Legislation to Give CIRM More Employees Goes to Governor

Legislation to remove the 50 person cap on the size of the staff of the California stem cell agency won final legislative approval yesterday.

The measure, SB 1064 by Sen. Elaine Kontaminas Alquist, D-San Jose, is now on its way to the governor's desk where it is expected to be signed. The bill would go into effect at the beginning of the year.

The limit on the number of employees was written into law by the ballot initiative, Prop. 71, that created the $3 billion research effort. The cap was redundant since the agency has a legal limit on operational expenses. The restriction ultimately hampered the agency's ability to perform its work.

In addition to removing the staffing cap, the compromise bill would require performance audits, albeit limited, of CIRM beginning next year at the agency's expense, according to the latest state Senate analysis of the measure. It also allows the agency to pay the patient advocates who serve on its board up to $15,000 a year. The CIRM board has already acted to do so.

CIRM backed the bill after it was significantly watered down. Gone are many reforms recommended by the Little Hoover Commission, the state's good government agency, along with provisions sought by the state's top fiscal officer, Controller John Chiang.

They include elimination of a performance audit by a special, Prop. 71-created, financial oversight committee chaired by Chiang. Instead CIRM itself would pay ($400,000 plus) for the audit and control its scope. CIRM already has written into the bill a stipulation that the audit does not have to include “a review of scientific performance.”

The staff analysis of the bill that was presented yesterday when it cleared the Senate floor on a 35-0 vote said,

“The author's office states that, while stem cell research is an important and laudable goal, concerns about transparency, accountability and oversight raised by the public, the independent Citizen's Financial Accountability Oversight Committee, the Little Hoover Commission, and the state controller detract from CIRM's ability to provide grants and loans in the most efficient way.

“These concerns divert resources and attention from CIRM's ability to maximize voter's investment in stem cell sciences. In 2009 alone, CIRM spent $1.5 million in external contracts for legal services, lobbying, public relations and communications costs to improve its public image, which is a duplication of existing internal resources. Given that the debt from the bonds is serviced from the (state's) general fund, concern about CIRM's lack of transparency and accountability gains greater significance during these challenging fiscal times. By addressing many of these public concerns, this bill enhances CIRM's ability to make grants and loans, and the removal of such barriers frees up resources that were previously diverted from the grant and loan programs.”

According to the analysis, the CIRM performance audits would cover “programs, functions, operations, management systems, and policies and procedures to assess whether it is achieving economy, efficiency, and effectiveness in the employment of available resources.”

The analysis also said it would be at least 10 years before CIRM is likely to generate revenue for the state through the results of the research it finances. The analysis said,

“Due to the time it takes research to be done and a product to be commercialized, the general fund is unlikely to see significant revenue until about 2020. The amount of revenues is unknown and depends on the number and types of drugs and technologies that are commercialized as well as their commercial success.”

CIRM's Sheehy Says CIRM to Pay Off in Cures and Economic Development

On Sunday, we carried an item dealing with the political environment in California surrounding a possible additional $4 billion bond measure to continue financing the California stem cell agency.

CIRM Director Jeff Sheehy, chairman of the board's Scientific Subcommittee, longtime patient advocate and communications manager at UC San Francisco, sent along the following response. It was received before the federal court ruling on hESC research, which Sheehy could have added as a reason for CIRM support.

“I think, David, you are looking at this as a game of 'zero sum' economics in which you assume every dollar spent on stem cell research is a dollar lost to some other worthy state budget item.

“The reason states issue general obligation bonds is that economists recognize that certain investments (historically in physical infrastructure like roads, bridges, ports, and school and university buildings for instance) create value that returns more than to the cost of the investment back to the state. Not only does building a bridge or road hire and pay companies and workers who then pay state income taxes and sales taxes, but there is a multiplier effect by which their personal spending of their wages, etc., on other items circulates through the economy creating additional spending. Further, the new bridge or road speeds other Californians to work faster and more efficiently saving hours of productive time that would have been spent in traffic, creating additional value. Ambulances or fire trucks get to emergencies faster saving lives or property. Given that some investments produce more money for the state in the long run than the money initially invested, states routinely issue government obligation bonds rather than try to budget this funding out of annual general fund dollars. The revenue from the increased economic activity deriving from the investment more than covers the bond repayments that come out of the general funds.

