Wednesday, March 30, 2005

Here Comes $3 Billion

The California stem cell agency appears ready to take the first steps towards issuing $3 billion in bonds to finance its efforts to find cures and treatment for everything from cancer to Lou Gehrig's disease.

The oversight committee of the agency meets one week from today in Los Angeles, only the fifth meeting since it came into existence. On the agenda is a resolution that would set the bond process in motion.

Also on the agenda is Christian right litigation that has raised uncertainty about the bonds and seeks to terminate the agency itself, despite that the fact that it was created by voters approving an amendment to the California state constitution.

Chairman Robert Klein has promised to come up with a strategy to squelch the bond uncertainty at the April meeting. Just what that is will have to wait until after a closed- door litigation session at the meeting.

Also on the agenda is an item that could speed some of the processes at CIRM. It calls for charging the institute staff with developing a proposal for the agency's research grants program. The staff proposal would then be considered by the full oversight committee at the May 6 meeting of the oversight committee.

The schedule for next Wednesday additionally calls for “consideration” of a host of issues including: conflict policies for oversight committee members and agency staff, policies for working groups including confidentiality and conflicts issues and a training grant program for future stem cell researchers.

Tuesday, March 29, 2005

Super Ovulation and Ortiz

If you haven't seen it already, reporter Laura Mecoy's story on the super ovulation issue and California State Sen. Deborah Ortiz is worth a read.

Mecoy, who writes for The Sacramento Bee, explores the reasons for Ortiz' position, which has greatly disappointed some who used to consider her a staunch ally. Ortiz, on the other hand, says she is not abandoning them.

She told Mecoy, "I just want to have a full discussion because we are changing from what we said during the campaign (for Prop. 71), and that troubles me."

The measure itself recognizes some of the problems with the issue, barring purchase of eggs from donors but apparently allowing for compensation for expenses.

Substantial money is to be made from stem cells as they are turned into medical products. That invariably will entice some to skirt, at the minimum, the edges of ethical behavior, which are not all that clear on stem cell matters anyway. Ortiz' concern seems merited.

But Mecoy also notes that at the same people are in misery. She quoted a mother of two in Davis who suffered a spinal cord injury 12 years ago.
“Three more years ... could be a matter of whether I make it out of this
chair or not," said Karen Miner. "I don't understand this push to delay this for three more years when we have all fought so hard, and people are dying."

Monday, March 28, 2005

Citizen-bioethicists and Stem Cells

California's stem cell agency is coming under scrutiny in the hallowed halls of UC Berkeley.

In what may be the only course of its kind in the country, students are examining the conduct of the agency and stem cell issues in general.

Topics for this week's classes are “Going Corporate: Patenting and Secrecy” and “Markets for What?” The class readings on the subjects include the websites of both Geron and CIRM. Also required this week is a book titled “Body Bazaar: The Market for Human Tissue in the Biotechnology Age.”

The class is called "Rhetoric of Scientific Discourse: Stem Cells, Cloning, and the Genetic Imaginary." Rhetoric and women's studies professor Charis Thompson devised it to analyze ethical and political implications of cutting-edge scientific proposals and activity. She taught a similar class at Harvard University before joining the UC Berkeley faculty in fall 2003, according to a
report by Noel Gallagher, a writer for the Berkeley campus.

"We are increasingly being asked to act as what I call 'citizen-bioethicists,' and to have political and personal opinions about scientific, technical and medical matters," Thompson told Gallagher. "This class is an attempt to outfit us for that role."

The first assignment for the 30 undergraduate students in the course was to read the full text of Prop. 71, making them part of the handful of persons who have actually done so.

The class began in January and will end in May. In the meantime, students will dig in such areas as “links between democracy and science” and “governance and genetics.”

Thompson told us that she has a grant that will enable 8 undergraduates and 2 graduate students to continue research in the area. She also said, “I am working with the oral history group on campus to begin a stem cell archive. In theory the class, or a variant of it, as issues develop, will always be offered in the spring.”

Friday, March 25, 2005

Business, Politics, Stem Cells and Steve Westly

Chris Nolan, in a column for eWEEK, touches again on the interplay of business and government in relation to the California stem cell agency.

Her points are good and often not well understood by students of business or politics. Having worked in both politics and government and in the private sector, including entrepreneurial roles, I can vouch that some of the skills are the same but some are different. The different frames of reference that are required may be what give crossover efforts difficulty. But it can be done. Felix Rohatyn, who was instrumental in rescuing New York City from bankruptcy many years ago, is one person who comes to mind as a skillful practitioner of politics and business.

