The Market's Invisible Hand and Its Impact on Stem Cell Research

As the $3 billion California stem cell agency intensifies its efforts this year to push cures into the clinic, a Canadian academic is raising a host of serious questions about the drive towards commercialization in scientific research.

Exhibit No. 1 was stem cell research, in an article Monday in The Scientist magazine. It was written by Timothy Caulfield, a Canada Research Chair in Health Law and Policy, and a professor at the Faculty of Law and School of Public Health, University of Alberta. He said,

"Commercialization has emerged as dominant theme in both the advocacy of science and in the grant writing process.  But is this push good for science? What damage might the market’s invisible hand do to the scientific process?"

Caulfield noted that research has played a role in commercial enterprises and that the goal-oriented research has led to important developments. But he also wrote,

"There are many recent examples of how commercialization plays out in top-down policy approaches to science.  The UK government recently justified a £220 million investment in stem cell research on the pledge that it will help stimulate an economic recovery. A 2009 policy document from Texas made the optimistic prediction that stem cell research could produce 230,000 regional jobs and $88 billion in state economic activity.  And President Obama’s 2011 State of the Union address went so far as to challenge American researchers to view this moment in time as 'our generation’s Sputnik moment'—the opportunity to use science and innovation to drive the economy, create new jobs, and compete with emerging economies, such as China and India. 

"The impact of this commercialization pressure is still unfolding, but there is a growing body of research that highlights the potential challenges, including the possibility that this pressure could reduce collaborative behavior, thus undermining scientific progress, and contribute to the premature application of technologies, as may already be happening in the spheres of stem cells and genetic research. For example, might the controversial new Texas stem cell research regulations, which allow the use of experimental adult stem cell therapies without federal approval, be, at least in part, a result of the government’s belief in the economic potential of the field? 

"Such pressure may also magnify the growing tendency of research institutions and the media to hype the potential near future benefits of research—another phenomenon that might already be occurring in a number of domains and could have the effect of creating a public expectation that is impossible to satisfy. 

"Furthermore, how will this trend conflict with the emerging emphasis on an open approach to science? A range of national and international policy entities, such as the Organisation for Economic Co-operation and Development, suggest 'full and open access to scientific data should be adopted as the international norm.' Can policy makers have it both ways?  Can we ask researchers to strive to partner with industry and commercialize their work and share their data and results freely and as quickly as practical?"

In late July, the governing board of the California stem cell agency is expected to make some hard financial decisions about where its future spending will be targeted. Just last week it approved a five-year plan with explicit goals for speeding stem cell research into the marketplace.

Former iPierian Exec Joins California Stem Cell Agency as CFO

A former executive at a California stem cell firm has been named as the first chief financial officer of the seven-year-old, $3 billion California stem cell agency, it was announced today.

Matthew Plunkett, CIRM CFO
CIRM Photo

Matthew Plunkett, former vice president and chief financial officer of iPierian Inc., has been at work at CIRM since late last month. The agency said in a news release today that Plunkett is overseeing "budgeting, forecasting, financial compliance and reporting, and implementation of the industry loan award program."

Plunkett will also "play a key role in securing opportunities to leverage CIRM funds with additional outside capital," said CIRM Chairman Jonathan Thomas.

Plunkett worked for iPierian from 2009 until last April. While he was at the firm, it received $7 million in grants from CIRM. The South San Francisco business has a unique connection to CIRM. Major investors in iPierian, including John Doerr of Kleiner Perkins Caulfield Byers of Menlo Park, pumped nearly $6 million into the 2004 ballot campaign that created CIRM. That amounted to 25 percent of the total contributed to the campaign, which was headed by Robert Klein, who later became the first chairman of the stem cell agency.

CIRM has said no connection exists between the contributions and subsequent awards to iPierian.

The agency has needed a chief financial officer for some time. It has sometimes struggled with routine budget matters, although that problem seems to have been largely solved even before Plunkett was hired. Plunkett will report to both the agency's chairman, Jonathan Thomas, and CIRM President Alan Trounson, in a continuation of the troublesome dual executive arrangement at the stem cell agency.

Prior to joining iPierian, Plunkett worked for Oppenheimer/CIBC World Markets from 2000 to 2009. In his last position there, he was managing director/head of West Coast biotechnology. He holds Ph.D. in organic chemistry from UC Berkeley.

Plunkett, who is earning $260,004 annually, began work on Nov. 28. Today's press release on his hiring came after the California Stem Cell Report inquired on Saturday about progress in filling the position.

Here is a link to a brief article in the San Francisco Business Times about the Plunkett announcement.
(An earlier version of this item incorrectly said Plunkett started work on Nov. 11 based on his resume which said "11/11.")

California Stem Cell Agency and Geron: Ethical Issues with Sale of hESC Trial

A Canadian bioethicist is raising ethical questions about Geron's hESC trial that have implications for the attempt by the California stem cell agency to salvage the once-vaunted effort.

Writing yesterday on the Hastings Center Bioethics Forum, Francoise Baylis of Dalhousie University said,

"It is one thing to close a trial to further enrollment for scientific reasons, such as a problem with trial design, or for ethical reasons, such as an unanticipated serious risk of harm to participants. It is quite another matter to close a trial for business reasons, such as to improve profit margins."

Geron last month said it was ending the trial because of financial reasons and to pursue development of its cancer treatments. CIRM awarded Geron a $25 million loan just last May and was surprised by the Geron move. The $3 billion state research program is now attempting to find a buyer/partner for Geron's hESC business.

