The Committees may wish to ask whether the ICOC should apply recently adopted NIH standards prohibiting ownership of biotechnology and pharmaceutical company by senior employees to employees of the ICOC and the Institute.
The Committees may also wish to ask whether statements of economic and other interests completed by Proposition 71 working group members should be accessible to the public, as are Form 700s under the Political Reform Act.

Patenting and Intellectual Property Issues

Proposition 71 contains a general statement directing the ICOC to establish standards that require all grants and loans to be subject to intellectual property agreements that balance the opportunity of the state to benefit from the licenses, patents, and royalties that result from basic research, therapy development, and clinical trials with the need to ensure that essential medical research is not unreasonably hindered by the intellectual property agreement.
An economic analysis commissioned by proponents of Proposition 71 before it was adopted suggested that royalties to the state from research funded under Proposition 71 could generate $537 million to $1.1 billion over the life of the program.
In 1980, in an effort to promote greater commercialization of federally funded research, Congress passed the Bayh-Dole Act. Under the Act, research recipients, for example, the University of California, are allowed to own inventions resulting from research grants they receive, and are encouraged to seek patents for the inventions and to enter into licensing arrangements with outside entities to develop and commercialize the inventions.
While the Act has been successful in moving inventions out of laboratories and into commerce, it has been faulted for leading to a fragmentation of patents and licenses and for not ensuring the affordability or accessibility of products or treatments resulting from publicly funded research, including to government programs serving lower income persons.
Handling of intellectual property created under state contracts was the subject of ACR 252 (Mullin), passed by the Legislature in 2004. The resolution requests the California Council on Science and Technology to create a special study group to develop recommendations to the Governor and Legislature on how the state should treat intellectual property created under state contracts, grants, and agreements.
SB 18 (Ortiz), introduced in December, 2004, states the intent of the Legislature that contracts, awards, grants, or loans entered into by any state entity that provides state funding for biomedical research ensure all of the following:
The contract, award, grant, loan, or other arrangement does not result in a gift of public funds.
Any clinical treatments, products, or services resulting from the biomedical research are made available at affordable costs to low-income residents, including health care and preventive health programs funded in whole or in part by the state and counties that serve low-income residents.
The terms of any loan, lease, or rental arrangement are consistent with market rates.
The state recoups its legal and administrative costs associated with patenting and licensing activities related to the biomedical research.
The state is provided a share of the royalties or revenues derived from the development of clinical treatments, products, or services resulting from the research that is commensurate with its role in the development of the clinical treatments, products, or services.
Any royalties or licensing revenues are used to repay any costs of issuing bonds associated with the biomedical research being funded.
The Committees may wish to ask what protections the ICOC intends to put in place to ensure that the state receives a return on its investment in research and that any resulting products or treatments are affordable and accessible to low-income residents.