The eWeek column begins: “Robert Klein, the Palo Alto, Calif., real estate developer who pushed the measure to passage, has been making some serious missteps, sending the wrong signals about how he'll deal with state officials.
“His organization, the
California Institute for Regenerative Medicine, and the 29-member panel that oversees its work, the Independent Citizens Oversight Committee, have run into trouble over what—to a businessperson—sound like technical details.”

Nolan also writes about the agency on her “Politics Left and Right” blog, which suggests, among other things, that State Controller Steve Westly provide some additional assistance to CIRM.

She says he is “a creature of Silicon Valley (who) understands how guys like Klein think (and) was an early and eager back of the stem cell proposition because he correctly saw it as a jobs measure. He's also been friendly with Gov. Schwarzenegger who, it seems, taught Westly a few things about political grace while the pair went campaigning together last year. Westly's got financial oversight responsibility for Klein's committee; he's perfectly positioned to take some irons out of the fire here. And he ought to do it. This could very quickly become a intra-mural Democratic party fight. Or worse.”

Next Step in Lawsuits

Uncertainty is the bane of bonds. Look for the California stem cell agency to move after its April meeting to attempt to ease the impact of the refusal by the state Supreme Court to rule on the legality of the agency.

Robert Klein, chairman of the agency, told the San Francisco Chronicle he would offer an “alternative” plan at the board's meeting early next month.

Reporter Bob Egelko
wrote, " 'As long as there's a challenge pending, there's a cloud over issuance of the bonds,' said Deputy Attorney General Tamar Pachter, the state's lawyer.”

One tactic would be for the agency to file its own suit to force a decision on the issues.

Here are links to stories by Paul Elias of The Associated Press and Laura Mecoy of The Sacramento Bee on the case.

Wednesday, March 23, 2005

The Fallacy of the Will of the People

More than two-thirds of the people of California don't care about their state's new stem cell agency or oppose it.

Bad news for this blog and bad news for those who argue that Prop. 71 represents the will of the people.

For those of you who recall that Prop. 71 was approved by 59 percent of voters, the apparent lack of support may come as a surprise. But just as in business, there are numbers and then there are other numbers. Ask Bernie Ebbers, former CEO of WorldCom.

Robert Klein, chairman of the stem cell agency, and others cite the 59 percent figure as a justification for keeping bothersome legislators out of their business. Prop. 71 is the will of the people, they say. What they fail to understand are the real numbers and their significance. Say “aw shucks” to Mr. Ebbers.

Given the recent controversies involving the agency, what its supporters should be concerned about are the 15 million Californians – 68 percent of the voting population -- who either opposed or did not feel strongly about Prop. 71 in last fall's election. That group represents an opening, a potential market for those would seek to destroy CIRM.

Before we venture on, let's look at the numbers from last fall. California's secretary of state reports that in the November election, the state counted 22 million eligible voters, meaning “the people.” Only seven million supported Prop. 71 – 32 percent of eligible voters. Another 4.9 million – 21 percent of eligible voters – opposed it.

How can this be, you might ask, given the 59 percent approval figure? It is fairly simple. That number is derived only from the people who voted, and many did not.

Out of the 22 million possible voters, only 16.6 million chose to register to vote. Minus those who actually voted for or against Prop. 71, that leaves 4.7 million registered voters who skipped right by Prop. 71 and another 5.6 million people who just did not care at all (did not register to vote). Add up the opposition voters (4.9 million), registered voters who chose not to vote on the measure (4.7 million) and those who did not register vote (5.6 million) and you have roughly 15 million people, give or take a few because of rounding.

President Bush and his minions last year taught us all a lesson about numbers like these. They looked at the persons who ordinarily did not vote. They mobilized them (mainly using the Christian right), energized them and thrashed John Kerry.

There is nothing new about people not registering or not choosing to vote once they are registered. But it means that Klein and company cannot find much solace in the 59 percent figure. It could easily turn into so much dross. Last fall's election was dominated by presidential politics. Most observers agree that voters did not look closely at Prop. 71, along with a bunch of other state measures. A substantial segment of the population, properly motivated, could turn on CIRM, a situation that a fledgling bureaucracy does not need.

If these numbers come as a surprise, it is because the media and others, for years, have become comfortable with using a flaccid shorthand. The persons who cast ballots become “the people.” Forgotten are the rest who rise up from time to time and do strange things.

On March 16, Klein said that “the voters of California sent a clear message.” Perhaps or perhaps not. But there is certainly an opening for the enemies of CIRM, especially since an oversight measure could be placed on the ballot next fall. The chairman might best heed the counsel of Zach Hall, the new president of the agency, who said on March 9, “The success of our venture will critically depend on the confidence of the people of California in our integrity and credibility. Decisions made by the Institute must be transparent and must be perceived to be fair and objective judgments based on scientific merit, free of bias and conflict of interest.”

Needless to say, “perceived” is a very important word for the agency.