Baylis noted that Stephen Kelsey, chief medical officer of the Menlo Park, Ca., firm, has been quoted as saying that the results of Geron trial – now with five patients instead of the projected 10 – "will be a fair reflection of what would have happened if we had completed the study."

Baylis wrote,

"This statement is deeply problematic, however."

Baylis, a professor and the Canada Research Chair in the departments of philosophy and of obstetrics and gynecology at Dalhousie, continued,

"No clinical trial should involve too few or too many participants. It is important that the trial not be underpowered and thus unable to generate scientific knowledge. It is equally important than no more research participants than necessary be exposed to potential research risks. If only five participants were needed to generate the scientific knowledge, then why would Geron and the F.D.A. have agreed to expose additional persons to the potential harms of trial participation?

"On the other hand, if Kelsey’s statement is false, and the findings from five research participants will be underpowered, then they may have been exposed to the potential harms of trial participation without the potential for benefit in the form of scientific knowledge."

She concluded,

"In either case, the scenario forces us to consider what measures should be taken with respect to future trials funded in the private sector so that participants are not left stranded. Perhaps regulators and institutional review boards should critically examine whether a company has both the financial (and other) resources and the will to complete a trial under review before granting regulatory or ethics approval.  If there are doubts about this, then either the trial should not be approved, or there should be stringent disclosure requirements so that prospective research participants are aware of the possibility that research may stop mid-trial for financial reasons."

'Troubling' Trend: Is CIRM Playing Field Level for Business?

A longtime observer of California stem cell matters today said he is troubled by a trend at CIRM that appears to give short shrift to research at biotech businesses in the Golden State.

John M. Simpson has been watching the California stem cell agency since late 2005, along with participating in its affairs, most notably development of its IP policies.

Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., prepared this statement to be read at today's CIRM board meeting in San Diego. Simpson is on the East Coast on other business and may not be able to reach the Washington, D.C., teleconference location to deliver his remarks personally. Here is the full text.

“I apologize that that I was unable to attend today's ICOC meeting. I
appreciate this statement being read into the record on my behalf.

“When Consumer Watchdog began its Stem Cell Project almost five years ago, I
naïvely expressed concerns that the program would be hijacked by the biotech
industry. That has -- at least so far -- not happened; rather, it has been
dominated by academic research institutions, whose representatives hold the
largest number of seats on the board.

“I believe the trend is troubling enough to ask whether the playing field is
level for all applicants. I believe there are grounds for concern.

“Here are some suggestions to improve the situation:

“-- A task force should be convened to consider why companies have fared so
poorly and what should be done. All sessions must be public.

“-- A workshop should be scheduled with interested companies to discuss ways
to improve their applications. It must be opened to the public.

“-- An effort should be made to recruit scientific reviewers with substantial
experience in research programs conducted by businesses.

“-- CIRM meetings that currently include only grantees should be expanded to
include all legitimately interested parties. Currently you have an annual
conference for all grantees. This must be opened to include all grant and
loan applicants, even if they were unsuccessful. If there is a concern
about expenses, unsuccessful applicants could be charged a modest fee. What
better venue to learn what makes a successful application than a conference
that includes CIRM's awardees? It would also create opportunities for
developing collaborations. Currently CIRM continues to suffer from the image
that it is a closed club. Opening conferences to all applicants -- and even
other interested parties -- would help correct that.

“Thank you for your consideration.

“John M. Simpson”

CIRM Dwarfed in Biotech Patent Fight

The battle to protect the biotech industry from generic drug makers, a war in which CIRM is a dogface, is going swimmingly, according to an article this week by The Associated Press.

In a piece headlined “The influence game: Biotech drug lobbying war,” Alan Fram wrote that the weapons include “millions of dollars in lobbying, thousands in campaign contributions and uncounted visits to members of Congress. And one noteworthy letter.”

His conclusion?

“The lobbying battle has so far been one-sided. The Senate health committee voted 16-7 for a 12-year (patent) protection period last month, while (Rep. Henry) Waxman's House energy panel voted 47-11 for 12 years of protection last Friday on an amendment by Rep. Anna Eshoo, D-Calif., who has numerous biotech firms in or near her Silicon Valley district.”

CIRM is a decidedly bit player on this stage, given the vast stakes and expenditures involved. The agency has written a letter – NOT the one cited by Fram – after directors, over the last few months, debated whether a state-funded agency should lobby to protect the biotech industry. That letter in turn generated another letter from U.S. Sen. Dianne Feinstein. (Both can be found here.)

CIRM also has hired a Washington lobbying firm, the Podesta Group, an unusual step for a state agency, paying it $240,000 for 10 months work. But Podesta's assignments from CIRM seem to involve more than patent protection.

All of CIRM's efforts are hardly a dribble on the health care reform playing field, where all the action is taking place. The Associated Press article, distributed nationally, spells out how money talks when it comes to locking up intellectual property. Fram described a “huge disparity” in cash. He wrote,

“Representing biotech companies, the Biotechnology Industry Organization has spent $3.7 million lobbying so far this year. Their ally, (the Pharmaceutical Research and Manufacturers of America), has spent $13.1 million — the second most of any group that lobbies in Washington.

“The main group opposing them, the Generic Pharmaceutical Association, has spent $1.1 million lobbying this year. Another group, a coalition of generic drug companies, insurers and large employers, has spent another $180,000, though most of its members — like AARP and the General Motors Corp. — are more focused on the overall (health reform) bill and are devoting few resources to the generic fight.”

Fram continued,

“All that money has let the biotech industry launch a lobbying blitz, with targets including lawmakers from biotech-heavy states like California, Maryland, Massachusetts, New Jersey and North Carolina.

