Webinar Now Available on Fast-Track Plan to Hand Out $1 Billion in California Stem Cell Cash

The ins-and-outs of CIRM 2.0 – at least some of them – are explained by the CEO of the California stem cell agency, Randy Mills, in a Webinar now available on the agency’s Web site.

The Webinar includes presentation slides and a Q&A. About 200 persons logged in for the session earlier this week on the new, fast-track effort to unload the agency’s next $1 billion. Kevin McCormack, senior director for communications, said after the Webinar,

"Of the 234 people who registered and, at some point tuned in today (Jan. 21), 108 were industry. Over the course of the 50 minute webinar some tuned in and dropped out so there was a rolling audience with 200 being the most tuned in at any one time."

If you are one of those who would like some cash from CIRM, this is must viewing. The 51-minute session can also be downloaded for later consumption.

$250,000 Stem Cell Agency Performance Audit to Skip its Scientific Performance

When is a "performance audit" not a performance audit? Answer: When the California stem cell agency commissions it.

Under a new law, the $3 billion state research effort is required to conduct its first-ever "performance" audit this year and again every three years. Under the law, CIRM could have stipulated that the audit would include scientific performance, but it has chosen not to do so.

Instead, the audit will primarily examine "policies and procedures" for issuing contracts, grants and treatment of intellectual property to determine how well the agency is doing.

Admirable goals but certainly not even close to a full measure of CIRM's performance. Most would agree that the paramount measure is whether the agency has made good on the promises of the 2004 election campaign that created it. To do that would require an examination of CIRM's scientific program and the results it has generated.

The agency plans to pay $250,000 for the audit, selecting a bidder next month. The deadline for firms to present their bids is Friday. At least 10 firms have expressed an interest in the contract. They include Teeb Lead Project Management Solutions, Capital Partnerships Inc. (also dba The Resources Company), Crowe Horwath LLP, KPMG LLP, IntelliBridge Partners, Moss Adams LLP, Level 4 Ventures, Inc., Thompson, Cobb, Bazilio& Associates, PC; Moss Adams LLP, Strategica, Inc., and Sjoberg Evashenk Consulting, Inc.

The requirement for the audit was contained in legislation authored by State Sen. Elaine Alquist, D-San Jose. When she introduced her bill last year, she said CIRM is "essentially accountable to no one."

Alquist initially would have placed the performance audit in the hands of an independent, third party, the state controller, instead of CIRM itself. The controller, the state's top fiscal officer, is chairman of the only state body, the Citizens Financial Accountability Oversight Committee, specifically charged with evaluating the performance of the stem cell agency and its board. Introduction of the legislation came after Controller John Chiang and the committee unanimously called for more accountability at CIRM.

The legislation  also originally provided that the audit would include CIRM's strategic policies and plans, which would have brought scientific matters under scrutiny.

But as the bill moved through the legislature, CIRM was successful in amending it to remove the "strategic policies and plans" language. Also inserted was language that the audit did not need to cover scientific performance, which gave CIRM more control of the scope of the audit.

However, CIRM took the matter further this summer. In its RFP for the audit, the agency misstated the statute, telling potential bidders that the law bars an examination of scientific performance, when in fact it does not.

Here is CIRM's language from the RFP:

"The statute specifically excludes scientific performance from the scope of the audit."

Here is the language from the law:

"The performance audit shall not be required to include a review of scientific performance."

Asked for a comment, CIRM defended the RFP characterization. Melissa King, executive director of the CIRM board, said in an email,

"The statement is correct because it is intended to convey that a scientific review is expressly excluded from the required audit areas. Furthermore, most government accounting firms do not have the expertise to conduct a scientific review. That is one of the reasons we have asked the IOM (Institute of Medicine) to conduct a study."

The $700,000 IOM study is more far-reaching, but has also been commissioned by CIRM. The IOM has a reputation for independence. However, any examination that is paid for by the agency that is the subject of the scrutiny will always face questions about its objectivity. It goes to the old saying about he who pays the piper, calls the tune.

Both the performance review and the IOM study are certain to become election campaign documents in a couple of years. CIRM survives only on money that the state borrows – bonds. And the agency is aiming for voter approval of another multibillion dollar bond measure to continue its operations beyond about 2017. To win support, CIRM and its backers undoubtedly will ballyhoo what it presumes will be favorable findings to bolster its bid for more cash.

When viewed in the context of a ballot campaign, CIRM efforts to limit the scope and shape the findings of either the performance audit or the IOM study will also undoubtedly damage their credibility.