“The more salient question for CIRM is whether it is actually building a platform for the creation of future wealth or building a 'bridge to nowhere' that does little to increase the productive capacity of California. And the Institute of Medicine report, if it is to have any value, must answer that very question. Are the investments in the dozen new facilities for stem cell research, the training of new scientists and technicians from the undergraduate level through the post-doc level, and stem cell research from the basic, laboratory level on through to the clinic creating a platform by which additional wealth for California will be created far beyond the repayment costs of the bonds?

“And while I need a solid IOM report to definitively answer the question, I do believe that overall (minus a lot of superfluous contracts and overly high salaries and a cavalier attitude towards ensuring value for the taxpayers by many CIRM staffers) the investments in intellectual infrastructure made through Prop. 71 will pay off hugely for California as it leads the world in developing and deploying regenerative medicine.

“If CIRM does nothing else but functionally cure HIV infection as the LA Times article suggests is possible, the savings for the state will be huge in lowered medical costs and in income for the state from profits and the growth of Sangamo, based in Richmond CA. This approach targeting HIV may not work, but I feel strongly that eventually some cure for some disease or condition will come out of this spending.

“I also think companies will form and grow just like Intel, Apple, Google and eBay did from the investments made in research at California universities and institutes. Genentech and Gilead are both biotech giants that emerged from research done at California institutions that are generating substantial dollars in economic activity and creating jobs and tax revenue for the state. iPerian, forming and locating here thanks to CIRM and mentioned by you in an earlier column, might be a wealth generator like those mentioned above or it could be one or more of the many small biotech firms working in regenerative medicine up and down the state.

“So David, while I always greatly appreciate your commentary and your reporting, I think to put CIRM funding in the same barrel as annual general fund financing for schools is off the mark. With a five-year-old in public school in San Francisco, I am as frustrated with Sacramento¹s inability to adequately and consistently provide funding on an ongoing basis to educate our children as anyone could be. But pitting annual school funding against capital investments for our future will not stimulate the types of debate that will lead to answers for the respective, relevant questions.”

California Radio Talk Show on hESC Ruling

Art Torres, co-vice chairman of the California stem cell agency, will be one of the guests on a radio talk show tomorrow at 9 a.m. PDT on station KQED in San Francisco dealing with this week's hESC ruling. You can listen to the program live on the Internet.

The station said,

“National Institutes of Health director Francis Collins said Tuesday that the recent court ruling blocking federally funded research on human embryonic stem cells won't affect grant payments that have already been paid out this year. But the institute will freeze its reviews of new grants of this type. Although California's $3 billion stem cell initiative is not affected, we talk about the ruling and its potential impact on Bay Area biotech. Guests include, Dr. David Stevens, chief executive officer of Christian Medical and Dental Associations; Dr. Helen Blau, professor and director of Baxter Laboratory for Stem Cell Biology at Stanford University; Tom Abate, staff writer covering economics for San Francisco Chronicle; and Art Torres, former chairman of the California Democratic Party and vice chair for the board at California Institute for Regenerative Medicine.”

The Latest from the NIH re the hESC Ruling

UC Davis stem cell research Paul Knoepfler this afternoon reported on the latest from the NIH on the federal court ruling on hESC research.

Writing on his blog, he quoted the text of the statement and then offered a comment.

“Pursuant to a court order issued August 23, 2010, NIH is not accepting submissions of information about human embryonic stem cell lines for NIH review. All review of human embryonic stem cell lines under the NIH Guidelines is suspended. The February 23, 2010, proposal to revise the Guidelines is also suspended.

“My interpretation of this is that basically all the changes to embryonic stem cell policy under the Obama administration and all the federally funded use of ES cell lines approved under the new guidelines during this administration is suspended. No one should bother submitting new lines for approval and those that were under review are not going to be reviewed any more. All of that is frozen.”

Media Coverage: Political and Research Implications of hESC Ruling

Here are some excerpts and links to interesting coverage of yesterday's federal court ruling on stem cell research.

Text of the judge's ruling from the Washington Post.

Wall Street Journal, reporters Laura Meckler, Gautam Naik and Brent Kendall on election year politics and more.

"It also could inject the divisive issue into election-year politics and spark discussion in Congress whether to try to nullify the decision by writing new legislation.... 

"The government is spending about $137 million on human embryonic stem cell research this year and is projected to spend about $126 million next year. It's unclear whether the judge's decision would affect currently funded projects. Stem-cell advocates were calling on the government to appeal the decision and seek to have the preliminary injunction nullified....

"A significant amount of stem-cell research will go forward thanks to private funding and the state of California's ambitious stem-cell initiative, which isn't affected by Judge Lamberth's ruling. The California group (CIRM) spends $250 million annually on stem-cell research, with some 30%-40% of the money directed to embryonic stem-cell research."