“The biotech organization has brought its CEOs to Washington, and has run print and radio ads in the states of pivotal lawmakers. The pharmaceutical association has helped organize lobbying by universities that conduct biotech research and venture capitalists who invest in such firms, and paid for a Duke University study that concluded biotech firms need 12 to 16 years of protection from generic competitors to break even.”

All of which brings us to a business maxim of Jack Welch, the fabled executive who once led General Electric. He did not mess with enterprises in which GE could not be No. 1 or No. 2. Even today, his Web site says that maxim “stopped the decades-long practice of sprinkling money everywhere.”

The California stem cell agency is not even close to being No. 1 or No. 2 in the biotech patent protection game. That is something for CIRM directors to think about as they consider their priorities later this month when they deal with their strategic plan. Their grant portfolio is just about to hit $1 billion. They have only a tiny staff to oversee those expenditures and to hand out another $2 billion over the next few years. They will soon launch a new $210 million grant round, the largest research round ever for CIRM. And they will enter new, uncharted waters with a risky $500 million biotech lending program. A sharper focus on essentials may be in order.

CIRM Responds to Report on Future Industry Funding

The California stem cell agency today commented on the item we posted concerning a statement by its president that it is considering funding its future with cash from the biotech industry.

Responding to a request for comment from the California Stem Cell Report, Don Gibbons, chief communications officer for CIRM, said,

“I tried to post this comment twice and your system sent back error messages.

“Two things. We heard the concerns regarding an industry advisory group and that recommendation was removed from the latest draft of the strategic plan update that has been circulating internally the past few weeks. Second, regarding President (Alan) Trounson's musings with the Bloomberg reporter, how does 'in the long run' and 'may try' become 'is.'"

Regarding problems with posting comments, if any readers experience such difficulties, please let me know at djensen@californiastemcellreport.com. The blog is hosted by Google, which provides the templates and mechanism for posting comments. I am more than glad to take up problems with Google on behalf of our readers.

Klein Promoting Stem Cell Issues in Washington

This item has been removed. The Robert Klein involved in it is not connected with the California stem cell agency, we have been told.

Mulling Industry Ties: CIRM, Charities and Cash

The Wall Street Journal this morning carried a piece about the multimillion dollar linkages between some charities and the biomedical industry. The article offers some food for thought concerning the California stem cell agency and its financial crisis along with changes in the strategic direction of the agency.

Reporter Keith Winstein wrote that charities are "increasingly frustrated with the slow emergence of new disease treatments" and are pumping tens of millions of dollars into industry.

He quoted Robert Beall, the head of the Cystic Fibrosis Foundation, as saying,

"Academics are really not good at taking good understandings of the basic defect and translating it to new therapies. We had to get the drug companies to start to get involved with cystic fibrosis."

Winstein said that "about a dozen disease-based charities recently have started funding early-stage drug research at start-up companies -- usually in exchange for royalties or stock options." They include the cystic fibrosis foundation, the CHDI Foundation and the Juvenile Diabetes Research Foundation, of which CIRM Chairman Robert Klein is a director.

The article said that the investments create "potential conflicts for charities, which are called upon for impartial advice to patients but could end up with financial stakes in high-price treatments."

Winstein reported that Aaron Kesselheim, a physician at Brigham and Women's Hospital in Boston, says the investments can create a "potential minefield." Winstein continued,

"Normally, a patient-advocacy group might be expected to argue for lower prices for pharmaceuticals -- but a group with a royalty stake or equity in a drug maker has the opposite interest as well.

"Disease-focused charities also often give recommendations to doctors, patients and the FDA. The fibrosis foundation runs a pharmacy network to dispense drugs, and accredits treatment centers. The impartiality of such activities might be questioned if a group had a stake in one of several competing drugs, says Dr. Kesselheim.

"'Equity relationships can create substantial unconscious biases in the way that these foundations conduct their business that might lead them away from the ideal public-health strategies,' he says.

"'For example, a generic drug might be really useful for patients with MS, or epilepsy, and because the foundation has these sort of close ties with for-profit companies, then they might have subconscious biases against advocating for those sorts of outcomes that might lower costs.'"

CIRM is currently working on a plan to sell California state bonds to private foundations and perhaps others to help fund the stem cell agency's grants. The proposal could dovetail with the foundations' desires to push therapies into the marketplace along with generating reasonable and safe returns in its investment portfolio.

At the same time, CIRM is emphasizing its connection to industry with a push towards bringing therapies into the marketplace. The agency expects to release a $210 million RFA in the next several days for a disease team project that will be one of its largest grant rounds. The agency expects more than 100 applicants for the grants, which are aimed at pushing stem cell research closer to producing a commercial product. Commercial enterprises are expected to be among those seeking CIRM cash. The disease team round is also likely to see the launch of a $500 million biotech lending program for both industry and nonprofits. Last month, CIRM Chairman Klein told directors that the disease team round is a "very, very important" element in pitching the bonds to foundations.

(Editor's note: The WSJ article may not be accessible without a subscription. If you would like to see the full article, email djensen@californiastemcellreport.com and I will send you a copy.)

Biotech Courtier, the People's Will and 'Money Talks'

Gov. Schwarzenegger's veto of this year's CIRM legislation was deeply buried by most news outlets, if they carried anything at all. But his action triggered a fiery op-ed piece by J. Wesley Smith in the San Francisco Chronicle.

Writing on Oct. 2, Smith, senior fellow in human rights and bioethics at the Discovery Institute, asked,

"What is it about embryonic stem cell research that turns politicians into courtiers? "

He said government leaders are more than ready to denounce the "get-rich, money-talks ethos" of Big Pharma, but "trip over each other to grant (biotech) policy agendas carte blanche."

