CIRM Denies It Was Prompted to Release Economic Study

The California stem cell agency today said that it was not prompted to release publicly a $50,000 economic impact study concerning CIRM as the result of an inquiry from the California Stem Cell Report.

Don Gibbons, chief communications officer for the agency, said in a one-sentence email to us,

"You have quite the ego, writing not once, but twice, that you prompted us to post the Analysis Group report, which is not true."

Gibbons did not explain why the report, which was originally scheduled to be released last January, was posted on the CIRM website one day after we inquired about its whereabouts. We attempted to email him several times this morning, seeking an explanation. However, our emails are being rejected by the CIRM email system. Our presumption is that there is some sort of technical glitch involving emails that are being sent via a satellite link from Mexico.

So this posting also serves as a request to CIRM for an elaboration on the reasons for the delays in releasing the Analysis Group report.

We have additionally asked the Analysis Group if it has any comments on the two items that were posted on Wednesday concerning its work. If they do, we will carry their comments verbatim.

Coming Next Spring: A $350,000 Paean to CIRM's Value

Is the California stem cell agency performing work that is beneficial to the economy of the state of California?

Any fair-minded person has to respond affirmatively to that question, and perhaps even some who are not so fair-minded.

But does CIRM have to spend $350,000 of taxpayer funds to prove its economic value? Will such an effort convince any skeptics that the $3 billion ($6 billion including interest) stem cell research program is economically worthwhile? The answer to both those questions is no.

If CIRM pays for an economic study, it will be forever clouded by the reasonable assumption that the agency received the findings that it already knows it wants. And those findings would amount to a paean that holds up CIRM as critical to the economic survival of the Golden State.

That conclusion is even more likely given the language in the recent CIRM RFP for a consultant to prepare the economic propaganda piece for the agency.

The RFP makes no bones about what CIRM wants and what the consultant better provide for $300,000. Certainly not an independent, detached assessment of CIRM's economic worth. Instead, the RFP states that the consultant must "execute a vibrant and aggressive strategy to support the goals and initiatives of CIRM."

To be sure the consultant fulfills expectations, he will work with a high-powered CIRM panel consisting not only of the chairman and president of CIRM, but also the vice chair, the vice president for operations, the general counsel, the legal counsel and unspecified "others." Lots of "minders" there to be sure no heresy comes forth.

CIRM has already spent $50,000 this year for what was supposed to be a new economic study. That report was originally scheduled to be released in January. After the California Stem Cell Report asked about it on Oct. 7 in connection with the $300,000 RFP, the document was publicly released a day later on the CIRM web site.

The $50,000 report was prepared by the Analysis Group of Palo Alto, Ca., which is likely to have the inside track on this latest contract. (For more details on the report, see the item below.)

Analysis Group also received $200,000 from the Prop. 71 campaign, which was directed by now CIRM Chairman Robert Klein, for a document that predicted health care savings of as much as $12.6 billion over 30 years and a net state government profit of at least $1 billion.

That report, however, was held up as an example of stem cell hype. "Hopelessly optimistic" was how one reasonably detached writer, David Hamilton, described the campaign analysis in a "biotech bubble" story for Slate.com.

The latest RFP also indicates that CIRM grant recipients will be burdened with additional paper work in the future. It implies that grant applicants will need a nose for dollars and must be able to demonstrate how CIRM cash, if they receive it, will benefit the California economy.

The RFP states that the consultant must create "a standard and routinized methodology for data collection from CIRM grantees and loan recipients and other sources to enable future measurements of economic impact."

Compliance with that methodology is likely to become part of the terms of any grant or loan in the future. We would hope that all the data gathered would be available to the public so that other economists and health policy experts would be able to draw their own independent conclusions.

Interested economic consultants must submit their proposals by Oct. 24. The contract could be awarded shortly thereafter. Look for the economic report in March 2009, if the RFP is to be believed, with the lucky consultant also embarking on a bit of a road show, according to the RFP's terms.

Unsaid in the RFP is the near certainty that the consultant will have an ongoing, lucrative relationship with CIRM for years to come as he updates the report with fresh information annually.