IOM Study of CIRM to Come Before Stem Cell Directors in August

Directors of the California stem cell agency are moving forward with a proposal to commission a blue-ribbon study of their $3 billion effort by the Institute of Medicine.

The directors' new Science Subcommittee on Tuesday voted to bring the proposal, which is now connected to legislation to remove the CIRM staff cap, to the full board in August, said a spokesman for CIRM.

In response to an email query, Don Gibbons, chief communications officer for CIRM, said the panel directed the staff to “work with the leadership of the committee to develop the full scope of work for any IOM(Institute of Medicine)study.”

Gibbons also said that CIRM is seeking to verify that “this scope of work could qualify for the audit required” by SB1064 by Sen. Elaine Kontominas Alquist, D-San Jose. The bill is now on the Senate floor, clearing the Appropriations Committee Thursday on a 10-0 vote.

CIRM and Alquist negotiated a compromise on the legislation that has won the approval of the CIRM board, the first time it has endorsed legislation that would alter the agency's activities. CIRM needs passage of the bill to remove the 50-person cap on CIRM staff.

During the negotiations, proposals for independent performance audits were stripped from the bill – ones that would be conducted under the auspices of the Citizens Financial Accountability Committee, a sister panel to CIRM. As it now stands, a performance audit would be required, but it would be commissioned and paid for by the agency itself. CIRM has made it clear that it is not interested in addressing the accountability concerns raised by the citizens committee.

The bill specifies that use of the state auditor would be acceptable. However, that agency might have difficulty with evaluating the science side of CIRM's performance. The state auditor could presumably hire a consultant to assist in that area. Instead of the state auditor, the stem cell agency could contract with a private firm, which is more likely to be susceptible to suggestions from CIRM about the conduct of the performance audit.

The Institute of Medicine may well tilt to the science side of CIRM's activities with a lesser focus on whether the people of California are getting a good return on their $6 billion (including interest) investment. The institute may also be less interested in CIRM's accountability and openness than would be the case with an audit done for the Citizens Financial Accountability Oversight Committee.

Still to be determined is the cost of the performance audit and timetable. Costs in the neighborhood of $400,000 have been mentioned for a performance audit. An IOM study could run more. To be useful, an audit should be done as quickly as possible. However, it is certain to take many months or more to complete.

Murky Backdrop on $5.4 Million Grant to Burnham Scientist

Directors of the California stem cell agency tomorrow will be asked to approve a $1.85 million increase in a grant to a Southern California researcher after he filed a proposal that violated CIRM's rules against spending CIRM funds out of state.

The CIRM staff made the recommendation for the 50 percent boost (for a total of $5.4 million) in the grant to Evan Snyder of the Sanford-Burnham Medical Research Institute in La Jolla. Last April CIRM directors approved a $3.6 million award to Snyder, apparently without knowing that it would violate the explicit ban on non-California spending. The staff said the money was needed because of the increased cost of moving the work to California.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., called on directors to reject the grant outright. To do otherwise, he said, would be “extremely unfair to other applicants who followed correct procedures.”

In a statement to the California Stem Cell Report, Simpson said (full text available here),

“Either the applicant deliberately flouted the rules requiring all research to be done in California and thought he could get away with it or he didn't understand the rules. In either case he did not follow them.

“Assume the best and, unlikely as it seems, grant that a top California researcher and his institution didn't understand CIRM's regulations. But just as ignorance of the law is no excuse, ignorance of the rules governing CIRM awards is no an excuse for not following them.”

In response to a query, Snyder defended his proposal. He said the proposal uses California taxpayer funds "in the most economical and frugal manner possible.” He said Simpson “is misinformed about the most parsimonious way of stretching California biomedical research dollars during hard financial times. CIRM and the ICOC(CIRM directors), in fact, exerted exceptional fiduciary (not to mention scientific) responsibility in awarding this grant. They awarded the contract to the lowest bidder.”

Just how all this came about is a bit murky. CIRM shrouds its grant-making process in secrecy. Names of grant applicants are not revealed until after the winners are approved. Names of rejected applicants are never disclosed. Even today the CIRM staff information on the Snyder grant that is being presented to directors tomorrow does not include his name or the name of his employer. However, that information was given to directors last April as part of its “extraordinary petition” process. The staff report itself became public on the CIRM Web site only three business days prior to the CIRM board meeting in Sacramento.

