CIRM Eyeing Major Reliance on Industry Cash

The president of the California stem cell agency, Alan Trounson, says it is considering funding its future with money from the biotech industry.

The possibility of a state government agency relying on industry dollars raises significant and new conflict of interest questions concerning the $3 billion effort. CIRM's governing board is already filled with representatives from institutions that have received the bulk of its funding.

Trounson made his comment June 4 in an interview with Bloomberg News. He also told the financial news service that it “wants to get 10 to 12 new therapies into human testing within four years.”

Both the comment about industry funding and human clinical trials appear to be the first public remarks along those lines by CIRM officials. However, we presume that Trounson may have misspoken on the human clinical trials, although Bloomberg has not run a correction as of today (June 8). The Bloomberg article is being circulated nationwide via email by a variety of persons interested in stem cell research.

The stem cell agency, now the largest funding source in the world for human embryonic stem cell research, is unusual financially in California. CIRM relies on state bond funds for its operations and grants. That source of cash is not subject to cuts by the governor or the legislature, only the ability of the state to sell bonds.

CIRM was sold to voters in 2004 as a 10-year program. However, no sunset provision is in place for the agency. It does have a 10-year limit on its bond funding. We have been told that clock started running with the first issuance of its state bonds in 2007.

Here is how Rob Waters of Bloomberg wrote about Trounson's comments on biotech funding for CIRM,

“In the long run, the agency may try to use industry funding to continue operating once its $3 billion in state bond revenue is exhausted by the end of the next decade, he said.”

As far as we know, no California state department relies on donations from private industry for its funding. But CIRM has the unusual capability of creating a nonprofit agency, rare among state departments. A nonprofit could serve as a vehicle for channeling industry funds to CIRM.

CIRM has been edging closer to industry over the last year with the staff's proposed revision of its strategic plan calling for much tighter ties.

Trounson's comments about future reliance on industry funds casts a new and different light on all of the agency's current actions. Is a decision on a grant being made because it will enhance or harm future funding from industry? Will CIRM's standards for its research grants be altered because of the need to be friendly to an important biotech company or a top researcher tied to a biotech firm? Will CIRM create, as is proposed, a special “biotech advisory group” to help evaluate CIRM interaction with industry?

The advisory group is recommended in the revisions to the CIRM strategic plan and has already generated controversy, along with CIRM's direction away from basic research and towards efforts favored by industry.

(You can find CIRM's plans on industry linkages in the draft of the strategic plan, beginning on page 28.)

CIRM already has several representatives from industry on its 29-member governing board. One wonders what would be gained by creation of this new panel, except that it presumably could meet privately and discuss matters that might be deemed inappropriate for airing at board meetings, which are required by law to be public.

The question of the long-term outlook for CIRM came up last month a meeting of the Little Hoover Commission, the state good government agency which has drafted major recommendations for changes in CIRM's structure. The draft proposals suggested CIRM explicitly lay out its plans for sustainability or shutdown. Representatives from CIRM at that meeting did not respond to the comment.

The question of future funding is already on the agenda of the CIRM directors' Finance Subcommittee this Thursday. It would certainly seem that Trounson's comments are suitable for some discussion in that context. The public can take part in the meeting at a number of teleconference locations throughout the state. Their specific addresses can be found on the agenda.

As for Trounson's remarks on human clinical trials, we assume that Trounson was referring to the $210 million disease team grant round, the second largest in CIRM's history. The RFA calls for up to 12 grants with the objective that grantees file an investigational new drug application within four years of the start of the award. Those applications are one step along the way to human clinical trials.

We have asked Don Gibbons, CIRM's chief communications officer, if CIRM has any comment on Trounson's remarks to Bloomberg. We will carry any remarks if Gibbons responds.

Patient Advocate Slams CIRM Reforms as Ludicrous

Patient advocate Don Reed recently presented his views on the Little Hoover Commission's preliminary recommendations for improvements in the operations of the California stem cell agency.

The piece on his blog, stemcellbattles.com, used terms like “worst fears,” “disaster,” “ludicrous” and “politicizing.” Reed said the the agency is highly successful. “Why gut it?” he asked.

Reed has followed the agency since the campaign to create it in 2004. He is vice president for public policy of Americans for Cures, which is the private stem cell lobbying group of the chairman of stem cell agency, Robert Klein. He is only one of two staff members currently listed on the group's Web site.

We do not agree with Reed's analysis of what the Little Hoover Commission is considering, and we think that some of his information is off target. For example, Reed asserts that five audits have determined that CIRM is “open and honest.” In fact, all but of one of those audits had a quite limited scope involving compliance with accepted accounting practices. And as many persons know, compliance with accounting standards does not signify a healthy or open enterprise. One recent case in point is General Motors.

The only audit to go beyond such limited scope was a “performance audit” by the state's auditor, but it also did not examine CIRM's openness or honesty.