Economists Say "Too Early" to See Significant, Quantifiable CIRM Results

Has the four-year-old, $6-billion, California human embryonic stem cell research effort already paid off?

According to a $50,000 study commissioned by the state stem cell agency, it is "too early to expect to observe significant quantifiable health and economic benefits from CIRM’s funding."

The 31-page report by the Analysis Group of Menlo Park, Ca., which previously performed two controversial economic impact studies for the Prop. 71 campaign, was originally scheduled to be released in January. The document was made available to the public on Oct. 8 after the California Stem Cell Report asked about it in connection with CIRM's plans to spend $300,000 for another economic study.

Analysis affirmed that it is too early to draw definitive economic conclusions about the world's largest human embryonic stem cell research program. The report also contained useful summaries of CIRM's efforts and related stem cell activities in California.

It said, for example,

"Some stem-cell related companies appear to have increased activities in California. For example, Stem Cell Sciences is expanding into California from the UK, and companies like Invitrogen and Novocell (formerly CyThera) have hired new scientists from within and outside the U.S. Other companies, such as Jackson Labs, have committed to major relocations or large-scale expansions in California. As an example, Jackson Labs is in the process of developing and expanding a new California research facility near Sacramento that will ultimately be more than 200,000 sq ft."

The report is largely based on CIRM press releases and other CIRM documents, which presented the justification for another, six-month study at a cost of $300,0000 and continued ongoing work for many years by an economic consultant. The Analysis Group's and the report's two authors, Laurence Baker of Stanford and Bruce Deal(see photo), managing principal of Analysis.

Deal and Baker wrote,

"While it is clearly too early in the course of CIRM’s activities to make a broad assessment of their economic benefits, it is possible to begin to monitor and report on some aspects of CIRM’s activities and their relationships to possible sources of economic benefits."

We queried Don Gibbons, chief communications officer for CIRM, concerning the relationship between the $300,000 proposal and the $50,000 study. He replied,

"It is a very different study from the one proposed in the RFP. Instead of analyzing existing related studies and making projections based on those studies, we are seeking to benchmark certain data points now and determine what data we should be collecting going forward so that we can compare today’s benchmarks to data from serial reviews over time. This requires much more extensive work."

CIRM obviously has an inherent self-interest in demonstrating its value and assuring its existence well beyond its 10-year financing limit. CIRM Chairman Robert Klein has talked on more than one occasion about keeping CIRM alive pretty much indefinitely, but it only has bond funding capabilities for 10 years. Perpetuating CIRM is one of the goals of Klein's $500 million biotech loan proposal, which is aimed at providing an additional $100 million in funding. Klein has additionally spoken of going to the legislature in a few years with a request for additional funding. He would certainly need a hefty study demonstrating CIRM's worth to California to support such an appeal.

Until more time passes and more data are gathered, that tome remains to be produced. Meanwhile, Deal and Baker say,

"CIRM research grants are just beginning to go out, and it would not be reasonable to expect any health benefits or therapies attributable to CIRM at this time. Making predictions about the likelihood of particular future breakthroughs for particular diseases is outside our area of expertise. It is possible that no new treatments of widespread therapeutic use will be developed, which would mean very limited or no economic benefits from improved health."

But on the other hand, Deal and Baker report,

"All told, the information available to date suggests that California is already starting to see new economic activity resulting from CIRM and that there is significant potential for additional future economic benefits."

We are certain that Deal and Baker will find ample evidence over the next few years to document CIRM's value. We hope that CIRM and Deal and Baker will share the raw data and other information with other economists as well.

CIRM Dredging Up Old Economic Controversy

Four years ago, supporters of California stem cell research ballyhooed the economic impact of the Prop. 71, the ballot measure that created the state's $3 billion inquiry into human embryonic stem cells.

A $200,000 study commissioned by the Prop. 71 campaign predicted healthcare savings of as much as $12.6 billion over 30 years and a net state government profit of at least $1 billion. The study was instantly a bone of contention during the campaign and long after and held up as an example of stem cell hype.

"Hopelessly optimistic" was how one reasonably detached writer, David Hamilton, described the campaign analysis in a "biotech bubble" story for Slate.com.