Tuesday, March 22, 2005

Lee-Halpern Petition Rejected by Klein

Reporter Laura Mecoy of The Sacramento Bee looks like she is alone on rejection of every point of the Lee-Halpern petition by Robert Klein, chairman of the California stem cell agency.

Writing this morning, she said:

"The chairman of the state stem cell agency's oversight board rejected every point in a petition seeking more open meetings, stricter conflict-of-interest rules and salary caps at California's new research institute.

"But with pressure mounting in the Legislature and the courts to address these issues, the chairman said Monday the panel would hold hearings seeking a wide range of views on each issue - rather than limiting itself to the petitioners' views.

"These are important issues which we have set up public hearings to address," Chairman Robert Klein II said. "But to make a deal with a special interest group is not consistent with the interests of the public in having a full public hearing of these issues."

Blogosphere Simmers with Stem Cell Commentary

“Sweetheart deal,” “irrational pandering” by cities, subversion of the people's will – all these and more are part of the freshly flowering cyberspace commentary on California's stem cell agency.

In recent days,we have seen a spate of postings. They include a blog on the website of the influential Washington Monthly magazine and on the website of the American Journal of Bioethics.

Kevin Drum, who writes the Political Animal blog for Washington Monthly, called Prop. 71 “something of a sweetheart deal written by the biotech industry and rather clearly for the benefit of the biotech industry.”

His item triggered a string of comments, including one from a writer called Platypus, who described him(her)self as a “molecular geneticist who has reviewed grants for one of California's other targeted research programs (the California Breast Cancer Research Program).”

“There is almost certainly a large mismatch between the amount of money that is suddenly available ($300 million/yr) and the number of California-based researchers who currently are carrying out high quality stem cell research,” Platypus said. “So, a major challenge/serious problem is how to spend the money wisely. Right now you could fund all the really great stem cell research projects in California on a fraction of the available money.”

“So, what do you do with the rest of the $300 million/yr? Some of it could (and should) be used to build up research infrastructure and lure additional stem cell researchers to California, However, any benefit from this expansion in research capacity will take years. In order to show that Californians are getting immediate results for their tax dollars, there will be great political pressure to fund as many projects as possible as soon as possible, resulting in wasting a good deal of the public's money on mediocre (or worse) science.

“I hope the program succeeds, but it's going to be difficult to carry out successfully. The initial structuring of the program is key, so that it not turn into the California Biotech Industry Relief Act of 2004.

“Finally, you can't just buy a scientific breakthrough, no matter how much money you throw at the problem. There is great danger in misleading the public as to what we can and can't do as medical researchers.”

David Magnus, writing on on the website of the American Journal of Bioethics, noted that Prop. 71 insulated funding and management from state lawmakers. He said the tough issues that must be faced are better handled by the stem cell agency's oversight committee rather than becoming "fodder for political gamesmanship in the legislature.”

“Unsurprisingly, the state legislature is unhappy with the fact that they are not relevant to an important undertaking within the state. State Sen. Deborah Ortiz (possibly motivated by a desire for higher public office) has abandoned her long standing support of stem cell research and is attempting to subvert the expressed will of the people,” said Magnus, who is director of the Stanford Center for Biomedical Ethics.

He cited Ortiz' measure to make it “illegal for women to voluntarily serve as oocyte donors for the expressed purposes of research (since in practice these women take drugs to superovulate to produce a sufficient number of eggs).”
“It is worth noting,” Magnus said, “that women routinely do this in IVF, and in fact, there is nothing to prohibit women from continuing to produce eggs as surrogates for other people trying to reproduce. Apparently Ortiz believes that assisting reproductively challenged individuals is sufficiently important that women should be allowed to make this decision, but research is not important enough to allow anyone to expose themselves to risk.

“This issue highlights the difficulty of turning these matters over to a legislature that fundamentally lacks knowledge or insight into the research process or into the details of the practice of medicine. The citizens of California wisely chose to pass a measure that had built in measures for oversight and public accountability—the fact that the legislature is left out is a poor reason to undo the will of the people.”

On the Local Liberty blog of the Center for Local Government at the Claremont Institute, Matthew Peterson deplored the “irrational pandering of California cities in their mad quest to land the offices of the
CIRM. One of the best summaries is, no suprise, posted on a blog(editor's note: Peterson was referring the “lusting” item on this blog).”

He added, “It's all too easy to simply throw money down for a quick fix—such fast food solutions inevitably lead to failure.

“In this case, even the friendliest supporter of all things CIRM has to stop and wonder. Sure there are ways in which the offices will bring financial benefits with them, but isn't a big part of the radical pursuit of the 50 person office really stemming from a desire to have a "cool," "cutting-edge," "progressive" image?”