Like Reed, we support CIRM's endeavors. But we believe that it is hampered by unnecessarily restrictive provisions in Prop. 71, which are now codified in state law and the state Constitution and virtually impossible to change. Many of those provisions are management minutia that should have been left to the CIRM board to decide. Those include the dual CEO structure, super-majority quorum requirements and a poorly thought-out cap on the number of CIRM employees. That is not to mention the conflicts of interest on the board that were built into the initiative in order to win political campaign support from all the key institutions and businesses.

Reed is attempting to drum up a letter-writing campaign from patient advocates and “true believers” in stem cell research to persuade the Little Hoover Commission to pull back on its recommendations.

While we respect Reed's beliefs, the Little Hoover Commission should pay no more attention to “true believer” letters than the NIH should to the thousands of letters it has received from the religious right opposing its proposed rules on human embryonic stem cell research – at least as far as both rely on faith-based reasoning.

The California stem cell agency is giving away $3 billion in taxpayer funds at a cost of another $3 to $4 billion in interest. Evaluation and support of the effort must be based on hard facts and conditioned on how well it actually meets its public responsibilities and its much-touted adherence to the highest standards of openness and transparency.

CIRM's Finances and Budget to be Examined Next Week

The financial condition of the $3 billion California stem cell agency will come under scrutiny next week at a meeting of Finance Subcommittee of its board of directors, along with CIRM's $500 million biotech loan program.

Leading the agenda is the proposed budget for the upcoming fiscal year, which begins July 1. Also scheduled to be discussed are funding sources and financing stretching into the first half of 2010-2011.

Following a severe financial scare earlier this year, CIRM is currently in safe financial shape for the next 18 months, despite the state's huge $24 billion deficit. That's because CIRM relies on bond financing and received a $500 million booster this spring as a result of a state bond sale. CIRM also cannot be cut by the state legislature or governor because it is constitutionally outside their control as a result of the ballot initiative that created it.

That is not to say CIRM is out of the longer-term woods. Its funding will only last for another 18 months, absent another bond sale.

The agency has approved $761 million in grants, which extend over several years. Its operations budget is tiny in comparison -- only $13.4 million for the current fiscal year.

The largest component of the budget -- $7 million -- goes for the salaries and benefits for CIRM's 40 staffers. The next largest component -- $2.7 million -- is for outside contracts, necessary because of the small staff and special needs of the agency.

Last year, the budget was missing significant details concerning outside contracting and travel, triggering complaints by the Consumer Watchdog group of Santa Monica, Ca.

When some of the details were produced -- days after CIRM directors routinely approved the budget -- John M. Simpson, stem cell project director for Consumer Watchdog, reported that they showed that CIRM Chairman Robert Klein would be out of the state on CIRM business 88 days, CIRM President Alan Trounson 68 days and Chief Science Officer Marie Csete 75 days. The budgeted dollars -- $558,000 -- were up 287 percent from the previous year.

The latest budget documents from CIRM show that it has spent only $104,000 of the $558,000 as of the end of March. In fact, as of that date, CIRM had spent only $6.7 million of the $13.4 million budgeted for operations this year. CIRM officials tout this as indicative of management frugality, which is to be lauded. But the magnitude of the difference raises questions about CIRM's budget justifications last year. It also raises a question about whether CIRM should fill out its staff to the 50 person limit. The small band appears to be overworked, based both on expressions from some board members and top management as well.

Last June, Michael Goldberg, chair of the Finance Subcommittee and general partner of the venture capital firm of Mohr, Davidow Ventures of Menlo Park, Ca., told his fellow directors to expect a more thorough-going budget document than was presented at that time.

The biotech loan program will come up in connection with a review of the response to an RFP for underwriters for the effort. CIRM staff does not have the expertise to run the effort so outside help is needed. The agency hopes to have more than one underwriter because of the conflicts involved in what is a very small financial community.

June 8 is the deadline for proposals with possible award on June 15, only four days after the Finance Subcommittee meeting.

The RFP did not specify an amount that CIRM would expect to pay for handling the $500 million loan program, but it certainly could be lucrative for the successful applicants.

The public can hear and participate in the meeting at a number of teleconference locations including San Francisco, San Diego, Los Angeles, Palo Alto, Pleasanton and Menlo Park. Specific addresses can be found on the agenda, which does not yet contain any links to background material to be presented at the meeting.

CIRM Board Meetings, Attendance and Discounts

The California stem cell agency has negotiated a discount hotel rate for persons who want to attend the June meeting in San Diego of its board of directors.

It is a step -- a first one for CIRM -- in the right direction to help out interested parties who must travel to attend the board meetings. It is also a move that highlights the attendance -- or lack of it -- at meetings of a $3 billion state government enterprise that is now the largest source in the world of funding for human embryonic stem cell research.