Asked for a comment, Don Gibbons, chief communications officer for CIRM, said “The budget for the California researcher included a research subcontract to a U.S. organization outside California. CIRM followed standard practice for this funding round, performing a detailed budget review of each proposal approved by the board. When it became clear that this proposal included a subcontract that CIRM could not fund, CIRM asked the PI if the proposal could be revised to meet CIRM funding requirements.”

Gibbons did not respond directly to a question about how an application proposing out-of-state spending came to be approved by the board. (More of Gibbons' response can be found here.)

Gibbons also did not respond to a request for the identity of the non-California recipient originally proposed by Snyder. But in Snyder's response (full text here) to the California Stem Cell Report, Snyder refers to the St. Kitts Biomedical Research Foundation in the Carribean. Snyder said it is “the best non-human primate facility for Parkinson's Disease research in the world.” However, it is unclear whether that was out-of-state spending identified by CIRM.

The Snyder grant poses some important questions for CIRM directors.

Should they reward a researcher who failed to follow CIRM rules?

Would that be fair to other applicants?

Should CIRM President Alan Trounson have been involved in the review of the proposal, which has collaborators at Monash University in Australia, an institution where Trounson presided over the stem cell research program? Presumably a failure to fund Snyder would have a negative impact on his Australian counterparts(Trounson's former colleagues), although they are not funded by CIRM.

How does the situation affect the public perception of CIRM? Snyder's boss, John Reed, the president of the Sanford-Burnham Institute, sits on the CIRM board although he cannot vote on the grant or even take part in the discussion about it. Should Trounson take part in tomorrow's discussion of the Snyder grant?

Would the situation have been handled in the same fashion if the grant applicant had been from a less illustrious institution, such as UC Merced?

Is the research so compelling and urgent that it overwhelms any sort of negative reaction? Or would it be better to defer the issue until additional information is available to directors and the public?

These questions should be considered in the context of a recent chorus of recommendations for more transparency and accountability on the part of CIRM. (See here, here, here and here.)

CIRM Directors to Take Position on Affordability, Accountability Measure

Directors of the California stem cell agency on March 4 will take their first public look at new legislation aimed at ensuring affordable access to therapies financed by taxpayers, including proposals to improve accountability and openness at the state research effort.

Also on the table at the meeting of the directors' Legislative Subcommittee is legislation to create a state board to deal with umbilical cord-blood matters.

Already three leaders on the CIRM board, Chairman Robert Klein, vice chairmen Art Torres and Duane Roth, have publicly opposed the affordability and accountability legislation as unnecessary. The CIRM board has successfully resisted every effort over the last few years by lawmakers to make changes in agency operations.

However, this year CIRM has declared that it needs to bypass the voter-approved limit on its staff at 50 persons, an action that the legislation would allow. The restriction was written into the law via Prop. 71 by Klein and others along with caps on agency spending. On the surface, removing the cap would seem to require a 70 percent vote of the legislature, also imposed by Prop. 71. But Klein says the agency is considering unspecified alternatives that would not require a vote of the legislature to avoid the restriction.

Earlier this month, Sen. Elaine Kontominas Alquist of San Jose, chair of the Senate Health Committee, introduced the accountability legislation (SB1064), declaring that CIRM is “essentially accountable to no one.” Introduction of the measure followed recommendations from a sister state panel to CIRM, calling for increased openness and transparency. The action apparently triggered two harsh newspaper editorials concerning CIRM.

The umbilical cord blood measure (AB52) is authored by Assemblyman Anthony Portantino, D-Pasadena. In addition to creating a new state board beginning next January and raising fees on copies of birth certificates to fund it, the measure specifically mentions CIRM. It says,

"California pioneered the first sibling donor cord blood pilot project, and is a world leader in the more general area of stem cell research and its medical applications through the establishment and funding of the California Institute of Regenerative Medicine (CIRM). This makes California ideally situated to become the leader in harnessing the therapeutic potential of nonhematopoietic cord blood-derived stem and progenitor cells."

In addition to the Legislative Subcommittee location at CIRM headquarters in San Francisco, the public can participate in the session at teleconference locations in La Jolla, Davis and Menlo Park. The specific addresses should be posted on the agenda in the next day or two. Comments also may be submitted to the board via email.

CIRM Conflict Problems Behind Latest Stem Cell Bill

A state lawmaker says her new legislation aimed at the California stem cell agency was triggered in large part by breaches of the agency's own conflict-of-interest policy by the agency's directors.