Peterson is writing a piece for the Claremont Institute which will explain why he believes the stem cell agency “combines the worst tendencies of modern politics: the promise of a New Man, democratic forms masking government in the shadows and taxpayer-subsidized bureaucracy.”

Monday, March 21, 2005

Two Critical Views of the Stem Cell Agency

The Sacramento Bee has editorialized on the current situation with the stem cell agency, suggesting that it move at its April meeting to alleviate legislative concerns.

editorial said, "Given that (Chairman Robert) Klein seems disinclined to publicly lead the stem cell program, members of the Independent Citizens Oversight Committee should take this role upon themselves. Prior to the next meeting, this oversight committee needs to set its own agenda, and put the institute on a course that marries science with accountability."

Long time journalist and blogger Chris Nolan has provided
insight into the thinking that may be part of the problems at the agency.

She wrote in Politics from Left to Right, "Some of what's going on here is a failure to understand the difference between private and public funding, a classic mistake made by business folks trying to work the political system and a profound weakness for that sometimes arrogant crowd known as
Progressive libertarians. They want government to run like a business: Efficiently and with smart folks like them in charge. But there reasons -- lots of good ones -- that we have oversight and open meetings laws."


On Friday, we incorrectly stated that Robert Klein worked and lived in San Mateo County. In fact, he works and lives in Santa Clara County, just south of San Mateo.

Friday, March 18, 2005

Lusting for the Stem Cell HQ

Can you say stem cell concierge? Can you say private jet service? If you can, you are talking about the bids cities have made for the headquarters of the California stem cell agency.

Lust is a good word for it. Longing for the permanent headquarters of the California Institute for Regenerative Medicine has prompted localities throughout the state to cough up commitments for crisis counseling to cops.

We have put together the following compilation of bids from a variety of newspaper reports over the past several days. It is only semi-complete, as is everything on this blog. Totally missing is San Mateo County, which was not available when we gathered the information. That is important because that county is where Robert Klein, chairman of CIRM, lives and does business. We will give you San Mateo when it weighs in.

Basically all the areas are offering free rent for 10 years. Some offers exceed the requested square footage by 3,000 feet. Links to a bunch of HQ news stories are at the end of this piece.

Keep in mind that this listing is based on what has been reported. Do not assume, for example, that Sacramento has not offered free health club memberships while others have. Probably it has not been reported in the press. Moreover, the negotiation process in the bidding will see many added incentives.

We are going to go with The Big Tomato (Sacramento) first in a blatant display of partisanship. This writer lived in the The Big Tomato for 21 years, most of which were a great pleasure. That said, we have been absent from the Golden State for more than six years. We have no financial interest anywhere in California, either in real property, biotechnology of any sort, venture capital, stocks or anything else, unless they are held in a mutual fund. But we do figure that listing Sacramento first in this rundown will give it the heft to put it over the top. Everybody else will have to be satisfied with alphabetical order.

Sacramento -- The city of Sacramento and the Angelo Tsakopoulos family made an offer the city valued at $7.3 million. It includes rent-free offices at One Capitol Mall in Old Sacramento, free parking and conference space, and up to $800,000 in cash for tenant improvements. The Angelo Tsakopoulos family also offered $450,000 in free utilities and services. Wendy Saunders, Sacramento's economic development director, said the city's contributions of conference space and parking were worth $750,000. Views of the Sacramento River are promised as well as a short jaunt to the Capitol itself.

Emeryville -- City leaders want to keep the headquarters right where it is now, in temporary facilities at the Emery Station office park on Horton Street, across the street from an Amtrak station. City officials said that slightly more than half of all U.S. biotech companies have their headquarters in the Bay Area -- a third of them in Emeryville, such as Chiron and Bayer corporations. The offer includes free health club, free use of Pixar Animation Studios' digital theater and gourmet kitchen; reduced rate hotel rooms for visiting scientists; free use of conference rooms at Chiron Corp.; free parking; free shuttles from BART. The current landlords have touted their connections to Chiron, one of whose founders is Ed Penhoet, who is vice chairman of the stem cell agency oversight committee.

Los Angeles – Space at City National Plaza downtown, along with $1 million in grants “to support administrative efforts,” private jet services, free round-the-clock concierge service, a police liaison and 10 free days of large meeting space.

San Diego – A $9 million offer, according to the city. But then it adds that it is “worth a million dollars (more) to be out there on Torrey Mesa overlooking Torrey Pines Golf Course and the Pacific Ocean, and to be surrounded by UCSD and some of the finest research institutions in America." San Diego offers a "readiness team" to assist in planning, coordination and startup of the facility, furnishings and systems and an "advisory council,"a group of top local executives available for advice, introductions within the community, resources and crisis support. Included are 100 hours of free legal services, free branding and marketing advice from public-relations firm Mentus.