Los Angeles Times, reporters Karen Kaplan and Naom Levy, on legal view of ruling.

"UCLA law professor Russell Korobkin, an expert on stem cell legal issues, said the ruling was "a terrible decision."

“By considering all research part of an unbreakable continuum, the decision implies that the Dickey-Wicker Amendment has no limits, which is an unconvincing interpretation, Korobkin said. 'It suggests that by conducting research on an acorn a scientist would also be conducting research on an oak tree, because acorns come from oak trees,' he said.”

New York Times, reporter Gardiner Harris, on feeding stem cells and politics of the decision.

"'I have had to tell everyone in my lab that when they feed their cells tomorrow morning, they better use media that has not been funded by the federal government,' said Dr. George Q. Daley, director of the stem cell transplantation program at Children’s Hospital Boston, referring to food given cells. 'This ruling means an immediate disruption of dozens of labs doing this work since the Obama Administration made its order.'

“In his ruling, Chief Judge Royce C. Lamberth of the U.S. District Court for the District of Columbia wrote that his temporary injunction returns federal policy to the “status quo,” but few officials, scientists or lawyers in the case were sure Monday night what that meant. Dr. Daley was among those who said they believed that it meant that work funded under the new rules had to stop immediately; others said that it meant that the health institutes had to use Bush Administration rules to fund future grants....

“The ruling could prove politically tricky, since it returns to public attention the politically divisive issue of abortion and research politics. President Obama made support for the research a signature part of his campaign, and he over-turned the Bush Administration’s more restrictive policy in the first two months of his administration.

“Polls show that the public generally supports embryonic stem cell research, and Judge Lamberth’s ruling — while a surprising legal setback for one of the administration’s signature scientific policies — could prove politically beneficial for the administration by reminding votes of a popular decision.”

CIRM still open for business -- Ron Leuty, San Francisco Business Times, The Associated Press(AP story appeared in The Sacramento Bee, San Diego Union-Tribune and other papers)

Washington Post story, reporters Rob Stein and Spencer Hsu

"'This is devastating, absolutely devastating,' said Amy Comstock Rick, immediate past president of the Coalition for the Advancement of Medical Research, a group of patient organizations that has been lobbying for more federal funding.

"'We were really looking forward to research finally moving forward with the full backing of the NIH. We were really looking forward to the next chapter when human embryonic stem cells could really be explored for their full potential. This really sets us back,' Rick said. 'Every day we lose is another day lost for patients waiting for cures.'"

CBS News on ruling and “snowflake adoptions”

CIRM Director Prieto Says hESC Research Ruling 'Almost Beyond Belief'

CIRM Director Francisco Prieto, a Sacramento physician, sent in the following comment on our item on today's ruling temporarily halting federal funding of hESC research.

"I think you're opening hits the nail on the head: this decision 'makes clear the importance of alternative funding sources such as the California stem cell agency.' It is almost beyond belief that the court could find that the plaintiffs really met the high standards for a preliminary injunction to call an immediate halt to Federal runding, i.e. that 'there is a substantial likelihood of success on the merits; (2) that the plaintiff would suffer irreparable injury absent an injunction; (3) that an injunction would not substantially injure other interested parties.' I believe none of these are true. Certainly researchers using adult stem cells have had unfettered access to compete for NIH funding since the Bush decision in 2001, and continue to be able to compete for funding. It seems almost obvious that this decision if upheld would injure substantially other interested parties - all the millions of people with chronic disease who hope that this research may lead someday to a cure."

California Stem Cell Agency Deplores Ruling Nixing Fed hESC Research

A federal judge today put a temporary halt to federal funding of research involving human embryonic stem cells in a move that makes clear the importance of alternative funding sources such as the California stem cell agency.

Some had questioned the relevancy of the state's $3 billion research effort after the Obama administration restored cash for hESC grants. Critics said California was no longer needed because the feds were back in the game. But despite the ruling today, the state can proceed with its research because it is not constrained by the federal law cited in the court action.

Today's ruling is not a final decision in the case and is likely to be appealed. But it could mean that NIH funding in this controversial area will be stymied for some time, depending on the legal skills of its attorneys. Meanwhile, California will remain the largest source of hESC funding in the nation, although it has been moving into other areas as well. In fact, some have criticized the agency for not continuing to focus intensely on hESC research, which was the justification for spending $3 billion that was presented to voters in 2004.