Smith was talking about SB1565, legislation by state Sen. Sheila Kuehl, D-Santa Monica, which was aimed at providing affordable access to CIRM-financed therapies. The measure was opposed by the biotech industry and CIRM.

Smith said the governor claimed "incongruously that it 'does nothing to advance the will of over 7 million voters,' when precisely the opposite - assuring access for the poor to CIRM-facilitated treatments - was clearly part of the package voters thought they bought when passing Proposition 71."

Smith continued,

"Given the governor's constant harping about the crucial importance of bipartisanship, the veto is ironic. Talk about a bipartisan measure! SB1565 passed the Senate unanimously and by an overwhelming 64-7 in the Assembly. Other than naming freeways after dead luminaries, it is rare to find such agreement in the ideologically divided California Legislature.

"In backing the CIRM's fiscal profligacy and giving the back of his hand to the poor and the ill through his veto, Schwarzenegger made a joke of his reputation as a fiscal conservative and bipartisan consensus builder. How sad that the once mighty Arnold, who came to Sacramento vowing to smash boxes, has instead assumed the role of a mere industry retainer."

Jerry Steele, an advocate of adult stem cell therapy writing on the TheraVitae blog, also was critical of the veto. He said,

"The CIRM has been mired in many controversies on where the money has been distributed and is deathly quiet on the issue of when it is going to produce any cure."

Steele asked if California has received a return on its investment,

"Well, even the staunchest supporter of the CIRM would be hard pressed to come up with any successful results- I tried Google and the most I could come up with was a few semi-famous scientists have migrated to California to live off the taxpayer."

Geron, a Menlo Park, Ca., stem cell company, had a different view, although it was very brief. In what amounted to a one sentence news release, the firm said it supported the veto because the legislation ran "counter" to Prop. 71.

Don Reed, patient advocate and a vice president of the private stem cell lobbying group belonging to CIRM Chairman Robert Klein, gave a cyberspace sigh of relief on his blog. But he noted that the Little Hoover Commission, a bipartisan good-government state agency, will be looking into CIRM.

Reed vowed,

"If the Little Hoover Commission develops a new law or initiative against us, I will let you know about it early, so we can protect California’s great gift to the world."

Unsaid was the implication that any proposed change in CIRM's operations would be an attack.

UC Davis Tightens Rules on Industry Influence

Efforts to control the influence of the medical industry in academia received more support recently at the UC Davis medical school, whose dean sits on the Oversight Committee for the $3 billion California stem cell agency.

Reporter Dorsey Griffith of The Sacramento Bee wrote earlier this week:

"UC Davis' ban against drug industry gifts, lunches and samples has expanded to include a prohibition of freebies from any company that markets its wares to the large health system.

"University of California, Davis, officials Monday announced the expanded new policy, which took effect Sunday.

"'There was consensus that we really needed to make sure that all our policies ensure that our behavior is totally transparent and ethical,' said Dr. Claire Pomeroy, vice chancellor and dean of the UC Davis School of Medicine. 'I think it's consistent with our values here of really being focused on the patient.'"

Pomeroy is one of 29 members of the Oversight Committee, which has its own set of issues dealing with conflicts of interests.

Stanford and UCLA, whose medical school deans also sit on the Oversight Committee, have similar rules, along with Kaiser Permanente Northern California, Yale and the University of Pennsylvania.

Salon.com Looks at Industry Opposition to SB771

The headline on Salon.com read: "Biomedical industry to California legislators: 'Don't you dare tell us what to do with your money!'"

Andrew Leonard, a California author and regular on Salon.com, continued:

"The horror! To CHI (California Healthcare Institute), SB 771 is unwarranted state intervention in their profit-making potential, an act of robbery that must be resisted with extreme prejudice."

Leonard referred to the excerpts of a CHI letter seen on the California Stem Cell Report in the "Biomedical Industry" item below.

He wrote:

"As a citizen of California who voted for the state's landmark stem cell initiative, and whose tax dollars will go toward paying off the bonds issued to pay for it, I fully support legislative efforts to ensure that some of the revenue generated by the commercialization of research paid for with my money return to the state....

"If the biomedical companies don't like it, they can just go find someone else's money to play with."

Leonard also said,

"Whatever happens, I look forward to following the twists and turns of California's ambitious attempt to bootstrap stem cell research via the reporting at the California Stem Cell Report blog. I have a particular weakness for blogs that obsessively cover every iota of news about a single, highly circumscribed topic -- they seem to regularly expose me to information that is not easily found elsewhere."

California's Biomedical Industry Lays Out Opposition to SB771

The chief lobbying group for the California biomedical industry Tuesday detailed its strong opposition to legislation that seeks to guarantee that California reaps an economic and health-related return on its $3 billion stem cell research investment.

David Gollaher, president of the 250-member organization, said the bill, SB771, will "create significant disincentives for firms to commercialize inventions funded with CIRM money. And without company participation, basic stem cell science cannot be developed into treatments for patients."

CHI's opposition was laid out in a five-page letter to Sen. Sheila Kuehl, D-Santa Monica, co-author of the bill and chair of the Senate Health Committee. It was also sent to Senate Republican leader George Runner of Antelope Valley, co-author of the measure, and all Republican members of the California Senate.

CHI is also unhappy with CIRM's own provisions for sharing the wealth on any inventions that stem from CIRM-funded research.