San Francisco – The $10 million package includes 20,000 square feet of free office space in a year-old building at 250 King St., known as Mission Place, across the street from the Giants ballpark and a short walk to UC San Francisco's new biosciences campus in Mission Bay. It also includes free shuttles, discounted gym memberships and the use of City Hall, SBC Park and city-owned convention facilities for gatherings, free high-cost videoconferencing equipment and broadband access, free and discounted office furnishings, free and reduced-rate hotel rooms and limo service and no-cost Web communications.

San Jose – The San Jose mayor, whose name shall be omitted in this sentence because he is shameless, personally pony-expressed 10 copies of his city's 25-page proposal to Sacramento, all in the hopes of generating more press coverage. San Jose offered two locations: The Concourse in North San Jose Innovation Triangle, 1731 Technology Drive; or Fairmont Plaza downtown at 50 W. San Fernando St. Perks: $500,000 in free tenant improvements, free parking, on-site exercise facilities, cut-rate hotel rooms, free furniture, security liaison at San Jose Police Department, donated video and computer setups,free round-the-clock concierge service and 10 free days of large meeting space.

Here are links to many of the stem cell HQ stories: San Francisco Chronicle, San Diego Union Tribune, Sacramento Bee, Los Angeles Times, LA Business Journal, Silicon Valley Business Journal.

Thursday, March 17, 2005

A Litany of Losses

The score looks dismal in week 13 in the life of the California Institute for Regenerative Medicine.

But the truly sad part about it is that much of the pain was unnecessary and is now hobbling an agency that was born with great expectations.

Here is a partial scorecard:

1. The agency now faces a potential ballot fight, possibly as early as next fall, if a proposed constitutional amendment to tighten oversight passes in time.

2. The bond market, where the agency hopes to raise billions, is judged to be skittish about any offerings given the current state of litigation against the agency.

3. Powerful supporters in the California legislature are now wary and suspicious, aligning themselves with those who would be ecstatic if the agency vanished from the earth.

4. Critical and nagging questions have been aired in the media across the country concerning the conduct of the agency. Given the pack nature of the press, more can be expected.

5. The personal integrity of the chairman of the agency has been questioned in the Capitol, with some describing him as a “megalomaniac” who is damaging the agency that he was so instrumental in establishing.

On the other hand, CIRM has appointed a well-regarded scientist, Zach Hall, as its interim president and adopted a conflict of interest code for its employees. Creating a new agency is a slow and tedious business, so it may be unreasonable to expect much more. CIRM yesterday, however, touted its progress by saying “we have now held 13 open public meetings in just 13 weeks.” Holding a meeting is about process as opposed to accomplishment, a fact that the businessmen and women on the Oversight Committee do not need to be reminded of.

The California Institute for Regenerative Medicine was certain to face controversy and opposition during its infancy just as it will during its entire existence. But some sort of honeymoon normally would have been expected. The promise of finding cures or treatments for everything ranging from diabetes to cancer is tremendously alluring. The agency also was expected to make California the stem cell capital of the world, creating jobs, attracting talent and generating prestige for the state.

But today the agency is under heavy assault. It is one thing to irritate the sometimes toothless watch dog groups. It is another to antagonize heavyweight lawmakers.

CIRM now must focus much of its energy in rebuilding support in the Capitol. It will need to do everything possible to prevent a constitutional amendment from being placed on the ballot to tighten controls over the agency. The last thing the agency needs is a statewide election contest over matters that should have been dealt with more skillfully. The sooner the issue is put to rest the better.

Such an effort in the Capitol will cost money and time, particularly time lost because of the distractions from the difficult and important business of creating a new agency.

A month ago, it certainly would have been much easier to discuss legislative concerns and arrive at solutions instead of dueling with press releases and nationwide Internet campaigns. No doubt some of the folks on the fringe would have never been satisfied short of taking their pitch to the California Supreme Court. But other critics seemed to be looking for some overt action as an assurance that their concerns would receive a serious hearing. That did not seem to be forthcoming.

In the wake of the jubilation over the passage of Prop. 71 less than five months ago, few would have foreseen the current state of affairs. Let's hope a new path can be quickly charted.

We welcome and will publish comments on CIRM or the failings of this blog. Please send them to

Coming Up Friday

Look for a report here Friday on the bids for the new permanent headquarters for CIRM. Semi-complete coverage promised.

"Welcoming" and News Coverage

The California stem cell agency and one of its leading critics this week were, for once, in something of an agreement. They both “welcomed” the participation of two California state senators in the agency's business.

But that was about as far as it went.