In a statement, CIRM said it “deplored” the ruling, declaring that it was “immoral.” CIRM said its research would continue unabated, but noted that today's ruling will have a major negative impact elsewhere.

CIRM President Alan Trounson said,

“The decision is a deplorable brake on all stem cell research. Many discoveries with other cell types, notably the so-called reprogrammed iPS cells, would not happen without ongoing research in human embryonic stem cells. This decision leaves CIRM as the most significant source of funding for human embryonic stem cells in the U.S.”

CIRM Chairman Robert Klein said,

“It would be immoral to unnecessarily delay the critical medical research that is vital for human embryonic stem cell therapies to reach patients suffering from chronic disease and injury. We must remember that the microscopic cells used for this research would otherwise be thrown away by in vitro fertilization clinics, by couples that had finished their family planning.”

CIRM's statement said,

“Under this decision, even research using on the hESC lines approved by President George W. Bush will be halted.

“However, CIRM will continue to fund research on all hESC lines recognized by the Bush administration as well as newer lines approved by the National Institutes of Health during the past eight months. This points to the importance of CIRM’s California model of sustained funding in this field that promises to create thousands of jobs in California as well as improved therapies for patients in Californian and around the world.

“With federal funding uncertain, CIRM will continue providing a stable source of funding for those researchers who have committed their labs to pursuing new therapies based on work with human embryonic stem cells. Through this ongoing funding, CIRM expects to be able to continue to leverage California’s investment through its Collaborative Funding Partners, grant-making agencies in seven countries and Maryland and New York.”

The statement continued,

“CIRM will also continue to fund research with other types of stem cells, particularly progenitor cells that can create many cell types and other pluripotent cells such as induced Pluripotent Stem cells (iPS cells). However, it is important to note that work in all these cells types requires insights gained through work with hESCs to proceed with maximum efficiency. hESC research informs the entire field.”

The $3 Billion Question: Kids, Scientists and CIRM

Two California newspapers today offered quite different views of the world – one bleak and the other filled with hope. They implicitly captured the framework that will determine the fate of the state's $3 billion stem cell research effort.

In the simplest terms, it could boil down to school kids vs. stem cell researchers. Or it could be framed as school kids vs. the health of millions or in some other way that is more favorable to the California stem cell agency. And there could lie the fate of a measure – perhaps as early as 2012 – asking the people of California to pony up another $4 billion or so to pay for hundreds of more stem cell experiments.

But first, CIRM will have to overcome emotions generated by stories like those in The Sacramento Bee today. Reporters Diana Lambert and Melody Gutierrez wrote,

“Last year, public school districts started the year with fewer teachers, bigger classes and reduced resources.

“This year, it's worse.”

Classes with 30 or more students are common, libraries are closing, buses are being eliminated, counselors are vanishing. Music, art and shop are luxuries at some schools. And the kids are going to school fewer days.

In marked contrast came the Los Angeles Times story. Rachel Bernstein wrote about research funded by the California stem cell agency that could offer a “cure” for HIV. The “cure” is many years – if ever – down the road, but the preliminary work has generated a wave of hope for many thousands of persons.

Central to both stories is California's $19 billion budget crisis, which is not going to vanish any time soon. Given the shortage of cash, the question becomes whether the state should use its dwindling resources to finance stem cell research, which will not have a genuine payoff for many years and is also being funded by the federal government. Or should the state educate its children, improve its hard-pressed undergraduate university system, aid the poor and disabled and provide health care that is urgently needed by those who cannot afford it.

These are not questions for the stem cell agency today. It already has voter approval to borrow $3 billion via state bonds at a total cost of $6-$7 billion. But they are questions for the voters in a few years. In the past five years, the agency has already awarded $1.3 billion and is moving rapidly into ever larger rounds of grants. CIRM Chairman Robert Klein is acutely aware that, in political and scientific terms, the need for more cash is just around the corner. He is pushing hard for CIRM grants that will hopefully generate tangible results that will win endorsements and voter approval of another bond measure. Last week, he gained approval for a $600,000 Institute of Medicine study of CIRM that he expects will be key to the success of a bond measure. It is expected to be completed in time for the general election in the fall of 2012, a presidential year.

Currently, the California stem cell agency is all but invisible to state's beleaguered public. Stem cell research is not on their list of concerns, which deal with holding or finding a job, paying the mortgage and such simple matters as getting the kids to class when the school bus is cancelled.