But first, the discount rates, whch are not inexpensive: A room for one night will cost $179 for one person compared to the $234 offered Monday afternoon on the Web site of the Sheraton San Diego Hotel & Marina (see photo).

The break may help to encourage attendance, particularly if somebody is looking to put together a holiday in San Diego.

However, attendance by the public, researchers, businesses or other interested parties has been sparse at CIRM board meeetings, to put it mildly. Many times the CIRM staff in attendance outnumbers other attendees, who often total only 10 to 20 persons. A few researchers or company representatives turn up regularly, knowing that $3 billion is not something to sniff at.

But most potential recipients -- be they businesses or academics -- are notably absent, a fact that has surprised us. CIRM board meetings (and those of their working groups and subcommittees) present an exceptional opportunity to talk directly to board members and staff, along with hearing their thinking during formal presentations. We understand that this openness is much different than at the NIH.

Meetings of the CIRM board are not a minor expense. Last time we checked, the cost of sessions of the 29-member board ran about $20,000 each, but that could have changed. Presumably the amount includees travel, cabs, meals, etc., for the board and staff members. The normal California state per diem rate for reimbursement for lodging in San Diego is $110. We assume that CIRM has negotiated that rate at the Sheraton for board members and employees. However, the board also has other, special needs, including meeting rooms, audio equipment, staff support and meals.

This month's meeting is scheduled for the 17th and 18th. The June 17 session is expected to begin late in the afternoon at the hotel and probably extend to about 9 p.m. or 10 p.m. At some point, the board will break for a closed-door dinner. The main business of the session is likely to be consideration of grant applications, but anything could and has come up in the past.

The session the next day is likely to be at San Diego State University, which is about eight miles from the hotel.

Melissa King, executive director of the CIRM board, said indivudals who want to take advantage of the Sheraton discount rate should call 877-734-2726 to make their reservations. She said interested parties must reference the ICOC meeting. (ICOC is the abreviation for the official name of the CIRM board.)

A Research Perspective From a CIRM Scholar

The following article was sent to the California Stem Cell Report by Brigitte Angenieux, 32, a postdoctoral fellow at the David Geffen School of Medicine at UCLA. She studies stem cells and brain tumors and is sponsored by a training grant from the California stem cell agency.

Angenieux's work involves the characterization of the biology of brain tumors to develop better and more efficient treatments. Her project consists of elucidating the genes that are important for the formation, the progression and the mechanism of drug-resistance of brain tumors. She also is interested in determining the relationship between neural stem cells and cancer cells.

She received her Ph.D. from the University of Lausanne, performing research involving retinal stem cells. She came to the United States in 2001. In addition to her research at UCLA, she enrolled in a journalism certificate program through UCLA Extension.

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HOPE AND DISILLUSION

By Brigitte Angenieux

LOS ANGELES -- Nick Orozco, 26, a young researcher, works at the University of California, Los Angeles (UCLA), one of the top 20 international universities. Orozco looks at his cell culture dish with a big smile. His experiment worked after three weeks, a small victory, but he has to redo the experiment three more times. This will take another month or so. His daily routine is a battle between hope and disillusion. Nevertheless he faces this reality with steely resolve because that’s the journey a stem cell researcher endures.

“There is a lot of hope in stem cell research, but I don’t think we understand everything. It takes a lot of time, more than what people are often willing to accept,” said Orozco.

Stem cell research makes headlines almost everyday. Doctors go on TV to explain the great potential of this new treatment. President Obama lifted the ban on federally sponsored stem cell research imposed by President Bush because of personal beliefs and ethical issues in the use of embryonic stem cells for research.

Hollywood stars haven’t shied away from the subject either. Michael J. Fox is a big advocate of stem cell research and its use to treat Parkinson’s disease, which he suffers. Recently, some news agencies have reported that the actress Farrah Fawcett, of the TV show "Charlie’s Angels," traveled to Germany to undergo a treatment to fight the spread of intestinal cancer. On April 6, the Fox News website mentioned Fawcett’s stem cell therapy even though it has been denied by the Fawcett's representatives.

Despite regular reports of breakthrough findings, this cutting edge treatment is still complex and obscure. Where are the cures researchers promised the public? Cancer is still not eradicated from the earth. Alzheimer’s patients are still struggling.

Science is not a straight-forward path, experts say. It requires time and multiple trials. There is no set time for each phase of drug development, but industry representatives commonly say it takes about two to eight years to carry an idea from the laboratory to FDA approval for a marketable drug.

“I think it’s a learning process, a trial and error effort,” said Orozco, who did his undergraduate degree at UCLA in the neurosciences and just applied to a medical school program starting in July. “This needs to be worked out before clinical trials.”

A recent case demonstrated that stem cell research should be applied with caution. An Israeli child suffering from a brain degenerative disease went to Russia for stem cell transplantation therapy. Now, several years after the transplantation, the child has developed cancer.