Reporter Terri Somers of the San Diego Union-Tribune today reported that Sen. Sheila Kuehl, D-Santa Monica, said that the bill's requirement for a review of CIRM by the state's Little Hoover Commission was aimed at finding possible solutions to some of the problems that have generated a separate state investigation and audit.

The Little Hoover Commission is a nonpartisan state agency aimed at improving efficiency and performance of state government. In addition to studies, it can conduct public hearings and offer up legislative solutions.

Somers wrote:

"'Those (reviews) are directed at things that have happened,' Kuehl said yesterday. 'What I want to do is look ahead to see if there are necessary fixes.'"

Somers continued:

"Kuehl said her decision to look at the potential for conflicts of interest arose after learning that several grant applications to the institute had to be disqualified because members of the institute's board had written letters in support of the applicants."

The conflict cases involve John Reed, president of the Burnham Institute, and the deans of five medical who intervened on behalf of potential grants to their organizations, which is a violation of CIRM ethics policy.

Kuehl told Somers that a Los Angeles Times editorial urged reconfiguration of the CIRM board, but that following discussions with CIRM, she agreed that directors with expertise brought "the best understanding." Kuehl said,

"I'm really looking for solutions that will protect the public interest but not throw the baby out with bathwater in terms of expertise."

Late yesterday, CIRM released a statement from CIRM Chairman Robert Klein concerning the Kuehl bill, SB1565. It said,

"Last week we had highly productive discussions with Sen. Kuehl and similar discussions with Sen. (George) Runner and we believe we should be able to arrive at satisfactory language that advances the mission of Prop. 71."

CIRM directors have adamantly opposed legislation similar to SB1565 in the past. Klein's statement was carefully crafted to avoid saying anything directly about the latest bill and leave open the possibility of defusing it with some sort of action by CIRM itself.

Here is a link to the text of the bill, which is not yet available online through the legislature. The Foundation for Taxpayer and Consumer Rights put up the copy.

Lawmakers Target California Stem Cell Agency

One of California's more powerful legislators today introduced a bill aimed at the state's $3 billion stem cell agency and designed to ensure that "the state’s neediest residents will have access to therapies and drugs" developed as a result of taxpayer-financed research.

The measure would also require the state's Little Hoover Commission to study the structure of CIRM and report to the legislature by July 1 of next year with recommendations.

The legislation, SB1565 by Sen. Sheila Kuehl, D-Santa Monica, comes only a few days after CIRM attracted unwanted attention (see item below) with its proposal to boost the top pay ranges of its key executives by as much as $200,000 a year or 50 percent. The salary proposal received an unfriendly reception from some of CIRM's directors on Wednesday.

Kuehl(see photo), chair of the Senate Health Committee, said in a statement that the bill, co-authored by Republican George Runner of Antelope Valley, would maintain "the public’s trust by identifying ways to increase public accountability and reduce conflicts of interest."

CIRM watchdog John M. Simpson of the Foundation for Taxpayer and Consumer Rights said in a news release:

"The stem cell agency’s oversight board was designed with built-in conflicts of interest and it’s too big to be effective. They always have difficulties mustering a quorum. An outside analysis by unbiased observers can only be good. A hard-nosed look by the Little Hoover Commission is just what’s needed.”

Simpson also said,

"We need a provision that allows the State Attorney General to intervene if drugs or therapies funded by the stem cell agency are priced unreasonably. We’ve seen too many cases where companies benefit from publicly funded research and then set prices at obscene levels. They act like socialists when seeking research funding but are greedy capitalists when there are profits on the table."

No comment was immediately forthcoming from CIRM.

The text of the bill was not available online at the time of this writing, but Kuehl's office said the legislation would

"...require that grantees and licensees submit for CIRM's approval plans that will afford uninsured Californians access to drugs and cell therapies resulting from CIRM-funded research. The bill also ensures that publicly funded programs get the best prices for stem cell therapies and drugs by requiring grantees and licensees to sell them to publicly funded programs at a price that does not exceed one of the benchmark prices in Cal-Rx, the state’s prescription drug discount program."

The measure requires a super, super-majority vote – 70 percent of both houses – to pass. The requirement was created by Prop. 71 to make it extraordinarily difficult for lawmakers to make changes in the operation of the agency.

Passage would require a consensus from lawmakers that is rare in the Capitol. However, it is probably fair to say that the this week's pay proposal by CIRM will certainly contribute mightily to building that consensus.

(Here is a link to Ron Leuty's story on the bill in the San Francisco Business Journal.)