CHI's letter said:

"Because commercialization is essential for the development and production of new medicines that can be used by Californians and others, CHI believes that the basic goal of intellectual property policies should be to minimize barriers to transfer technologies from basic research laboratories to the private sector for commercialization into products. Moreover, while we strongly support policies to improve patients’ access to advanced medicine, we maintain that IP policies and regulations are not the way to improve access and cost.

"Investment in biotechnology is inherently very risky. Any aspect of a technology transfer contract that increases risk, particularly by adding an element of uncertainty, makes it less attractive to potential partners and investors and thus reduces the prospects for successful commercial collaboration.

"We believe the intellectual property policies in your measure would reverse the improvements thoughtfully considered and accepted by the ICOC (CIRM's Oversight Committee) during several public meetings. SB 771 would impose more stringent revenue sharing and pricing and access provisions than those finally adopted by the ICOC.

"Additionally, we believe that codifying IP provisions in statute will deny the ICOC the flexibility it may need to amend its IP policies in the event they prove to be unworkable. As you know, the CIRM has just begun to issue research grants and it will likely be a number of years before any discoveries from this research moves to the commercialization stage. Thus, the ICOC may not know for some time if the IP policies it has adopted are effective and will need flexibility to change its IP policies if the situation warrants."

The letter concluded by saying that CHI questions

"...the appropriateness of commercial companies being forced to pay royalties, beyond what they negotiate with basic research institutions. If additional payments like this are required, along with the revenue sharing, pricing and access clauses mentioned above, they will only serve as an additional disincentive to commercial participation in CIRM-funded research."

The CIRM Oversight Committee is scheduled to discuss SB771 on April 10. Three members of that group are also directors of CHI. They are Ted Love, CEO of Nuvelo; Richard Murphy, head of the Salk Institute, and Philip Pizzo, dean of the Stanford School of Medicine.

The Senate Health Committee takes up the legislation on April 11. We have asked Kuehl's office if it would like to comment on the CHI letter.

SB771: CHI Takes 'Not-So-Subtle Jab'

California's biomedical industry has already begun its lobbying campaign against legislation to guarantee the state shares in the potential bounty from products developed from its $3 billion stem cell research effort.

Writing on Law.com, reporter Cheryl Miller said members of the California Healthcare Institute were pounding the hallways in the Capitol a few days ago armed with a "not-so-subtle jab" at SB771, which does not face its first legislative test until April 11.

Miller said that their talking points included the following:

"Recent legislative proposals that focus on revenue-sharing thresholds and pricing and access requirements place direct financial return ahead of the far greater benefit to all Californians (and people everywhere) from the development of innovative technologies. Such provisions are sure to discourage the private investment needed to bring state-funded science to market."

Miller also quoted the author of the bill, Sen. Sheila Kuehl, D-Santa Monica, as saying,

"I expect that there will be people who are not going to praise this bill. But they're going to have to find a way to critique it without saying we don't want the state to get any money."

CHI members have a number of legislative fish to fry so it is not clear how widely their stem cell message was distributed.

CIRM IP Legislation Begins Its Journey to Mixed Reviews

The chair of the California State Senate Health Committee today formally unveiled her legislation aimed ensuring the state receives a return on its $3 billion investment in stem cell research. But the measure initially met with mixed reviews.

One potential ally wanted more and foes want less. CIRM itself said no comment would be forthcoming until it had seen the official text of the legislation (SB771), which is not available at the time of this writing.

The bipartisan bill, as presented in the press release by Sen. Sheila Kuehl, D-Santa Monica, seemed to measure up to earlier information (see "CIRM Regulation").

John M. Simpson, stem cell project director for the Santa Monica-based Foundation for Taxpayer and Consumer Rights, said,

"The bill does not go far enough to ensure that all Californians have affordable access to the cures and treatments that result from stem cell research they are funding.

"There needs to be a provision that allows the attorney general to intervene if these therapies, treatments or cures are priced unreasonably.

"It's good that the bill would require an an access plan for uninsured people and that it would require purchases funded with public funds be made at the Medicaid price. The problem is that it doesn't do enough for all Californians who are paying to develop these treatments with their hard-earned tax dollars."

Jesse Reynolds, project director on biotechnology accountability for the Oakland-based Center for Genetics and Society, welcomed the measure, declaring,

"If a biotech company is making billions of dollars of profit from state-financed research, the people should receive a fair return on their investment, as well as access to any therapies."

Reynolds said the leadership of the stem cell agency has tried to "back out" of Prop. 71 campaign promises of huge economic returns to the state. He said,

"This would have been a billion-dollar bait and switch. The bill will make significant steps toward fulfilling these promises."

The California Healthcare Institute, which represents the state's biomedical industry, did not have an immediate comment. But the group is already opposed to CIRM intellectual property policies, which Kuehl says are too weak.

CHI says on its stem cell research page that CIRM's IP rules

"threaten to discourage commercial collaboration, technology transfer and licensing by (a) increasing the administrative complexity of licensing agreements involving CIRM-funded technologies in comparison to the mainstream of academic-industry transactions, which derive from federally-funded research, and (b) increasing investors' financial risk by imposing state price regulation on downstream products."

We should note that not all companies involved in development of the CIRM IP rules share CHI's adamant opposition to CIRM's IP rules. (CHI's stem cell page contains several links to more of its documents filed concerning CIRM IP.)

Kuehl drummed up some media attention in advance, granting interviews to both the San Jose Mercury News (see "CIRM Regulation") and Terri Somers of the San Diego Union-Tribune. Somers quoted Kuehl as saying,

“Californians are putting billions of dollars into this research. They ought to be guaranteed to get a little bit back, because everyone else is going to be on the take."