Dr. Meeyro Choe, 32, a pediatric fellow, took the opposite path of Orozco. She worked in a laboratory for two years between college and medical school. After medical school she took a fellowship and decided to give research another try because she “missed basic research.” She’s working at UCLA in a laboratory doing research on stem cells and cancer. As a doctor she is confronted with a dilemma: treating and answering her patient’s needs for a cure but not at the expense of their safety.

Clinical trials take an average of ten years, according to scientists. They involve three different phases, each testing a specific hypothesis. In phase I, researchers test an experimental drug or treatment for the first time to evaluate the toxicity. In phase II, the drug or treatment is given to a larger group (100 to 300 persons) to evaluate the efficiency. In phase III, the drug or treatment is given to a larger group (1,000 to 3,000 persons) to confirm its effectiveness. Then the drug or the treatment is available to the general public.

“Currently, nine out of 10 experimental drugs fail in clinical trial studies because researchers using lab and animal studies cannot predict how they will behave in people,” said Steve Peckman, associate director of The Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA.

Although the research is time-consuming and complex, it remains intrinsic to the future of medicine as well as the aspirations of such physician-researchers as Meeyro Choe.

“With medicine you can treat hundreds of patients, maybe, but with research you can help many more,” said Choe.

Structural Changes in CIRM? Preliminary Thoughts from California's Good Government Agency

SACRAMENTO – Significant structural changes affecting the leadership of the California stem cell agency would be made under preliminary recommendations of a staff report of the Little Hoover Commission, the state's governmental efficiency organization.

The size of the CIRM board would be reduced from 29 to 15, the dual CEO situation would be eliminated, salaries for the chairman and vice chairman would be halted and the super-majority quorums for board action would vanish.

The proposals, which are not yet official recommendations of the Little Hoover Commission, were unveiled Wednesday at a meeting of the group's CIRM subcommittee. The final report with modifications is likely to come up for approval in June.

Public comment on the plan, however, was severely hampered by the commission's refusal to make the document available to either CIRM or interested parties in keeping with the commission's longstanding practice of not publicly disclosing draft documents. Instead the public and CIRM heard a relatively quick oral overview.

Ironically, one of the charges of the Little Hoover Commission is to examine the transparency of CIRM. However, the commission's practice stands in sharp contrast to CIRM's policy of publicly disclosing its draft documents.

At one point, Stuart Drown, executive director of the commission, said that CIRM has worked hard at transparency, declaring,

"They put all kinds of stuff on the Web."

Other potential recommendations offered Wednesday include removal of the cap of 50 on the size of CIRM staff but retaining the 6 percent overhead limitation along with creation of procedures for possible removal of CIRM board members. Currently none exist under Prop. 71, the ballot initiative that created the $3 billion research effort.

The Little Hoover subcommittee also cited the need for a succession plan for CIRM leadership, including the chairman. It recommended a clear, revised, long-term plan for the organization that would lay out its plans for sustainability or shutdown. CIRM is widely regarded as a 10-year program, but there is no sunset provision on its work, which officially began in 2004.

CIRM Chairman Robert Klein has projected its existence for several years beyond 2014 and has mentioned the possibility of seeking additional bond funding, CIRM's only current source of significant cash. CIRM has the capability of creating a nonprofit organization, an unusual attribute among state agencies. Such an organization could possibly serve as a funding arm in the future.

Drown said a perception remains that the CIRM board is an "insiders' club." In addition to shrinking the size of the board, the initial recommendations suggested appointment of outside, independent individuals, possibly from the scientific community or the public, or both.

The subcommittee clearly shied away from any changes that would require another ballot measure, a procedure mandated by Prop. 71 for certain, major alterations in CIRM. The panel also appeared to be reluctant to recommend modification of the 70 percent, legislative vote requirement for other changes involving CIRM.

That super, super-majority vote standard does not apply to any other function in state government and was created by voter approval of Prop. 71.

Any changes recommended by the Little Hoover Commission would have to clear that 70 percent hurdle or be voluntarily adopted by CIRM -- if that is legally possible. CIRM could not, for example, reduce the size of the board on its own.

John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., praised the commission's staff for its recommendations and generally expressed support.

Two representatives from CIRM attended the meeting, Don Gibbons, chief of communications, and James Harrison, outside counsel to CIRM. They spoke briefly during the meeting but engaged the commission staff outside on the sidewalk in nearly 100-degree heat following the meeting. Klein sent a letter to the commission, the text of which follows in an item below.

During the session, we expressed our concerns to the subcommittee about its secrecy involving draft reports. We also sent a letter to the Little Hoover Commission concerning the practice. The text of that letter follows the Klein letter.

Individuals interested in making comments about CIRM can send them to the Little Hoover Commission at at littlehoover@lhc.ca.gov.

