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.

‘Boiling Blood,’ Biotech and Rainmaking

The headline in the Wall Street Journal this morning read “Blood Boils Over Bill to Protect Biotech Drugs.”

And on Friday, the story on Politico.com was about a “king of K Street” in Washington, D.C., the man who is the $240,000 federal lobbyist for the California stem cell agency.

Both stories are related to the agency’s lobbying efforts in Congress on behalf of an industry-backed bill to stall competition from generic companies that may seek to duplicate biotech drugs.

The WSJ story indirectly makes it clear how picayune is the CIRM lobbying effort. The bill endorsed by the agency is not even mentioned. The players are many and powerful. The stage is vast, encompassing the Obama administration’s sweeping health plan effort.

Reporter Alicia Mundy focused on a proposal by Sen. Ted Kennedy that would give biotech firms 13.5 years of protection from generic competition on what the WSJ called “lucrative” drugs. That is about twice as long as proposed by President Obama, who is wrapping the IP legislation into his health care package.

Mundy reported that Kennedy’s effort “may prevail because it would help keep the pharmaceutical industry on board with the (Obama) overhaul, said industry lobbyists and Senate staffers.”

Also involved in this is Tony Podesta, an accomplished rainmaker and CIRM’s Washington lobbyist(the agency has another lobbyist in Sacramento). Chris Frates of Politico.com wrote that “in the age of Obama, it’s a particularly good time to be named Podesta.”

Frates recounted the Podesta family ties to Obama, including brother John Podesta’s co-chairmanship of the president’s transition team.

Frates said Tony Podesta is active in campaign fund-raising, hosting a recent event that funneled $500,000 to the Democratic Senatorial Campaign Committee.

Some CIRM directors and others have questioned the agency’s lobbying effort as largely meaningless given the vast issues in play in Washington. However, $240,000 would not be meaningless to a stem cell researcher in California looking for help to push science along to finding a cure for one of the array of ailments many believe could be alleviated through stem cell therapy.

Assuming that protecting the biotech industry from generic competition is the correct position for a California state agency, the question remains: What do the people of California get out of the expenditure of $240,000, which does not even buy a bleacher seat in the Capitol? And that amount does not count the additional staff and directors time, travel and expenses. Does any of it change the outcome?

CIRM directors will receive a briefing on Thursday on the legislation at a teleconference meeting of their Legislative Subcommittee. The public can participate in session at locations in San Francisco, Elk Grove, Healdsburg, La Jolla (2), Irvine and Palo Alto. Specific addresses can be found on the agenda.

(Editor’s note: The WSJ article is only available to online subscribers. If you would like a copy, please email djensen@californiastemcellreport.com.)

The $10 Billion Patent Litigation Bill

As the directors of the $3 billion California stem cell agency this week reconsider their endorsement of an industry-backed, patent protection bill, they may want to think about some of the issues raised in an article in Monday's Wall Street Journal headlined “Why Technologists Want Fewer Patents.”

The opinion piece was written by L. Gordon Crovitz, former publisher of the Journal, and discusses the current state of patent law and intellectual property.

He wrote,

“The Patent Office now gets some 500 million applications a year, leading to litigation costs of over $10 billion a year to define who has what rights. As Judge Richard Posner has written, patents for ideas create the risk of 'enormous monopoly power (imagine if the first person to think up the auction had been able to patent it).' Studies indicate that aside from the chemical and pharmaceutical industries, the cost of litigation now exceeds the profits companies generate from licensing patents.”

Crovitz continued,

“The Supreme Court may decide that more progress would be made with narrower definitions of what is patentable. A book on the U.S. approach to patents, 'Jefferson vs. the Patent Trolls' by Jeffrey Matsuura, makes the key point that 'intellectual property rights were not goals in and of themselves, but were instead a mechanism through which society attempted to facilitate creative collaboration.'"

Some of you may recall that zealous stem cell patent protection has blocked research at Childrens Hospital of Orange County. And some have pointed to excessively tight control of IP as a main reason why nearly all biotech companies have been unprofitable for decades.

The three scientists who founded the company, Stem Cells Inc. of Palo Alto, Ca., which holds the patents in the Childrens Hospital case, have never spoken publicly on the issue, and we do not expect to hear from them.

It is unclear whether the Crovitz piece is available to non-subscribers. If you would like a copy, please email djensen@californiastemcellreport.com.

Stem Cell Directors Ruffled by Voting Changes

The California Legislature has long had a practice of voting that has kept the wheels of government churning and enhanced the power of already important committee chairman. It is known as “holding the roll open.”

The practice made a controversial debut in May at the California stem cell agency, triggering a sharp exchange between Chairman Robert Klein and some directors.

As a result, the procedure and possible guidelines for its use are now on the agenda next week of the board of directors of the California stem cell agency.

Here is how it works in legislative committees, which are always plagued with absenteeism. A bill is presented to the panel and discussed. A vote is taken. If insufficient votes exist to pass, the chairman of the committee can hold the roll call vote open until the committee adjourns, often hours later. That allows absent lawmakers to pop in and vote without having heard any of the discussion. Lawmakers presenting legislation may also ask to hold the roll open until they can drag in their supporters. Of course, the chairman can close the roll and thus kill a bill.