Medical and Ethical Standards—Protection of Research Subjects and Donors

Proposition 71 states that in order to avoid duplication or conflicts with standards for scientific and medical research, the Institute shall develop its own scientific and medical standards. It further directs the ICOC to establish standards for informed consent of research donors, patients, or participants, and for review of research involving human subjects, which are generally based on the standards in place as of January 1, 2003 for research funded by the NIH, with modifications to adapt to the mission and objective of the Institute.
The initiative specifically prohibits compensation to research donors or participants, while permitting reimbursement of expenses. It also directs the ICOC to develop standards to assure compliance with state and federal patient privacy laws and to limit payments for the purchase of stem cells or stem cell lines to reasonable payment for the removal, processing, storage, transport, or implantation of the stem cells or cell lines.
Finally, the initiative sets a limit on the time during which stem cells may be extracted from blastocysts, which shall initially be 8 – 12 days after cell division begins.
A number of individuals and groups associated with the Pro Choice Alliance for Responsible Stem Cell Research have suggested that the ICOC adopt a policy of not funding therapeutic cloning projects that involve multiple egg extraction as a means of securing eggs for research and instead limit approval to extraction of eggs by means of ovariectomies or tubal ligations, as a safer and more ethical approach. The groups also advocate having the personal physicians of women who are considering providing eggs for research conduct the informed consent procedures. In addition, the groups advocate putting in place a mechanism for long-term follow-up regarding the health of women egg donors and requiring a neutral and independent oversight body review all data on the safety of hyperstimulation drugs to better assess the risks and benefits of the drugs.
The groups note that other countries, such as Canada, have imposed moratoria on somatic cell nuclear transfer research, at least in part due to concerns about impacts on women’s health.
According to an open letter submitted by Suzanne Parisian, MD, a former Chief Medical Officer of the Food and Drug Administration and physician, the long term health risks for a woman receiving Invitro Fertilization drugs for egg retrieval are unknown. According to trial data submitted to the Federal Drug Administration, severe ovarian hyperstimulation syndrome occurs in about three–eight percent of patients and can lead to a serious life-threatening condition days after completion of egg collection and is also associated with increased risk of clotting disorders, kidney damage, and ovarian twisting. In addition, ovarian stimulation has been associated with serious and life-threatening pulmonary conditions. Finally, studies to date have not ruled out a possible link between stimulation drugs and increased risk of ovarian cancer.
Proposition 71 states that in order to avoid duplication or conflicts with other standards for medical research, the ICOC is instructed to develop its own standards. The initiative specifically exempts Proposition 71 funded research from several provisions of SB 253 (Ortiz) of 2002, and SB 322 (Ortiz) of 2003, including the requirement that embryonic stem cell research projects be reviewed by an Institutional Review Board and that such projects be subject to guidelines being developed by the Department of Health Services with the assistance of a technical advisory committee, which are due to be published in early 2006.
A number of guidelines governing standards for protection of donors of eggs and embryos either exist or are in the process of being drafted. For example, the National Academy of Sciences is expected to release a long-awaited set of standards dealing with a variety of ethical issues presented by embryonic stem cell research and somatic cell nuclear transfer later this spring. In addition, the guidelines required by SB 322 noted above were due in January, 2005.
Finally, standards developed by the American Society for Reproductive Medicine governing women undergoing egg extraction and use of hyperstimulation drugs for purposes of donating eggs to infertile individuals and couples (for reproductive purposes) state that donors who provide informed consent may donate eggs for these purposes. The standards state that women should not be induced into donating eggs for these purposes through use of economic incentives, and establish dollar thresholds for payments to donors that are either presumptively permissible or not permissible.
SB 18 (Ortiz) states the intent of the Legislature that patients undergoing assisted oocyte production, whether for purposes of donating eggs for medical research or for reproductive purposes, be provided with a standardized written summary of all known and potential medical risks associated with assisted ooctye production. The measure also states intent that prior to providing assisted oocyte production, the treating provider obtain written consent from the patient. In addition, SB 18 requires providers of assisted oocyte production to provide patients with timely and appropriate information to allow the patient to make an informed choice regarding the disposition of any oocytes remaining following the procedure and to obtain written consent for any donation of oocytes for research.
SB 18 also states intent that no human oocyte or embryo shall be acquired or otherwise transferred for valuable consideration, defined as payments beyond those reasonably related to removal, processing, or storage of oocytes or embryos. Finally, the bill states intent that no payment in excess of what is necessary to reimburse expenses shall be made to any research subject to encourage her to produce human oocytes for purposes of medical research.
The Committees may wish to ask what process the ICOC has either established or plans to establish to develop standards for protection of research donors and subjects and whether it will be a deliberative process that allows all perspectives to be presented and considered by the ICOC.
The Committees may also wish to ask what steps the ICOC intends to take to ensure that women’s health issues involved in egg and embryo donation are fully vetted and considered.

Consideration of Disease Disparity and Diversity in Hiring, Contracting, and Appointments Issues