Building support for another bond measure means generating thousands of stories like the one in the Times. The public must perceive CIRM as a positive force that will improve their lives and the lives of their loved ones. A tall task, but winning an election is like winning a war. It requires an intense, sharply focused drive that overruns all who stand in the way.

The California stem cell agency is not likely to emerge victorious if the election is framed as children vs. stem cell researchers.  If CIRM is to prevail, it must build a squeaky clean image – one that generates real hope but is based on meaningful results that are publicly impressive. That politically salubrious perception is not yet cemented in the minds of the California public.

It is unclear whether the Institute of Medicine study will do just that. Unclear as well is whether the study will address the fundamental question of whether the borrowing billions for research is the best way for the state to spend its money. Probably not is our guess. That would mean assessing the state's overall needs and prioritizing them.

At CIRM, however, discussion of the institute's study is couched often in a political context, which raises other issues. During the next two years at the agency, where will the scientific judgment end and the politics begin? It is natural for any organism, including a state agency, to want to perpetuate itself for good and not-so-good reasons. Politics, as well, is always part of the governmental process, which includes CIRM. However, its directors and the staff must tread carefully.

The campaign to win approval of a $4 billion bond measure is already drawing considerable attention within CIRM. The effort will need more soon. A baseline public opinion poll would be standard at this point to measure initial voter perception of CIRM and to identify ways in which the public could be influenced. That and other electioneering moves, however, are not suitable for a state agency.

Klein has said he will step down from the CIRM chairmanship in December. So far, however, he has given no indication that he will let go of California stem cell issues. He could well remain on the board. He has his own, personal stem cell lobbying organization(Americans for Cures), which grew out of the 2004 campaign for Prop. 71 that he directed. CIRM also could create a nonprofit entity that could take up tasks that are not appropriate for a state agency. Perhaps he might find a home in one or both of those organizations.

Whatever path Klein follows, if he chooses to lead the drive for more CIRM funding, he will face a formidable task. Unless something changes dramatically, winning approval of a $4 billion bond measure in two years seems an unlikely event given the current hardscrabble condition of the Golden State.

Correction

The "$243 Million" item on Aug. 19, 2010, incorrectly said that the "application process" for the latest disease team round would begin next year. The RFAs for the planning grants for that round are scheduled for later this year. In order to apply for a full grant later, an applicant must have already received a planning grant.

Massive, $243 Million Disease Round Gets Okay from Stem Cell Agency

Directors of the California stem cell agency today gave the go ahead to a $243 million disease team grant round aimed at generating a “development candidate” for a clinical trial, doubling the size of the original proposal by the CIRM staff.

The huge round would fund up to 30 planning grants and 12 full grants of up to $20 million. It would come on top of the initial disease team round of $250 million last October. The application process for the latest round would begin this November with planning grants, which are required to be eligible for full grants. Full grants are scheduled to be approved in 2012.


The size of today's round was doubled at the suggestion of CIRM Director Jeff Sheehy. He said most of the disease team efforts are risky and expected to fail. He said it was important to get more in the pipeline.

Sheehy first proposed 45 planning grants and 15 full grants. CIRM President Alan Trounson resisted the increase in the number of grants, declaring it would overtax staff and reviewers. After some discussion, Sheehy agreed to 30 planning grants and 12 full grants.

The board also approved a more than $600,000 study of its operations by the prestigous Institute of Medicine that would be expected to completed by the general election of November 2012. Chairman Robert Klein said the study would be key to winning voter approval of more billions in state bonds to fund stem cell research.

Sheehy supported the proposal, declaring it would be taken “very seriously” by editorial boards and other segments of the media as well as the public.

Duane Roth, co-vice chairman of the stem cell board, dissented. He said the study will require considerable work on the part of staff. He also said the board should not have “blind trust” that the findings would be ones desired by the board.

The study will be funded with part of the $3.5 million that CIRM has in private donor funds. The cost could increase beyond the $600,000 range because CIRM directors indicated they wanted some changes in the scope of the study. CIRM is currently involved in an expensive external review of its strategic plan and will be subject to a performance audit($400,000 or so), which it will also pay for, under the terms of legislation expected to be signed into law.

The board also approved paying its patient advocate members up to $15,000 annually. That action came during a session late yesterday, which CIRM had assured us would be solely an executive session.

In other actions, the board approved procedures for selection of a new chair and vice chairman. Klein has said he will step down as chairman in December. However, if the board does not vote on a replacement, he will continue in office.