Klein Letter to Little Hoover Commission

Here is the text of the letter sent by CIRM Chairman Robert Klein this week to the Little Hoover Commission.

May 26, 2009
Daniel W. Hancock Chairman, Little Hoover Commission
925 L Street, Suite 805
Sacramento, CA 95814

Dear Chairman Hancock:

We understand that the Little Hoover Commission Subcommittee on the California Institute for Regenerative Medicine (“CIRM”) will be meeting tomorrow to consider draft recommendations from its staff. Unfortunately, my wife is undergoing treatment for breast cancer, having just completed her third surgery, and my mother passed away this weekend, so I will not be able to attend the meeting, and CIRM’s President, Dr. Alan Trounson, is traveling out of state so he will not be able to share our views with you. After the Commission’s first hearing, Dr. Alan Trounson and I embraced Commissioner Kaye’s sentiments that a collaborative effort, with the Commission and CIRM working together, would be the most productive. I want to assure you that despite the unfortunate timing of tomorrow’s meeting, we remain highly committed to working collaboratively with you on recommendations to improve CIRM’s performance. CIRM has a long history of working with others to find common ground. For example, CIRM has previously acted on suggestions from members of the Legislature, the Bureau of State Audits, the Controller, and members of the public to enhance its efficiency and transparency.

In an effort to promote a dialogue, I have requested, through CIRM staff and through your staff at a CIRM meeting in Los Angeles, the opportunity to meet with members of the Commission to discuss your ideas for improving CIRM’s performance. I believe a discussion of ideas with your board will lead to the best outcome rather than CIRM “staking out” a position. To date, however, no meetings have been scheduled. I also understand that your staff will not share its draft recommendations with CIRM. This, of course, raises a question about how CIRM can participate in this process without seeing the staff’s recommendations.

On behalf of Dr. Trounson and myself, I apologize that we cannot join you tomorrow for the Subcommittee meeting. Again, we strongly believe that a collaborative effort to evaluate proposals will best advance the goal, as expressed by Commissioner Kaye, of identifying recommendations that could be implemented through legislation rather than another ballot measure, and we look forward to working with you to achieve common objectives. I am also committed to taking any recommendations for enhancing CIRM’s effectiveness to CIRM’s full Governing Board for a full discussion. The Board’s diversity spans the spectrum from deans of medical schools to presidents of independent research institutions to patient advocates who are themselves suffering from a chronic disease and to patient advocates who have worked with the federal government to advance this critical research. Finally, the board includes experts who have experience in actually developing and delivering therapies to patients. The rich diversity of the Board can contribute greatly to the development of collaborative recommendations that will benefit CIRM and the citizens of California. I am confident that, by working together, we can ensure that CIRM serves as a model for innovation and effectiveness.

Sincerely, Robert N. Klein Chairman, CIRM’s governing board

Letter from CSCR to Little Hoover Commission

Here is the text of a letter sent by the California Stem Report today to the Little Hoover Commission concerning its refusal to release its staff recommendation reports.

May 28, 2009

To the members of the Little Hoover Commission:

In 2004 California voters overwhelmingly approved (by 83 percent) a change in the state Constitution called the Sunshine Initiative. It established a “broadly construed” guarantee that you and I have a right to know what the government is doing, why it is doing it and how.

Today the Little Hoover Commission, a body devoted to good government, has a chance to pioneer an important aspect of the implementation of the voter's will.

It can do that by publicly releasing the Commission's staff draft reports on the important issues that the Commission examines and which all of California faces.

The issue of staff reports came sharply into focus just yesterday (Wednesday May 27) at a meeting of the Little Hoover Subcommittee looking into the $3 billion California stem cell agency, an extraordinary body unprecedented in state history.

Interested parties, including the stem cell agency, gathered to examine the staff report on the research effort and to make responsible, well-considered comments. Some of the individuals asked for copies of the report in order to inform their thinking. No was the answer. California citizens were told that it is the long-standing tradition of the Little Hoover Commission not to disclose publicly the written staff recommendations. Instead stem cell agency representatives and others were only allowed to hear a rapid-fire oral presentation, necessarily much briefer than what we understand was a 20-plus page document.

However, that practice – a policy of the Little Hoover Commission – flies in the face of the state's Constitution, which now states, as the result of the 2004 change:

“The people have the right of access to information concerning the conduct of the people's business, and, therefore, the meetings of public bodies and the writings of public officials and agencies shall be open to public scrutiny.”

We understand the sensitivities involved in making staff reports public. They are not the work of the Little Hoover Commission until modified and acted on by the full commission. But those concerns pale in the face of the benefits.