The Greenlining Institute has formally requested the ICOC, in a letter dated February 7, 2005 to Robert Klein, to commit to several goals concerning disease disparity issues and diversity issues. Among other things, the Institute has asked the ICOC to ensure that it secures full insight into the health issues of special concern to the state’s 20 million minority residents; ensure that its staff and contractors reflects the diversity of California; ensure that all contracts for services, construction, and development have a major minority supplier diversity component and goals; provide that universities and research institutes demonstrate that they are committed to diversity in their staffing and contracting as a condition of applying for Proposition 71 grants, loans, and contracts; and create a competitive environment in which the ICOC demonstrates that its research and achievements are not limited to areas or diseases of interest to non-minority Californians.
The Greenlining Institute has asked to appear before the ICOC to provide presentations from minority stem cell research and health experts to broaden the knowledge of the ICOC concerning these issues and to compensate in part for the lack of minority representation on the ICOC, and to raise the issue of diversity in contracts and hiring in the ICOC, Institute, and organizations applying for funding.
In its letter, the Institute notes that the 29-member ICOC has only four minority representatives and that only two of the first nine employees of the Institute are minorities. The letter also notes lack of diversity in the staffing and appointments within the University of California.
Finally, the letter notes that the California Public Utilities Commission has a formal supplier diversity program which has been in effect for 15 years and has withstood court scrutiny. The letter notes that under the program the typical public utility in California provided more than 15 percent of its contracts in 2004 to minority-owned businesses, and that it should be considered as a model by the ICOC.
A March 4, 2005 letter from the Greenlining Institute to the Committee makes specific recommendations for the ICOC to address disease disparity and diversity goals, among them:

Recommending that the ICOC and the Institute set 15–25 percent minority contracting goals and report annually on their achievements.

Requiring that contractors seeking contracts of $100,000 or more set forth their supplier diversity programs and achievements.

Informing potential contractors that supplier diversity will be a major factor the Institute and ICOC will consider in awarding contracts.

Securing from every University of California campus or other university that wishes to submit proposals for funding their supplier diversity data, broken down by race, ethnicity, and gender.

Recommending that the Chairperson and President create a major supplier diversity department.
The Committees may wish to ask what goals or processes the ICOC has adopted, or intends to adopt, to address disease disparity issues and to ensure diversity in hiring, appointments, and contracting related to Proposition 71.

Auditing and Public Accountability Issues

Although Proposition 71 requires the Institute to issue an annual report of its activities, commission an annual independent financial audit of its activities, and provides for review of those annual audits by the State Controller and an appointed Citizen’s Financial Accountability Oversight Committee, the auditing provisions appear to fall short of what would be contained in a “performance audit” that an auditing body such as the General Accounting Office or the State Auditor would apply. The State Controller’s Office in particular cites an Attorney General’s opinion stating that under the terms of Proposition 71 the annual audit commissioned by the Institute must be a financial audit, i.e. an audit that examines the flow and use of funds and assures that all funds are accounted for.
The State Controller recently presented to the ICOC suggestions for augmenting the audits that it commissions, including suggestions derived from examining the auditing that is currently done of similar scientific grant making organizations such as the NIH. These recommendations also appear to fall short of what would be contained in a performance audit. As defined by the General Accounting Office, a performance audit would include issues such as program effectiveness and results, cost effectiveness of activities, and compliance with legal or other requirements.
SB 18 (Ortiz) requires the State Auditor to conduct periodic audits of the Institute and the ICOC, with the initial audit required by March 31, 2006. The bill requires the State Auditor to provide to the Chairs of the Senate and Assembly Health Committees and to the Joint Legislative Audit Committee an analysis of the auditee’s implementation of its recommendations no later than December 31, 2006, and provides for further audits if the results of the analysis warrant further inquiry. The bill provides that the audits be performance audits and include all of the following:
A review of the strategic policies and plans developed by the Institute and committee.
A review of contracts and grants executed by the Institute and the ICOC.
A review of the policies and procedures put in place by the Institute and the ICOC regarding treatment of intellectual property rights associated with research funded or commissioned by the Institute.
A review of the decisionmaking procedures and policies adopted by the Institute and the ICOC, including procedures for open public meetings and disclosure of conflicts of interest on the part of the ICOC and working group members.
A review of medical and ethical policies and standards adopted by the Institute and the ICOC for research funded or commissioned by the Institute and the ICOC.
The Committees may wish to ask how the ICOC intends to implement the auditing requirements in Proposition 71 and how the Controller intends to review them.
The Committees may also wish to ask whether the more comprehensive auditing requirements contained in SB 18 would serve public accountability purposes by enabling the State Auditor to examine Institute contracts and agreements and the processes by which they are reviewed and decided on by the Institute and ICOC.