The study was ordered up by then Prop. 71 campaign chief Robert Klein. Now chairman of the California stem cell agency, Klein has commissioned another economic impact report by the same organization, Analysis Group of Palo Alto, Ca. This time the study will cost only $49,900 but it comes at the expense of taxpayers – not campaign donors. It also diverts funds from other activities of the stem cell agency. The question is why?

With few exceptions, no one is likely to deny that California's stem cell research can benefit the state economically. The principal dispute is about the magnitude of the impact. However, this latest study suffers from the same problem as the first. It is not likely to produce a finding that runs contrary to the beliefs of Chairman Klein and other supporters of the stem cell research. That leaves CIRM open to credibility challenges.

The study is also not necessary to convince true believers. And adamant opponents will never believe it. That leaves only a tiny segment of the population as a propaganda target, if one is to believe Klein. He has repeatedly minimized the size of that group, citing overwhelming support for hESC research among the general population.

The study will certainly generate several results – none of which is favorable for CIRM. It will raise questions about unnecessary spending of taxpayer money. It will rekindle a debate about the true economic impact of CIRM, stirring up controversies better left dormant. And it will feed concerns about stem cell hype on the part of the agency and raise questions about its credibility.

Here are samples from the David Hamilton's piece Feb. 6, 2007, in which the former Wall Street Journal reporter wrote that the campaign study appeared "hopelessly optimistic."

"To begin with, they assume that stem-cell treatments will work in the first place. Many of the most hyped biotechnology innovations of the last 25 years have yet to live up to their early promise. And when they do work, they often tend to improve medical care at the margins instead of revolutionizing it."

"What about the potential of stem-cell research to spur economic development—can a state that sponsors stem-cell research hope to attract cool scientists who will then draw others, plus a coterie of entrepreneurs and venture capitalists? Biotech companies do tend to cluster in places like San Francisco and Boston, but their overall impact on regional economies tends to be limited. While they often pay high salaries, the vast majority of these companies are tiny, unprofitable startups with fewer than 100 employees. They frequently collapse well before they earn a dollar in sales. Even successful biotech ventures are often bought out by distant drug companies, which sometimes shut down the acquired company while transferring its research activities and any products elsewhere."

Hamilton also cited a study by Richard Gilbert, a UC Berkeley economist, who estimated California's potential royalty income from CIRM research could be as low as $18 million compared to $1.1 billion suggested by the 2004 study by the Analysis Group.

We could be wrong about all this. Perhaps the Analysis Group will produce a study that is hailed as balanced, objective and useful. CIRM tells us to look for the report, originally scheduled for January, to appear later this month.

Ballyhoo, Economics and California Stem Cells

In an exuberant essay in the leading newspaper in Silicon Valley, an official of the California stem cell agency has touted its $271 million in lab construction grants as bold evidence of "the economic might of the little stem cell."

David Lichtenger (see photo), chairman of the Facilities Working Group at CIRM and head of Integrated Facilities Solutions of Palo Alto, Ca., wrote the op-ed piece that appeared May 16 in the San Jose Mercury News.

He said,

"Stem cells are tiny. In fact they are microscopic. Yet, they might prove to be the mighty engine not only for medical advances, but also for the ailing California economy.

"The economic might of the little stem cell was boldly evident earlier this month when the California Institute for Regenerative Medicine (CIRM), the state's stem-cell agency, awarded $271 million to 12 universities and research institutions to build new stem-cell laboratories."

The economic impact of stem cell research was one of the main arguments behind passage of Prop. 71, which created CIRM in 2004. It continues to play a major role in the justification for CIRM's $3 billion in spending.

We believe the agency has a responsibility to tell the story of its work and to maintain and build public support. Call it marketing, public relations, public education or whatever. Fundamentally, it is all the same thing and quite necessary. Without continued public support, the agency becomes vulnerable to assaults from many sides.

However, long after the last Prop. 71 vote was counted, the grandiose economic claims from the campaign generated blowback, including a study from a UC Berkeley economist Richard Gilbert debunking them. The agency last year also seemed headed for production of another economic study to justify its existence. More recently the proposed $500 million biotech loan program promised handsome returns even at default rates of up to 50 percent.