Publicly releasing the draft reports will be much fairer for such entities as the California stem cell agency (the California Institute for Regenerative Medicine) and any others that the Little Hoover Commission examines. With the release of the reports, they will have a chance to respond more intelligently to staff comments, critical or otherwise. Factual errors will come to attention earlier. The public will have a better chance to make more thoughtful comments. Indeed, public release of the staff reports will help to generate more public attention on the important issues studied by the Little Hoover Commission and will enhance its credibility and increase its impact. The issues will be more widely aired, building support for the Commission's ultimate recommendations.

California state departments have long used the terminology of “draft” to avoid public release of important documents. Speaking from years of experience with state government and the news business, my conclusion is that the use of such terminology is based mainly on timidity and unnecessary anxiety about the impact of the release of the documents. Doing the public's business will never be a tidy process, nor is winning public support. But withholding information -- and secrecy -- is a sure road to breeding cynicism and virulent suspicion of government, however well-intentioned public officials' actions may be.

I come to these judgments after decades as a California journalist, a longtime editor at The Sacramento Bee (business, special projects) and former UPI reporter in the state Capitol. My comments are also informed by two years as a press aide with former Gov. Jerry Brown. I do not represent the stem cell agency. Indeed, my blog on the agency –- now in its fourth year – has been expunged by the agency from its informational clippings, including other news reports and press releases, distributed at state expense to its board members.

I wish I could be with you today to make this presentation personally but my physician needs to see me on a matter she thinks is important. I have asked Stuart Drown to distribute this letter to you today in hopes of moving forward on implementation of the Sunshine Initiative.

I urge the Commission to release publicly its staff recommendations in a timely fashion. By doing so, the Little Hoover Commission can set an example for the rest of the state and take a first step towards restoring public confidence in government.

Thank you for your consideration.

Sincerely,

David Jensen, Publisher/Editor
California Stem Cell Report
californistemcellreport.blogspot.com
djensen@californiastemcellreport.com

CIRM as a Lobbyist: Mission Creep, Industry Ties and Board Conflicts

The California stem cell agency is once again going to consider its position and lobbying efforts on behalf of industry-supported federal legislation dealing with development of generic biotech therapies.

The topic is expected to be placed on the June agenda of the CIRM board because of a question about whether the board's endorsement of the bill on May 12 complied with the state's open government laws.

On the surface, the matter involves what some might consider a relatively minor legal point. But the endorsement also goes to both CIRM's mission -- whether it should be involved in heavy-duty federal lobbying -- and the agency's ties to the biotech industry and possible financial links involving directors.

John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., raised the issue of legality of the board endorsement with CIRM's outside counsel, James Harrison of Remcho, Johansen and Purcell of San Leandro, Ca. Simpson has shared his exchange of emails with Harrison with the California Stem Cell Report.

Simpson wrote Harrison on May 14, arguing that the motion to support the federal bill was "improperly passed" and is therefore void.

Simpson said,

"No notice was given that there would be consideration of supporting a particular bill. In fact the consensus at the previous (board) meeting was to develop principles.

"Based on the earlier meeting and the posted agenda, I decided not to attend one of the public sessions in person where I would have been able to comment. Instead I opted to listen to the meting over the Web. It is quite possible some (board) members not in attendance made the same decision."

Harrison responded on May 19,

"As you know, (the) Bagley-Keene (act) requires that a board's agenda include a 'brief general description of an item' to be transacted at the meeting. (Gov. Code,§ 11125.) Furthermore, Government Code section 11130.3 provides that an action is not void for failure to provide notice so long as the agenda was in 'substantial compliance' with Section 11125. The board's agenda for its May 12, 2009, meeting clearly satisfied the requirements of Bagley-Keene. Indeed, it specifically cited HR 1548, the federal legislation that was the subject of the motion. The agenda requirements of Bagley-Keene were not intended to prevent debate from evolving or to hamstring a board from taking action. In this case, the board's agenda was more than sufficient to put the public on notice that the board would consider federal biosimilar legislation. We therefore disagree with your assessment regarding the propriety of the agenda.

"Nevertheless, in order to provide a further opportunity for board member and public comment and to address any new developments, Chairman (Robert) Klein has directed staff to include an item relating to consideration of federal biosimilar legislation (HR 1427 and HR 1548) on the board's June agenda. The board will therefore be free to consider public comment and additional motions relating to this item."

Simpson said he disagreed with Harrison's analysis but appreciated that the matter would be brought up again.

The move to endorse HR 1548 by Rep. Anna Eshoo, D-Palo Alto, dates back to last month. (You can read more here, here and here.)

Supporters of CIRM's endorsement of her bill have argued that it is necessary to protect the biotech industry, which has perennial financial problems, so that it will develop drugs. Opponents have worried about mission creep at the tiny agency, which has a staff of about 39 persons. They have also suggested that CIRM is fooling itself if it thinks it can be a major player in Washington.

