What's Old is New Again: Multibillion-dollars in Stem Cell Spending and Conflicts of Interest

Controversy about conflicts of interest at California’s $3 billion stem cell agency arose once again last week -- this time involving a plan to basically hand over conflict regulation to a prestigious, national organization that is virtually unknown outside of the scientific world. 

That little known group is the National Academies of Sciences (NAS), which doesn't rank high in anybody's breakfast table talk. However, the NAS has already weighed in with recommendations for solving conflicts of interest at the California stem cell agency. And the agency's board has said "neyt" to the NAS proposals.

Instead, the directors of the agency, formally known as the California Institute for Regenerative Medicine (CIRM), enacted their own, less sweeping changes to try to reduce the perception of conflicts of interest among the 29 members of the board.

Events last Thursday at the CIRM board meeting captured the essence of the conflict concerns. Nine awards totalling $54 million were involved. All went to enterprises that had links to institutions represented by CIRM board members. None of the board members tied to the recipient institutions was allowed to vote on the applications. 

However, the entire CIRM board makes the decisions that create the agency's grant programs, ranging from clinical trials to basic research. And over the years, roughly 90 percent of the $2.7 billion in CIRM awards has been swept up by institutions with representation on the agency's governing board, according to calculations by the California Stem Cell Report. 

Seven years ago, the NAS looked at that situation and other CIRM activities at the agency's behest. CIRM paid the NAS $700,000 for the work, done through what was then called the Institute of Medicine (IOM). 

Here is how the chairman of the 13-person study group, Harold Shapiro, a former president of Princeton University, described the problem to the Los Angeles Times in 2012. 

“They (the CIRM directors) make proposals to themselves, essentially, regarding what should be funded. They cannot exert independent oversight.”

The report said, 

“Far too many board mem­bers represent organizations that receive CIRM funding or benefit from that funding. These com­peting personal and professional interests com­promise the perceived independence of the ICOC(the CIRM governing board), introduce potential bias into the board’s decision making, and threaten to undermine confidence in the board.” 

Issues about conflicts surfaced even before the agency came into being when opponents used matter during the 2004 ballot campaign that created the agency. 

The electoral effort to establish the agency was directed by Robert Klein, who also directed the writing of the initiative and then became the agency's first chairman. Klein, a Palo Alto real estate investment banker, has now submitted to state officials a new ballot measure to give the agency $5.5 billion more.

It would make major changes in the agency, increasing its board size from 29 to 35. Some of the additional members would come from enterprises that would stand to benefit from the largess of the retooled agency.  

Klein's initiative would legally require CIRM to establish conflict of interest regulations that are "generally aligned with standards adopted by the National Academy of Sciences." That is new language that could provide a rationale for not creating tougher standards and take some of the heat off the agency and its directors. 

Jeff Sheehy, a longtime patient advocate member of the board and chair of its science committee, released to the California Stem Cell Report a 3,300-word critique of the Klein initiative. Sheehy said last week in his analysis, 

"Questions related to conflicts of interest regarding the distribution of $5.5 billion in state funds obtained via debt financing should NOT be handed to an entity that is not under the control of the State of California. In addition, the National Academy of Sciences has no public meeting requirements nor other measures around public accountability and transparency that are uniformly applied to all government bodies in California.

"Those sections removing conflicts of interest oversight from the purview of Californians should be removed. The way to address any concerns expressed around conflicts of interests by board members is to add new language changing the composition of the ICOC(the agency's governing board)."

For a look at one experience in California dealing with state stem cell issues and the NAS, see this item on the California Stem Cell Report. 

On Friday Nov. 15, the CIRM board will meet to consider Klein's new initiative, which requires more than 600,000 signatures to be placed on the November 2020 ballot. Klein is the only person who can make changes in it. He has until Monday Nov. 18 at 5 p.m. to do so, if he wishes. 

Klein has not yet commented on the upcoming CIRM board hearing. The California Stem Cell Report will carry his written response verbatim when it is received.