For more on the legislation, including the difficult task Kuehl faces, see "Rationale Behind" and "Legislators Target."

Affordable Access to Stem Cell Cures Hits Hard Sledding

The latest move to ensure the affordability of stem cell cures developed by California-financed research faces opposition from both the California biomedical industry and one of the chief advocates for widespread access.

John M. Simpson, stem cell project director for the Foundation for Taxpaper and Consumers Rights, said the proposed policy to be considered this Thursday by the CIRM Oversight Committee falls "far short of ensuring that all Californians will have affordable access to the therapies, drugs and cures that their tax dollars fund."

CIRM's latest access effort is linked to a new and untested law. Called the California Discount Prescription Drug Program, it was opposed by the California Healthcare Institute, which represents the state's biomedical industry. One law firm, Arnold and Porter of Washington, D.C., which has a large health industry practice, wrote about the law:

"California’s attempt to lower drug prices, by threatening drug manufacturers with prior authorization requirements, will likely face legal challenge in federal or state court. Absent a successful legal challenge, the threat of prior authorization requirements may force most drug manufacturers to the negotiating table."

Simpson's group has been nearly alone in actively advocating affordable access to the results of California stem cell research. He responded with the following when the California Stem Cell Report asked him about the access/intellectual policy proposal coming up later this week:

"The proposed for-profit (intellectual property) policies -- like the non-profit polices -- fall far short of ensuring that all Californians will have affordable access to the therapies, drugs and cures that their tax dollars fund.

"There is an appropriate formula for a payback to the state if taxpayer dollars fund discoveries that produce a revenue stream. The plan appears to strike a reasonable balance between capping the payback so companies know their potential liability and provisions that increase the state's share if there is a true 'blockbuster' discovery. The provision that Californians get preference in the event of a limited supply is only fair since we are funding the research.

"But there must be a provision to preclude the possibility of egregious profiteering. If prices are unreasonable, the state through the attorney general must have the right to intervene -- 'march in' -- and remedy the situation. There must be a reasonable relationship between the public money invested and the price that is charged.

"What must be be prevented is the Genentech situation. The National Cancer Institute provided $44.6 million to develop the cancer drug Avastin, yet Genentech set the price at $100,000 a year.

"Another troubling aspects about the for-profit policy is that it provides that there will be a discount on therapies purchased in California with public funds without spelling out the mechanism for reaching the discount. The devil will certainly be in the details.

"We see that in the non-profit regulations. The original policy called for selling drugs and therapies at the federal Medicaid price. Under incessant battering from the so-called California Healthcare Institute – actually nothing but a shill for the biomedical industry -- the regulation before the ICOC Thursday has been watered down to cover only drugs and only through the California Discount Prescription Drug Plan. It doesn't cover all purchases made by publicly funded health plans. They pledge to amend the regulation to include therapies when a mechanism is worked out, but with CHI in the picture I am frankly worried."

CIRM's affordability language says:

"As a consequence of expenditure of the 'first dollar' of CIRM funding, the for-profit awardee organization agrees to provide a plan to provide access at the time of commercialization to resultant therapies for uninsured California residents.

"In addition, the awardees will provide the therapies at a discount price to residents whose therapies are purchased in California by public funds. For drugs generated as a consequence of CIRM funding, awardees agree to provide drugs at prices negotiated pursuant to the California Discount Prescription Drug Program (commencing with California Health and Safety Code section 130500, et seq.) to eligible Californians under that program. Awardees also agree to provide discount pricing for therapies in addition to drugs that result from CIRM funding.

"In the unfortunate event of limited availability of therapeutic products resulting from CIRM funding, awardees agree to give preference to Californian residents unless prohibited by law and whenever feasible. If an awardee is unable to grant preference to Californian residents, the awardee agrees to submit a statement of justification to CIRM."

The latest legislative analysis of the prescription drug measure says:

"According to the author, this bill is needed because Californians, especially those with no drug coverage, continue to pay some of the highest costs in the world for prescription drugs. The author states that this bill uses the state's purchasing and negotiating power to help Californians cope with the rising cost of prescription drugs by creating a drug discount card program for state residents. According to the author, despite the skyrocketing cost of drugs, to date the state has done little, compared to other states, to help residents afford their medication."

Both industry and health advocate groups opposed some facets of the legislation for different reasons. You can read a discussion of those concerns in a Senate staff analysis.

Here is a piece by Health Access California on the new law.

Here is the full text.

Biomedical Industry Says Nay to California Stem Cell Affordability

The California biomedical industry has served notice that it will mightily resist current efforts to ensure the affordability of treatments that result from embryonic stem cell research funded by the California stem cell agency.

The industry's "letter of intent" comes in the form of a legal opinion written by a heavyweight Sacramento law firm, Wilke, Fleury, Hoffelt, Gould & Birney, on behalf of the California Healthcare Institute, the state's leading biomedical industry group. Wilke, Fleury's other clients in the past have included Big Pharma companies such as Novartis and Glaxo Wellcome.

The firm's letter to CIRM addresses the proposed intellectual property rights regulations that would apply to CIRM grants to nonprofit organizations. The IP proposal is attempting to implement the expectation that low and middle income persons will not be frozen out of Prop. 71 therapies because of their high cost.

Writing on behalf of his firm and CHI, John Valencia attacks the following CIRM language:

"…licensees will agree to provide to patients whose therapies and diagnostics will be purchased in California with California funds or fund of any political subdivision of the state the therapies and diagnostics at a cost equal to that resulting from the provisions of Title 42, United States Code section 1396r-8, subdivisions (c)(1)(A)-(B) and subdivision (c)(2)."