Francisco Prieto, a Sacramento physician, was named chairman of the directors' Evaluation Subcommittee, and Ted Love, executive vice president of Onyx Pharmaceuticals, Inc., of Richmond, Ca. , was named vice chairman. The panel evaluates the performance of the chairman, vice chairman and president of the agency.

Here is a link to the CIRM press release on the meeting.

CIRM Board Meeting Underway

The board meeting of the California stem cell agency began about 10 a.m. today. Currently speaking is CIRM President Alan Trounson, who is reviewing recent research involving stem cells.

Today's Board Meeting Coverage Cancelled; Tomorrow's Still On

We are cancelling plans to provide coverage of today's CIRM board meeting. Don Gibbons, CIRM's chief communications officer, says the meeting will be in executive session for personnel matters, presumably the formal evaluation of CIRM President Alan Trounson, his first ever.

However, we will have coverage of tomorrow's board meeting, which begins at 9:30 a.m. PDT.

Coverage of Today's Stem Cell Board Meeting

We will be monitoring via the Internet this afternoon's meeting of the board of the California stem cell agency and filing items as warranted. The session is scheduled to begin at 4 p.m. PDT. We will also file items for tomorrow's session as well. It is scheduled to begin at 9:30 a.m. However, the CIRM board meetings usually start late.

On the agenda are instructions for listening to the Internet audiocast. The meeting itself is at Stanford.

(After this item was posted, Don Gibbons, chief communications officer for CIRM, informed us via email that today's meeting will be devoted to a personnel session, presumably the evaluation of CIRM President Alan Trounson. That will be private, and consequently we will have no coverage of the session this afternoon.)

Belated Info on Election of New CIRM Chair, $120 Million Grant Round and Costly CIRM Study

With only one business day remaining before its meeting this week, the California stem cell agency released details of its plan for an expensive study of its activities along with procedures for election of a new chairman.

The late-coming information disclosed that the proposed Institute of Medicine study of CIRM would cost $615,000. Previously, CIRM discussions indicated that the cost would be in $1 million range. The memo called for the study to be completed in August or September 2012, a few months prior to the presidential election. CIRM Chairman Robert Klein has said the study would be key to winning support for a multi-billion dollar bond measure that would be presented to voters at an unspecified date. CIRM relies state bonds -- borrowed money -- to finance its operations and grants.

The agency today also released an important memo on procedures for replacement of Klein, who said he will step down in December when his six-year term expires. Unclear is whether Klein wants to remain on the board as a regular member. The board cannot simply choose one of its members as the new chairman. Under the terms of Prop. 71, it must pick only from candidates nominated by the governor, treasurer, controller and lieutenant governor. In theory, however, it could reject all of them and ask for new candidates, although the memo does not discuss that possibility.

The procedures proposed by James Harrison of Remcho, Johnansen & Purcell of San Leandro, Ca., the board's outside counsel, envisioned nominations coming from those officials prior to the board's December meeting. Harrison said the board could meet behind closed doors to consider the candidates. Presumably that would be classified as a personnel session, since both the chairman and vice chairman are considered employees.

Another important item was posted late, in this case Friday. It is a proposal for a $120 million grant round, the second in the disease team effort.

As we remarked earlier, this information comes far too late for the public to evaluate it and formulate well-thought out comments for tomorrow's meeting.

CIRM Hiring of Former Geron Exec Raises Conflict of Interest Questions

The California stem cell agency has hired a former executive of Geron Corp. to serve as a consultant on a $50 million clinical trial award round in which Geron is expected to be an applicant.

He is Laurence Elias, who worked for Geron from March 2006 until October 2009 as vice president for oncology clinical development.

In April, Nature Medicine identified Geron as one of the likely applicants in CIRM's first ever involvement in financing a clinical trial. On May 24, CIRM hired Elias as a $50,000 consultant at a rate of $300 an hour. His contract runs until Dec. 31.

In response to a query, CIRM defended the hiring and said no conflicts of interest were involved. The agency said,

“Dr. Elias is an independent consultant and an accomplished clinical development professional. He was consulted for his technical and regulatory input to ensure that the clinical elements of the RFA were technically complete and accurate.  The concept for the clinical RFA had already been approved and as such Dr. Elias was not in any position to influence the overall scope or structure, nor will he have any role in evaluating applications.  Dr. Elias’s integrity and professionalism are beyond question.  CIRM staff and Dr. Elias complied with all conflict of interest requirements.”

The RFA for the clinical trial round was originally expected to be posted in April or May. It is now scheduled for Aug. 31. CIRM has not responded to repeated inquiries concerning the reason for the delay.