One anonymous reader also raised concerns about possible conflicts of interests among board members. In a comment filed on our May 12 item, the reader said "the whole thing stinks." The reader wrote,

"The industry members of the board include at least one self-described former employee of biotech leader, Genentech. Are there stock options? What about former Chiron founder and ex-vice-chair, (Ed) Penhoet, does he have stock options? What about the new CIRM counsel, formerly at Genentech, does she have
options?

"What about the two UCSF members, the UCSF (medical school) dean and Jeff Sheehy, who now answer to a former Genentech executive, UCSF's new
chancellor?...

"The whole thing stinks. Using a position on a state board to direct state funds to lobby for a bill to advance one's own private interests over those of patients ought to be against the law. This smells like Cheney and Halliburton!"

We do not have answers to the reader's questions, but we should note that Sheehy has expressed major reservations about endorsing the bill. Nonetheless, the reader's concerns highlight the conflict-riddled nature of the stem cell agency and the virulent suspicions that the situation can generate. The reader's comments also speak to CIRM's transparency and accountability, which will come under scrutiny this afternoon in Sacramento.

That's when a subcommittee of the state's Little Hoover Commission, the state's good government agency, will consider possible recommendations for changes in the operation of the $3 billion state stem cell research effort.

The Silence of the Scientists

Consumer Watchdog, the Santa Monica, Ca., group that has spent more time and money than any other organization monitoring California stem cell matters, today chastized a trio of major researchers for their failure to speak out on an issue that some contend is holding back not only the science but the industry.

Writing on his organization's blog, John M. Simpson, stem cell project director for the group, discussed the dispute that involves Irv Weissman of Stanford, Fred Gage of the Salk Institute and David Anderson of Caltech and indirectly their institutions.

StemCells Inc. of Palo Alto, Ca., which was founded by the three researchers, is "thwarting noncommercial neural stem cell research" at Children's Hospital of Orange County as part of the company's zealous protection of its patents, Simpson said.

The springboard for Simpson's latest commentary was an article about the matter by Michael Hiltzik in the Los Angeles Times. It pointed out that some experts believe that over-protection of IP is hampering stem cell science and even the high tech industry.

Simpson's piece was headlined "A deafening -- and embarassing -- $ilence" and substituted a "$" for the "S" in silence.

Simpson wrote,

"This is a situation that should have been settled easily in a month, if not a week. After a two-year stalemate the silence is deafening."

The three researchers have not responded to requests for comments from Hiltzik nor from earlier ones from the California Stem Cell Report. We are renewing our queries and have promised the men that we will carry their comments verbatim.

You can read our earlier item on the Hiltzik piece here.

More Bad Link Fixes on the Stem Cell Patent Flap

A couple of other bad links in the patent ruckus item on May 25 have been fixed. Here are the good links to the original piece about the issue and our follow-up item on it.

Fixing Link to LA Times Stem Cell Patent Column

We had a bad link to the Los Angeles Times piece on the patent ruckus in Orange County. Here is the correct link.

Stem Cell Patent Flap Gains Wide Media Exposure

Three of the top names in California stem cell research – not to mention the world – surfaced during the weekend in a piece in the Los Angeles Times about a matter that is at the heart of the field – money.

Michael Hiltzik, a columnist at California's largest newspaper, brought up the scientists in connection with a patent imbroglio in Orange County that reaches into Stanford, the Salk Institute and Caltech via the researchers, who are Irv Weismann, Fred Gage and David Anderson, respectively of the three institutions.

Generally, such disputes put the general public to sleep. But Hiltzik wrote today,

"...(T)he penetration of private investment concerns into what used to be largely academic pastures threatens to hobble, rather than hasten, the march of science. The harvest may be secrecy, delay and the directing of research only toward developments that promise quick financial returns."

The matter pits researcher Philip Schwartz of the Children's Hospital of Orange County against StemCells, Inc., of Palo Alto, Ca., which was founded by Weissman, Gage and Anderson. Schwartz has spent six years providing academic researchers with neural stem cells cultured by a method he helped to invent at Salk, Hiltzik wrote.

But StemCells Inc. has effectively put a halt to Schwartz' distribution. That occurred after the firm wrote a letter to Children's Hospital warning that Schwartz' efforts infringed on its patents in the neural stem cell field and that it wanted to discuss a licensing arrangement.

This all started two years ago, but nothing has been resolved, although little apparent conflict exists between the “core clienteles” of StemCells Inc. and Children's Hospital. Hiltzik said,

"...(I)n the biotech world, where millions or even billions of dollars in profits beckon to those who can assert ownership of important discoveries, good intentions and purely scientific goals don't matter like they used to. Access by basic researchers to the essential building blocks of biomedical advances has been shrinking for years, thanks to a land rush by entrepreneurs wielding patent portfolios."

Hiltzik reported that the conflict between research and business has gone beyond biotech. He noted that Andy Grove, the fabled former CEO of Intel, this month warned of the evil effects of over zealous protection of IP.