The law firm's 10-page argument says that CIRM is bent on a course that will not stand up to tough legal scrutiny, with the implication that its proposal is likely to meet a vigorous legal challenge.

Wilke, Fleury says CIRM's proposal is "largely redundant" and "susceptible to failure." The law firm states:

"The apparent objective of the proposed regulation – to provide California purchasers with preferred product acquisition pricing for 'therapies and diagnostics' resulting from CIRM-funded research -- lacks adequate certainty and definiteness to meet the general purpose of state agency regulatory adoptions to define, clarify, interpret and implement statutory enactments. Outpatient prescription drugs which result from CIRM-funded research will be readily available to virtually every state and local agency purchaser, at preferred product acquisition cost levels guaranteed by federal or state law, or the designed combination of the two. The proposal requires further detail in relation to key elements (i.e., definitions for key operational elements of the proposed regulation, such as 'therapies,' 'diagnostics,' 'California funds,' and 'political subdivision') in order to avoid failure upon review by the state Office of Administrative Law (OAL) for lack of clarity."

Wilke, Fleury continues:

"In virtually every instance, the proposed regulation is of questionable value until greater certainty is provided regarding the cost guarantee that will attend to CIRM-funded discoveries other than eventual outpatient prescription drugs."

Wilke, Fleury does a have a point in its letter concerning the CIRM language. More artful drafting is needed so that it will stand up to challenges and be fully understood by grant recipients.

But fundamentally the biomedical industry does not want to be hampered in any way in its efforts to extract the maximum profit from its inventions, whether they are funded by taxpayers or by the industry itself. That is certainly a justifiable position for a business, whose first loyalty is and should be to its bottom line.

That said, if business wants to dine at the public trough, it will have to abide by the etiquette of government and not its self-interest.

It is difficult to overemphasize the importance of the CIRM IP debate, given its far-reaching impact in a fledgling field of research and medicine. But the discussion concerning IP and access and affordability to CIRM-financed stem cell therapies is invisible to the public. The major media have ignored the tussle over who is going to benefit economically and medically from CIRM's $6 billion worth of taxpayer-funded stem cell therapies. Even groups representing the poor and minorities are missing from CIRM's IP discussions, although they would seem to have a substantial stake in ensuring affordability.

In public policy discussions such as this, effective representation, as offered by Wilke, Fleury, is likely to carry the day regardless of the best intentions of the rule makers and many of the supporters of Prop. 71.

Watchdog Group Praises CIRM IP Task Force

The California stem cell agency is sort of like the weather – as they say, everybody complains about it, or so it seems sometimes.

Now comes a note from one of the folks who has done some pretty consistent complaining, but also seems to be able to work with CIRM.

He is John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumers Rights of Santa Monica, Ca.. He said in a letter to Ed Penhoet, chair of the CIRM Intellectual Property Task Force:

"The IP Task Force, under your chairmanship and with the stellar staff support of Mary Maxon and Scott Tocher, has so far exemplified a perfect model of soliciting and considering input from all stakeholders."

The impetus for Simpson's remark was what he called a "disturbing suggestion from some biotech industry representatives that the Task Force's process was other than transparent, orderly and consistent."

He referred to a Sept. 15 letter.from the California Healthcare Institute concerning IP policies for businesses. Written by David Gollaher, president of the biomedical industry group, the letter said that the organization "remains concerned" particularly about the process through which the Oversight Committee and the Task Force have "addressed or failed to address substantial concerns" of the CHI.

Gollaher said he was "especially dismayed by the apparent disregard" of some CHI comments concerning access to CIRM-financed therapies by the uninsured and public agencies. He also expressed concern about the process involving "right to practice" language.

"We would have expected any decision-making process...to have included input from all interested stakeholders. This, unfortunately, was not the case. In the future, CHI urges the ICOC to ensure its processes are transparent, orderly and consistent."

Ortiz Drops Critical Elements from CIRM Oversight Bill

Major changes will be made in legislation to tighten oversight of the California stem cell agency, including the elimination of provisions that could have required royalties as high as 50 percent on inventions financed with state funds.

The moves may well be an initial step in a compromise on the sweeping legislation by California State Sen. Deborah Ortiz, D-Sacramento, who is the leading legislative voice on stem cell issues. Her decision to strip significant provisions from SB401 makes it clear that CIRM needs to address the other issues in the legislation. Ortiz has made it known for some time that she is not wedded to a ballot measure or legislation to ensure accountability and openness.

Her office indicated late Wednesday that the measure will be amended before it comes up again in the Assembly Appropriations Committee, which is its last stop before it goes to the Assembly floor. The committee Wednesday delayed action on the bill until late next week.

According to Hallye Jordan, director of communications for Ortiz, the senator told the committee that she intends to address critics' concerns that "the bill’s intellectual property provisions are inflexible and will discourage industry participation in stem cell research and that she is carrying the bill for political purposes."

Here is most of Jordan's statement on Ortiz' appearance Wednesday:

"She told committee members that she intends to amend the bill's IP provisions so that they mirror the regulations that the Independent Citizen’s Oversight Committee and the California Institute for Regenerative Medicine (ICOC/CIRM) have already adopted and which are currently under review by the Office of Administrative Law, per the Administrative Procedure Act. In doing so, she noted she is giving up the ability to get a higher share of royalties and better prices that might have been achieved under the original provision of SB401.

"She also said she will amend the bill to make it clear that it will not go on the ballot until after the November 2006 election.