We asked CIRM for Elias' statement of economic interests, which some of its consultants are required to file. CIRM said one was not required in Elias' case.

Geron, in announcing Elias' hiring in 2006, said,

His responsibilities will include the planning, design and execution of clinical trial strategies and protocols as well as the monitoring of these multi–center clinical trials.”

The other two companies expected to be competing in the clinicial trial round are Advanced Cell Technology and iPierian, which is backed by venture capitalists who funnelled about $6 million into the election campaign to create the California stem cell agency.

Our take: The Elias hiring has all the appearances of a conflict of interest. We would not expect iPierian or Advanced Cell Technology to be pleased by the situation.

Bad Link Fixed

CIRM had a bad link to the transcript of the Feb. 3 meeting of its governing board, which was mentioned in the item, "economic interests statements." The link has now been fixed.

Economic Interest Statements of CIRM Directors Posted Online by California Stem Cell Report

Eight months ago, the only public body charged with overseeing the financial practices of the California stem cell agency unanimously recommended more openness and transparency on the part of the $3 billion enterprise.

Chaired by California's top fiscal officer, Democrat John Chiang, the Citizens Financial Accountability Oversight Committee said that CIRM should post online the statements of economic interests of its directors and top executives, following the practice of both Republican Gov. Arnold Schwarzenegger and Chiang himself.

Chiang said,

“To ensure that taxpayer dollars are spent lawfully, wisely and successfully, the stem cell program must pursue the highest standards of transparency to be fully accountable to the public.”

CIRM has all but ignored the recommendation. Instead, it has moved to prevent the committee from exercising more financial oversight of the state's unprecedented research operation.

In response to the controller's recommendation, the California Stem Cell Report is publishing online the statements of economic interest of the 29 directors of the stem cell agency along with those of some of the agency's top executives.

When Schwarzenegger announced his efforts at improving openness, he said,

“Transparency is fundamental to promoting efficiency and effectiveness in government and strengthening the democratic process by giving citizens enough information to reach their own conclusions about how their tax dollars are being spent.”

Understanding and assessing the performance of the California stem cell agency is even more critical than with most other state enterprises. CIRM holds a unique and unprecedented place in state government. Created by a $30 million ballot initiative campaign, it is isolated from the normal financial oversight functions of the governor and legislature. Its stream of income – all borrowed money(state bonds) – cannot be touched, despite California's grave financial crisis.

At the same time, CIRM is riddled with built-in conflicts of interest. Its 29-member board is
heavily influenced by directors tied to institutions that are the beneficiaries of its largess. More than $900 million of the $1 billion-plus that directors have handed out has gone to enterprises with members on the board.

None of this is going to change any time in the near future. Which makes it all the more important for the public to understand who has what at stake when it comes to giving away billions of dollars.

You can find the statements of economic interest here. Here is a link to a state document that helps to explain the nature of the information. You can find the statements of economic interest for Chiang's stem cell oversight committee on his Web site. Here is a link to the transcript of the committee's meeting last January during which questions were raised about accountability and openness at CIRM. Here is a link to the transcript of a subsequent CIRM board meeting during which CIRM President Alan Trounson described  (on p. 132) the discussion at Chiang committee meeting as a “strange critique” and “irrational attack.”  Here is a link to a piece by Los Angeles Times columnist Michael Hiltzik, who attended the meeting and wrote that the agency "has self-righteously fought every attempt to improve public oversight over its disbursement of what is, after all, the people's money."

(The statements of economic interest involving CIRM directors were provided via email by the agency at the request of the California Stem Cell Report, which the agency is required to do by law. They are also available via conventional mail from the Fair Political Practices Commission in Sacramento and in person at both agencies.)

Dismal Lead-Up to CIRM Board Meeting Next Week

If CIRM wants to keep the public in the dark about what its directors are up to next week, it is doing excellent so far.

With only two business days before the directors meeting, little noteworthy has been provided via the board's agenda to inform the public about how its money is being spent. Of nine significant matters coming before the directors, only two have some explanation. One of those is appointment of new members to the grant review group, an action that is routine. The other makes changes in contract policies.

On the agenda is a plan to pay one-third of its directors up to $15,000 annually. However, an ordinary reader would never know that. All the agenda says is “consideration of amendments to ICOC bylaws.” Of course, the public would have to also know there is a meeting next week. No notice of that has been posted on CIRM's home page.

A plan to spend $1 million for an external study of CIRM operations merits only eight words: “consideration of proposal commissioning IOM report on CIRM.” We wrote 853 words on the subject on Wednesday, and it is worth more. Good arguments exist for performing the study, but the public is not going to hear them from CIRM in time to comment intelligently.