All of which indicates a need for some perspective. CIRM leveraged its $271 million in lab grants into a $1.1 billion program that will certainly generate hundreds, if not thousands of construction-related job. However, the biotech industry, which goes well beyond stem cells, is a tiny player in the California economy. It accounts for something over 100,000 jobs, according to a state report, a mere piffle compared to the total workforce of 18 million in an economy that runs at around a mammoth $1.7 trillion annually.

And CIRM's $271 million does not even surpass the $356 million being spent on San Quentin's "condemned inmate complex."

That said, CIRM's lab grants have indeed generated a long overdue investment in the science side of California's infrastructure. CIRM deserves ample credit for handily leveraging its dollars. The agency is also preparing to make another substantial contribution this year to the state's intellectual capital with $66 million in training programs.

Lichtenger's essay was reasonably measured and nicely written. However, it is doubtful that stem cells will be the "mighty engine" for the "ailing California economy" any time in the foreseeable future. It behooves CIRM to exercise judicious restraint as it touts its achievements. Managing expectations is the key, and the best course is to avoid over-promising.


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Where's the Money?

Even today headlines talk about the stem cell "gold rush" in California. And it is years after the Prop. 71 campaign financed a study that seemed to promise as much as $1 billion to the state from state-backed stem cell research.

While the headlines may reflect a paucity of imagination on the part of headline writers, the dreams of buckets and buckets of stem cell cash still energize much of the dialogue concerning ESC research.

Jesse Reynolds, writing on the blog Biopolitical Times, recently revisited the subject of stem cell swag. The occasion for commentary was an article in Nature Biotechnology.

Reynolds, who works for the Center for Genetics and Society in Oakland, said what is remarkable about the piece is what's missing. He wrote:

"There’s no reference to the over-the-top -- yet widely-cited -- optimistic scenarios spun in an economic analysis that was widely touted, and funded, by the campaign to establish the (California) state program."

Reynolds noted that Stanford University professor of health research and policy Laurence Baker was a co-author of both the Prop. 71 campaign study and the Nature Biotechnology article, a fact that Reynolds said was not acknowledged in the magazine.

Reynolds said Baker furiously backpedaled from his campaign study. Reynolds quoted the Nature Biotechnology article as saying:

"[A]t this point predicting particular breakthroughs or economic benefits would amount to little more than speculation.... New stem cell therapies will not necessarily reduce [health care] spending; indeed they may drive spending up...Forecasting and even retrospectively assessing the success of Proposition 71's IP provisions will be extremely difficult."

The economic promises of stem cell research are as of much interest today as they were three years ago. Lawmakers are currently struggling to ensure that the state does, in fact, share in any profits. The biotech industry and CIRM are opposed to that legislation (SB771), authored by State Sen. Sheila Kuehl, D-Santa Monica, chair of the Senate Health Committee.

CIRM itself is in the midst of drawing up rules for revenue sharing involving future grants to California businesses. And elsewhere in the country, other states are launching stem cell research efforts, peddling the idea that it can funnel vast economic benefits into the state.

Beware the White Coat Crowd

Health industry gadfly Merrill Goozner is taking a jaundiced view of the stem cell arms race in states across the country.

Citing New York's latest proposal and California among other states, Goozner wrote on The Huffington Post:

"Stem cell research is promising, and it shouldn't be impeded by a bunch of anti-science right-to-lifers with God and the president on their side. But like any strain of research, the likelihood of a major medical breakthrough coming from stem cells is probably not that much greater than gene therapy, the human genome project, the war on cancer or any of the multi-billion-dollar medical research programs that came before it. A lot of knowledge and a few good things will come out of stem cell research, but will it make those with severed spines stand up and walk? Call me irreligious, but I'm skeptical."

He continued:

"Of course, there will be some new jobs created for university researchers, their underpaid foreign graduate students, and the white coat crowd in the biotech industrial parks subsidized by the taxpayers. But is this really the best use of government subsidies, especially at a time when the health care sector -- 16 percent of GDP and still growing -- is sapping the vitality of the rest of the economy? Has anyone given any thought to how much some of these breakthrough stem cell technologies might cost, and how the rest of the economy might pay for them?"

Goozner is directs the Integrity in Science Project at the Washington-based Center for Science in the Public Interest.