"These amendments are expected to go a long way in addressing critics’ concerns, leaving, perhaps, only the argument that opponents don’t want to have stem cell research back on the ballot. Senator Ortiz and other legislators believe voters have a right to determine whether SB401 will provide public accountability and the appropriate protection of the state’s $3 billion-$7 billion taxpayer-funded investment into stem cell research.

"SB401 is important to ensure that the CIRM, ICOC and working group members are subject to public accountability, and hold meetings in public, make their records public and disclose of their financial interests as required of all public officials.

"SB401 includes exceptions so that the working group members may conduct scientific peer review and protect proprietary or scientific prepublication information when appropriate. The Senator and other SB 401supporters believe the ICOC/CIRM proposed regulations allowing the ICOC president to waive the conflict of interest provisions in 'exceptional' circumstances, do not provide clear, defined criteria as to what constitutes 'exceptional' circumstances. They also are concerned with ICOC/CIRM provisions that exempt from open meeting discussions and public record disclosures 'critical mission' matters, which also are vague and overly broad.

"Senator Ortiz also pointed out that there is no guarantee that the ICOC/CIRM regulations that have been submitted to the Office of Administrative Law will remain intact after the public comment period.

"SB401 is supported by Californians Aware and California Common Cause," Jordan concluded.

The Appropriations Committee staff analysis, prepared by Scott Bain, said the bill's requirement that the Department of Justice review CIRM intellectual property agreements would likely cost around $150,000 annually. The department currently does not have IP expertise. Cost of the state auditing function in the bill was estimated at least than $20,000. Cost of placing the measure on the ballot would be $330,000. Legislation that has a price tag of $150,000 or more is being held for consideration next week as lawmakers wrestle with state budget matters.

Listed in the staff analysis as opposing the bill were CIRM, the Juvenile Diabetes Research Foundation and the Coalition for Advancement for Medical Research. Both groups contend the bill "will have the effect of unnecessarily impeding the research program," according to the analysis.

Under the topic of "concerns," the analysis said,

"The California Healthcare Institute (CHI) expresses concern that this bill applies licensing and other conditions to CIRM grants and loans that are in the best interest of the state, but these provisions may discourage industry participation. The California Institute of Technology, Stanford University, the University of California and the University of Southern California write that they believe CIRM's intellectual property policy should be given a chance to work and be tested before either codifying in statute or making significant changes."

On Tuesday, CIRM's legislative subcommittee met for "consideration" of SB401 and a number of other stem cell-related bills. We have queried CIRM about what action was taken at the meeting, but are still awaiting a definitive response.

Effort Advances to Beef Up Royalties and Oversight of CIRM

Legislation to tighten oversight of California's $6 billion stem cell research program moved forward Tuesday despite opposition from the state's stem cell agency.

The measure by Sen. Deborah Ortiz, D-Sacramento, cleared the Assembly Health Committee on a 9-2 vote. It now goes to the Assembly Appropriations Committee.

As we reported last week, Ortiz' wide-ranging proposal, SB401, would require more openness in meetings of the California stem cell agency, require divestiture of investments by Oversight Committee members in some cases and increase the state's share of royalties.

The action was not covered by any newspapers as far as we can tell. The legislative staff analysis said the only opposition to the bill, at the time the analysis was written, came from CIRM and the California Healthcare Institute, an industry group. The analysis said,

"The California Healthcare Institute (CHI) maintains that this bill limits the effectiveness of CIRM. In addition, CHI states that while this bill seeks to apply licensing and other conditions to its grants and loans that are in the best interest of the state, its provisions may discourage industry participation and points out that the state's share of financial return should be proportionate to its contribution, not a fixed percentage of total revenues similar to the percentages contained in this bill."

Ortiz' office released background information on the bill that said:

"As editorial boards across the state have noted, while the promise of stem cell research is great, Prop. 71 omits several important protections to ensure public accountability and transparency of funding decisions. For example, the initiative exempts its working groups, which make important recommendations on what projects to fund, from state open meeting and public records requirements. It similarly omits requirements for working group members to disclose interests they have in entities engaged in stem cell research. Finally, the initiative is unclear on the question of how the state is to achieve an economic return on its investment in stem cell research."

The measure was amended in committee to ensure that it would be placed on the November statewide ballot.

CHI, Stem Cells, Love and Morrow

The California Healthcare Institute made some stem cell news this month with the appointment of a new director to its board and with the involvement of its chief counsel in an faith-based political flap.

CHI, a biomed industry group and supporter of the California stem cell agency, named Ted Love, chairman and CEO of Nuvelo Inc. of San Carlos, a biopharmaceutical firm, to the CHI board of directors. Love is also a member of the Oversight Committee of the California stem cell agency.

Earlier this month, CHI and stem cell research surfaced in a different way in the congressional campaign of Republican state Sen. Bill Morrow. His wife, Barbara, is vice president and general counsel of CHI.

Her connection to CHI became an issue, at least for some, because CHI supports embryonic stem cell research, something that Christian activists oppose.

According to the Agape Press web site, whose motto is "reliable news from a Christian source:

"Senator Morrow does not deny that his wife is employed at the Institute. But he claims her work as general counsel does not require her to promote the company's position on ESCR. The state lawmaker explains that his wife took the job after much prayer and consideration.

"'We sat down with pastors and nationally known bioethicists who were Christians and ministers ... before we accepted that position,' Senator Morrow says.

"Morrow states that he and his wife felt 'very comfortable' with the advice they received -- specifically, that it would clearly understood Mrs. Morrow would not be called on to lobby in support of ESCR. 'And under those conditions, which they've held up to, that's what she's done,' he adds."