Because of absenteeism, CIRM has been plagued with an inability to reach the super-majority quorum requirements mandated by Prop. 71. Some of the pressures have eased since limited teleconference participation has been permitted for some members for CIRM board meetings.

Holding roll call votes open would help grease CIRM's wheels, but some directors were not happy with the introduction of the procedure at the May 12 teleconference board meeting. The session involved support of industry-backed federal legislation having to do with patent protection of biotech therapies.

At one point, Director Oswald Steward, chair and director of the Reeve, Irvine Research Center, University of California, Irvine, raised questions about the voting procedure. According to the transcript, Steward said,

“I just don't understand why this process has been invoked now today, and I have to say in a very strange way.”

Other directors joined in with their reservations. Steward then said he was "a little offended" by the voting practice.

At that point, an obviously irritated Klein (based on the audiocast of the meeting), snapped,

"Hold on. Excuse me. Point of order here."

Directors raising issues about the voting procedure included Philip Pizzo, dean of the Stanford School of Medicine; Gerald Levey, dean of the UCLA School of Medicine, and Jeff Sheehy, director for communications, UCSF AIDS Research Institute.

Pizzo caught the flavor of most of the concerns. He said that permitting roll call votes to be held open would affect the “quality of our discussions.”

Pizzo said,

"Whereas, I like the idea of facilitating the process, I think at a subsequent (board) meeting we should discuss it because it does impact on our culture and how we do things."

He continued,

"I think we've been enriched over the years by hearing each other's point of view. I worry that we're going to wind up coming in with prefixed ideas that don't necessarily allow themselves to be attentive to new insights."

Klein did not directly address those concerns in May but said he would put the voting procedure before the entire board next week in San Diego.

While the practice offers some efficiency, differences exist between legislative committees and the CIRM board. Lawmakers could be reasonably well-informed on a measure without hearing the debate. They have in their hands well prior to the committee meetings a thorough-going analysis of bills before the committee, their pros and cons and a list of opponents and supporters. That never happens at CIRM.

CIRM Backs Biotech Industry Legislation, Aiming for Greater Federal Influence

The California stem cell agency today performed something of a semi-reversal and endorsed industry-supported federal legislation that would set rules for creation of generic biotech drugs.

CIRM’s board of directors last month supported a move to develop a statement of principles on the legislation, declining to ratify a recommendation by its Legislative Subcommittee that it support the industry bill.

However, this morning the board decided to back the industry measure rather than acting on the statement of principles developed by its staff over the last two weeks. The vote was 16-2 with two abstentions.

The consensus was that the industry needed to be encouraged financially to develop therapies, generally following the arguments made at the board meeting April 28-29.

Board member Joan Samuelson of Healdsburg, Ca., a patient advocate representative on the board, today said,

“The overriding concern is getting therapies to patients.”

Board member Oswald Steward, chair and director, Reeve, Irvine Research Center, University of California, Irvine, said, however, the board “should not act like a political action committee.” He said it “should be respected as much as the National Academy of Sciences.”

Jeff Sheehy, another board member and director for communications, UCSF AIDS Research Institute, supported Steward’s position, declaring he had “a lot of problems supporting a particular bill.” He said it would take the board “fairly deeply into the legislative process.”

Several board members, including Chairman Robert Klein, argued that CIRM could not become a player on the legislation without taking a specific stand. A statement of principles was meaningless at this point, they said.

The bill backed by CIRM is HR 1548 by Rep. Anna Eshoo, D-Palo Alto, which is favored by the Biotechnology Industry Organization. The board took no position on a rival bill, HR 1427 by Rep. Henry Waxman, D-Los Angeles, which BIO opposes. The Generic Pharmaceutical Association opposes the Eshoo bill.

Some board members were concerned about irritating Waxman, including Gerald Levey, dean of the UCLA School of Medicine. He said he did not “want to see CIRM caught in a political battle because we have enough of those.”

CIRM Vice Chairman Art Torres, a former state legislator who worked with Waxman, indicated that relations with Waxman would not be a problem as long the board did not directly oppose the Waxman bill.

Torres also indicated that the competing proposals may be wrapped into President Obama’s health initiative, which Waxman would carry.

A subtext of today’s session concerned the extent of CIRM’s role as a lobbyist at the federal level. The statement of principles on the legislation made a strong case for federal activities by CIRM as did Klein. CIRM recently hired a powerful Washington lobbyist, the Podesta Group, on a $240,000, 10-month contract, but the board has never had a full-blown discussion about how far it wants to go in lobbying at the federal level. The state of California has its own lobbyist, who works out of the governor’s office, but few, if any, state agencies engage in major federal lobbying efforts.

To be a significant player on the federal scene requires a hefty effort. Spending on lobbyists (nearly 11,000 in all) totaled $3.3 billion last year, and that figure does not reflect all expenditures made in attempts to influence federal legislation and regulations.

We invite comment on this subject or others. You can comment by clicking on the word "comment" below. Anonymous comments are permitted.