Here are links to some of the stories this morning on the stem cell agency, the proposed constitutional amendment and other proposals. We are also carrying on this blog the joint press release from the two California senators, the statement from Robert Klein and Ed Penhoet and the statement from the Center on Genetics and Society because not all of them are available on their various web sites at the time of this writing.

See the CIRM statement and the one from Genetics and Society for their "welcoming" comments.

Megan Garvey, Los Angeles Times; Carl Hall, San Francisco Chronicle; Bill Ainsworth, San Diego Union Tribune.

SACRAMENTO – Senator Deborah Ortiz (D-Sacramento) and Senator George Runner (R-Antelope Valley) today announced they will introduce two bills and a Senate Constitutional Amendment to ensure public accountability in the implementation of Proposition 71, the stem-cell research initiative approved by voters in November.

“To maintain the public’s confidence, the integrity of this important research and California’s significant financial investment, we must make sure meetings are open to public scrutiny, strict conflict-of-interest and economic disclosure standards are developed, patients’ rights are protected and the state receives a fair financial return on its generous investment,” Ortiz said.

“The voters of California did not vote for Proposition 71 so that biomedical companies get a windfall of billions of tax dollars with little or no accountability,” Runner said. “It’s critical that we establish the highest ethical conflict of interest standards, true operating transparency, and a direct benefit to Californians from their $6 billion investment.”

Proposition 71, the California Stem Cell Research and Cures Act, provides $3 billion in general obligation bonds to fund stem cell research and research facilities in California. The act established the California Institute for Regenerative Medicine, led by the Independent Citizen’s Oversight Committee (ICOC), to award grants and loans for stem cell research and research facilities.
Under the Ortiz-Runner constitutional amendment, employees of the Institute, the ICOC and members of the working or advisory groups will be subject to conflict-of-interest and financial disclosure requirements similar to those that govern California public officials and individuals serving or employed by the National Institute of Health. The legislation also will require that all meetings and records are subject to state open meeting and public record laws.

The measure will include strict guidelines to ensure clinical treatments, products or services resulting from the biomedical research are made available to California citizens and public health programs at affordable
costs. It also will require that all financial arrangements ensure the state recoups legal and administrative costs and a share of royalties or licensing revenues derived from the development of clinical treatments, products or services.

Ortiz and Runner also will jointly author legislation to provide for a three-year moratorium on multiple donations of eggs solely for research purposes. That bill will expressly prohibit payment in excess of reimbursement and require providers of fertility treatment services to give patients timely and appropriate information so they may make informed choices regarding the disposition of any human eggs remaining after fertility treatment. Fertility treatment providers also will be required to provide standard disclosures of medical risks, developed by the Department of Health Services, to women considering undergoing fertility treatment.

A second bill will require the State Auditor to conduct periodic financial and program audits of the ICOC and the Institute.

Because of provisions in Proposition 71, the Legislature may only make changes “in furtherance of” the initiative by receiving approval from voters. Legislative constitutional amendments require two-thirds majority approval from both the Assembly and the Senate to qualify for the ballot.

The Senators believe the provisions dealing with egg donations, patient protections and audits are “supplemental to” Proposition 71, and can be enacted by a simple majority vote of the Legislature.

“These measures will uphold our promise to the public that Proposition 71 is implemented in an open, thoughtful and deliberative manner,” Ortiz said. “We owe this public accountability to millions of Americans afflicted by conditions that may some day be cured through stem cell research, and to the taxpayers of California who are funding this critical research.”
# # #

Statement by Robert Klein, Chair
Ed Penhoet, Vice Chair
Independent Citizens’ Oversight Committee
For the California Institute for Regenerative Medicine
Regarding the News Conference Today in Sacramento by
State Senators Deborah Ortiz and George Runner
Wednesday, March 16, 2005

Emeryville, CA – Robert Klein and Ed Penhoet, Chair and Vice Chair, respectively, of the Independent Citizens’Oversight Committee for the California Institute for Regenerative Medicine, made the following statement regarding today’s news conference in Sacramento by State Senators Deborah Ortiz and George Runner:

“First of all, we want to acknowledge and express our appreciation to Senator Ortiz for her leadership in the area of stem cell research in Sacramento and throughout the State of California.

Senator Ortiz and the California Institute for Regenerative Medicine share the same goal: to support stem cell research and to ensure that California leads the way for finding cures for people with disease, illness and injury.

60 % of California voters cast their ballots last Fall, and more than 70 patient and disease advocacy groups, and medical, research and scientific organizations affirmed their hope in the promise of stem cell cures. Their votes were not only an expression of hope, but also a vote of confidence that the Prop. 71 initiative contains sufficient governance, oversight and accountability mechanisms to address the very same issues Senators Ortiz and Runner discussed today.