The problem has become more serious, however, in stem cell science, according to Gregory Graff, a patent expert at Colorado State University.

According to Hiltzik,

"Graff says this phenomenon is becoming especially pronounced in stem cell science, which is especially dependent on collaboration but is already being cordoned off by commercial entities claiming property rights to essential research. The best solution, he says, may be for academic institutions -- where 45 percent of all stem cell research is performed -- to create collaborative patent pools so they can more freely disseminate information and technology without giving up all their potentially lucrative patent rights."

The issues raised by the Children's Hospital-StemCells, Inc., flap were first publicly reported April 15 by John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca. We carried a follow-up on April 16, noting that Harvard business professor and biotech industry consultant Gary Pisano warned in 2006 about the harmful impact of the "monetization of IP" on the biotech business. Our item triggered a robust exchange of comments that are attached at the end of the piece.

We asked Weissman, Gage and Anderson for comment a couple of times over the last several weeks. They did not respond to our queries. Nor they did respond to Hiltzik.

Little Hoover Hearing on CIRM on Wednesday

Possible recommendations for changes in the operations of the $3 billion California state stem cell agency will be discussed on Wednesday in Sacramento at a meeting of the CIRM subcommittee of the state's Little Hoover Commission.

The nonpartisan commission is California's longstanding good government and efficiency body and has been examining CIRM since last November, including the agency's accountability and transparency. The Little Hoover report is expected to be out this summer.

The session this Wednesday afternoon will provide a preview of its thinking and allow the public to make comments. To read more about its proceedings, click on the label below that says "hoover."

Consumer Watchdog Seeks Alteration of NIH Plan

Citing the “perverse effect” of proposed NIH stem cell research rules, the Consumer Watchdog group today called for changes in the guidelines along the lines recommended by the California stem cell agency and the Interstate Alliance on Stem Cell Research.

John M. Simpson, stem cell project director of the Santa Monica, Ca., group, said that the NIH plan would bar funding of research that had received financial support from the Bush Administration.

In a press release from his organization, Simpson said,

"Most of us were heartened when President Obama lifted Bush Administration restrictions on funding stem cell research, but the perverse effect of these proposed NIH rules is that the limited research scientists were able to conduct under Bush will now be ineligible for federal funding,

"Certainly this is not what President Obama intended and the regulations must be modified."

Simpson also noted that comments can be sent to the NIH online at the following Web site: http://nihoerextra.nih.gov/stem_cells/add.htm

Oceanside Firm Disappointed by NIH hESC Proposal

A California stem cell company has filed a strong critique of the NIH's proposed rules for human embryonic stem cell research.

International Stem Cell Corp. of Oceanside Tuesday said it was “surprised and disappointed” by the draft guidelines.

The company said the government is proposing to fund research that involves the destruction of human embryos while barring funding for research that uses cells from unfertilized eggs (parthenogenetic stem cells). International Stem Cell uses unfertilized eggs.

The firm said in a news release that use of such cells has been approved by CIRM and three independent embryonic stem cell research oversight committees in the United States.

International Stem Cell also said the proposed NIH rules will limit opportunities for U.S. researchers, potentially lead to lost jobs and researcher flight to other countries and create a de-facto monopoly for two organizations that control most of the patents for current embryonic stem cells.

Latest CIRM Comments on NIH hESC Rules

Here is a link to the most recent version of CIRM's comments on the proposed NIH rules on human embryonic stem cell research. Comments to the NIH must be filed by May 26.

CIRM Seeks Changes in NIH hESC Plans

The CIRM board of directors today approved recommendations for changes in proposed NIH rules for research involving human embryonic stem cells.

The action came on a 20-0 vote in a session during which directors were told that 7,000 responses to the rules had been received by the NIH. CIRM Chairman Robert Klein said the responses were running 7 to 1 against.

CIRM supports the NIH plans with some changes. The opposition appears to oppose them outright for religious reasons.

Board members were encouraged to individually call on their constituencies to file comments on behalf of hESC research with the NIH. Philip Pizzo, dean of the Stanford School of Medicine, said he had already done so in his weekly newsletter and emailed a copy of his comments to board staff for wider distribution.

Klein said the agency could not legally ask all its grant recipients in a “mass mailing” to support hESC research, but he said individual board members were free to do whatever they wished.

Geoff Lomax, senior officer for the CIRM Standards Working Group, developed the recommendations following a public hearing and contacts with researchers. He said the suggestions were aimed at avoiding the loss of material that is needed scientifically and already in use.

The document presented to the board will be refined by attorneys and staff before it is sent to the NIH by May 26.

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.

More Info on CIRM Board Webcast

You will need the following conference ID number to log into the Internet audiocast for this morning's meeting of the board of the California stem cell agency: 100945.
The url is http://65.197.1.15/att/confcast