The initiative anticipated and the Institute is structured to provide significant conflict of interest regulations AND medical and ethical standards, especially those that protect women, based upon recognized and respected standards adopted by the National Institutes of Health. Those regulations and standards are in process of being developed by the Institute’s governing board, the ICOC, its subcommittees and working groups. The public and all interested parties have been, will be – and should be – active participants in this process. In addition, the National Academies of Sciences and Medicine are currently in the process of developing model medical and ethical standards for stem cell research – specifically to meet California’s timeline -- which are due public in April and shall be taken into full consideration by the Institute and the public in the coming months. And, it is important to note, that there are federal regulations already in place that will apply to future research conducted with Prop 71 grants to ensure the appropriate protections for all patients.

In the short few months that this Institute has been in place, we have made significant progress towards setting appropriate and necessary conflict of interest rules for staff. The ICOC is committed to adopting stringent conflict of interest policies and medical and ethical standards – with input from the public. In fact, we have now held 13 open public meetings in just 13 weeks.

We welcome Senator Ortiz, Senator Runner and their colleagues’ participation in this ongoing process, and we look forward to collaborating together with members of the Legislature and the public in this important endeavor.

At the time same time, the voters of California sent a clear message: they entrusted the Institute’s governing board, which is comprised of 29 prominent Californians -- leaders in academia, science, medicine, research, patient advocacy and business -- to move forward with the work ahead. This Board is dedicated to addressing all and more of the issues addressed by Senators Ortiz and Runner today.”

# # #

Critics of Proposition 71 Welcome Reform ProposalCenter for Genetics and Society, Pro-Choice Alliance for Responsible Research support proposal by Sens. Ortiz and Runner

SACRAMENTO – Public interest critics of California’s new stem cell institute, which was created by Proposition 71, welcomed a reform proposal announced today by Senators Deborah Ortiz and George Runner.

“The voters of California passed Proposition 71 based on promises of widely available cures, high ethical standards, and public accountability. They did not vote for throwing out laws that prevent secret meetings and guard against conflicts of interest,” said Marcy Darnovsky, associate executive director of the Center for Genetics and Society.

“We’re glad to see the Senators stepping up to protect Californians, who are the investors in this multi-billion dollar experiment.”

The Center for Genetics and Society and the Pro-choice Alliance for Responsible Research – who both support embryonic stem cell research but were prominent critics of Proposition 71 both before and after the recent campaign – expressed their support and optimism for the proposal’s passage.

“The Ortiz-Runner proposal will bring the public accountability and openness that the authors of Proposition 71 deliberately left out,” added Susan Berke Fogel, director of the Pro-Choice Alliance for Responsible Research. A moratorium on multiple egg extraction is critical to protect women’s health, as long-term effects of the drugs used are yet not known.”

The legislators’ announcement follows last week’s joint informational hearing on implementation of Proposition 71, chaired by Senator Ortiz and Assemblymember Wilma Chan. The hearing addressed many of the issues that have been raised by public interest critics, including conflicts of interest, open meetings, egg extraction, diversity in employment and hiring, health disparities, and financial returns to California.

“I hope that the leadership of the Institute realizes that this proposal will strengthen – not hinder – their work,” said Jesse Reynolds, program director at the Center for Genetics and Society. “The Institute must retain the confidence of the voters to be effective.”For more information, see .

Wednesday, March 16, 2005

Odd Couple Tightens Oversight Efforts.

Biotech Reporter Paul Elias of The Associated Press wrote this afternoon about the latest effort to tighten control over the California stem cell agency.

His story began: "Two state senators with opposite views on stem cell research forged an odd political alliance Wednesday when they introduced a proposed constitutional amendment to 'reform' the new $3 billion California Institute for Regenerative Medicine, which is already facing two lawsuits seeking to put it out of business.

Sens. Deborah Ortiz, D-Sacramento, and George Runner, R-Lancaster, also introduced legislation banning for three years so-called 'multiple egg donations' from women who voluntarily submit to hormone injections to 'superovulate' in the name of research. If passed, that law would effectively prevent the agency from funding human cloning projects for medical research for three years."

The agency issued a statement a few minutes ago that said in part, "The initiative anticipated and the Institute is structured to provide significant conflict of interest regulations AND medical and ethical standards, especially those that protect women...."

"We welcome Senator Ortiz, Senator Runner and their colleagues’ participation in this ongoing process, and we look forward to collaborating together with members of the Legislature and the public in this important endeavor.

"At the time same time, the voters of California sent a clear message: they entrusted the Institute’s governing board, which is comprised of 29 prominent Californians -- leaders in academia, science, medicine, research, patient advocacy and business -- to move forward with the work ahead. This Board is dedicated to addressing all and more of the issues addressed by Senators Ortiz and Runner today.”

The legislative move, however, is certainly not good news for CIRM. We will have more on this subject Thursday morning.

The Lowering of Expectations

The interim president of the California stem cell agency has injected a touch of reality into the business of research funding.

According to reporter Laura Mecoy of The Sacramento Bee, “The state probably won't issue its first stem cell grants until the fall, nearly four months after its initial plans to begin giving out money in May, the program's interim president said Tuesday.

“In a conference call with reporters, Zach Hall said the May deadline was an 'early hope' that didn't include the time needed to adopt grant guidelines and appoint a committee to review the grant applications.” Mecoy wrote.

Megan Garvey of the Los Angeles Times emphasized another angle having to do with the need to create regional stem cell research facilities. That tied into UCLA's announcement it will spend $20 million creating a new stem cell research facility.

Roiling Undercurrents on Klein

Rumblings around the corridors in the Capitol in Sacramento are not kind to Robert Klein, the chairman of California's stem cell agency.

“Meglomaniac and liar” are a couple of the terms bandied about. These do not come from some disgruntled job seeker.

According to one source, “Legislators who have had any contact with Klein generally believe Klein is ICOC's (stem cell agency oversight committee) own worst enemy. He has driven everyone here nuts.

“He's spent the last couple of weeks visiting every legislator and legislative leader trying to get them” to call off last week's hearing into the agency.

“The feeling under the dome is the guy's a megalomaniac and a liar. No one agreed with his request to call off the hearing.

“If anything, it only made them mistrust him more and raised concerns about what is going on over there behind closed doors.”

Apparently that is what led to more aggressive than normal questioning of the interim president of the agency, Zach Hall, by members of the unusual legislative panel. Klein was absent and sent Hall.

Klein's behind-the-scenes lobbying came after he publicly stated he was willing to cooperate with legislators. It also came at the same time, that his allied nonprofit organization, Cures for California, sent out emails across the country to generate pressure on the legislature. The messages solicited recipients (presumably disease sufferers) to send emails to the Legislature or call seeking postponement of the legislative hearing.

The email said, “The hearing will inevitably generate press which could be damaging to the efforts of the Institute, and could impede their incredibly important work. The patient community needs your help!”

“Please mobilize within the next 12 hours!” the email exclaimed.

However, Klein earned good marks for having Hall testify at the hearing. “Congenial” was one word describing Hall although he did not ease all concerns.

In another way Hall was also a plus. “The less ICOC and the Institute are associated with Bob Klein, the better the public's confidence will be in their implementation of Prop 71,” a Capitol source said.

Tuesday, March 15, 2005

Robert Klein: The Missing Man

Was the most influential California legislator on stem cell issues unhappy with the Robert Klein's failure to appear at last week's hearing into the agency?

In response to an inquiry from the California Stem Cell Report, the office of Sen. Deborah Ortiz, D-Sacramento, said she encouraged Klein, who is chairman of the state stem cell agency, to appear. She assured him that his concerns about legal questions and litigation involving the California Institute for Regenerative Medicine could be overcome.

Ortiz, chair of the Senate Health Committee, “encouraged Mr. Klein to view the hearing as an opportunity to inform legislators and the public about the great strides the ICOC is making in this very difficult project: building the world's premier stem cell research institute from the ground up,” her office said.

“She assured Mr. Klein that she would instruct all witnesses and legislators to avoid discussing any issues that were pending before the court. She also encouraged Mr. Klein to attend the hearing with his attorney, who could advise him if there were any points that the attorney believed could jeopardize the litigation pending before the Supreme Court.

“Sen. Ortiz very strongly supports and campaigned for Proposition 71. She hopes the Attorney General is successful in his attempts to have the California Supreme Court take jurisdiction over the constitutional challenges that have been filed and resolve them quickly so that the implementation of this important research can begin and the cures we all hope will come from this significant public investment will be developed.”

The California Stem Cell Report's bottom line: State agencies are sued regularly. Their department heads, however, manage to come before legislative committees when requested. Is Klein different? The worst part about this is that his actions do not benefit the stem cell agency. As we pointed out previously, there is small profit in stiffing the legislature.

We welcome and will publish comments on the stem cell agency or the failings of this blog. Please send them to

Monday, March 14, 2005

California Stem Cell 101 -- Must Reading

It may not be everything you want to know about the current state of affairs with the California stem cell agency, but it is exceedingly close.

It is an excellent background paper prepared for last week's legislative hearing into the California Institute for Regenerative Medicine. It explains the ongoing issues in a straight-forward and evenhanded manner and is must reading for anyone who wants a clear overview of the agency.

The report also included questions that could be addressed by the agency.

They include:

“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.”

“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.”

“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."

“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.”

The full text of the background paper follows in a separate item below. It did not carry the name of its author, although normally such documents are prepared by legislative committee staff.

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.

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