All of which makes CIRM look as if it is trying to hide something. It goes without saying that this is a sad and dismal situation for an organization that is spending $6 billion (including interest) that comes from California taxpayers.

$1 Million Evaluation of Stem Cell Agency Comes Up Next Week

Directors of the California stem cell agency appear ready to commission a $1 million “gold standard” study of its operations with the hope that it will pave the way for voter approval of billions more for stem cell research, perhaps as early as November 2012.

The proposal is scheduled to be voted on at the CIRM board meeting next Wednesday and Thursday meeting at Stanford. However, few details of the latest version of the plan are currently available on the CIRM Web site.

Nonetheless, some information can be gleaned from the transcripts of the directors' Science Subcommittee meetings in May and July, when the proposed study was discussed.

Here is what we have been able to extract. The study would be performed by the prestigous Institute of Medicine(IOM). The cost would be in the $1 million range. CIRM Chairman Robert Klein is proposing that about half of the amount would come from private donors. In July, Klein referred to a 15-month timetable, which might be quite speedy for the Institute of Medicine, which moves slowly, according to the transcripts. If work begins in January, the study could be completed in time for the presidential election in the fall of 2012. Politically speaking, that is the likely to be the best time to seek approval of another multibillion dollar bond measure, given the larger voter turnout in presidential elections. Klein, however, did not mention a specific election timetable.

During the two subcommittee meetings, no CIRM director raised the possibility that the study would identify serious flaws in the agency's $3 billion operation. Klein predicted that the study “would be a solid milestone.”

Jeff Sheehy, chairman of the Science Subcommittee and a communications manager at UC San Francisco, said the IOM would provide a “gold standard objective evaluation.”

Sheehy continued,

“I certainly don't want to go off the board in two years without this report being finished. I don't think I could go to any member of the public, any editorial board, any member of the legislature, the governor, any elected official without some sort of external review of what's gone on with a billion dollars of the taxpayers money, especially in the middle of this horrible recession.”

Sheehy noted that the IOM is less than a household word. In May, he provided this description,

“The Institute of Medicine is an independent nonprofit organization that works outside government to provide unbiased and authoritative advice to decision makers and the public. established in 1870, theIOM is the health arm of the National Academy of Sciences, which was chartered under President Abraham Lincoln. The IOM asks and answers the nation's most pressing questions about health and healthcare. And the aim is to help those in government and the private sector make informed health decisions by providing evidence upon which they can rely.”

During the Science Subcommittee meetings, CIRM directors often referred to the IOM's vaunted independence, which they implicitly did not think would be affected by a $1 million contract. There also was no discussion of limitations that CIRM might impose on the scope of the study before signing a contract. In the case of a current $300,000 contract to assess the economic impact of the agency, CIRM specified that its economic consultants must “execute a vibrant and aggressive strategy” supporting CIRM, a requirement that fundamentally damages the credibility of whatever the their report says.

At subcommittee meeting in July, CIRM Director Philip Pizzo, dean of the Stanford School of Medicine and a member of the Institute of Medicine, said,

“Of any organization that I'm familiar with on a national level, there isn't any other that carries the weight of independence and critical review (of) the IOM and the National Academy of Sciences.”

Klein, who ran the 2004 Prop. 71 campaign that created the organization he now chairs, repeatedly framed the study in the context of a ballot campaign. He said he wanted it “finished in time that the public can analyze it before we go back and put forth the question about whether we're entitled to more bonds.”

Klein did not publicly identify potential donors to help pay for the study. A question could be raised about whether he or others intend to solicit funds from persons who have financial ties to enterprises that would stand to benefit from CIRM funding.

Directors acknowledged that the $1 million price tag appears steep. However, it is a tiny amount when compared to the $6 billion cost (including interest) of the stem cell research effort.

Klein's support for an IOM study seems to be in some contrast to his previous complaints about the amount of scrutiny (audits and otherwise) that CIRM has received from various sources. This spring, the agency also successfully stripped out of pending legislation a requirement that the state controller, who chairs a Prop. 71-created panel to oversee CIRM finances, commission an independent performance audit. Instead, the now CIRM-backed legislation (SB1064) places that audit squarely in the hands of the stem cell agency.

At the July meeting, Klein mentioned a proposal from the IOM. We have asked CIRM for a copy of that document.

Leadership and Small Things

Author and Harvard business professor Rosabeth Moss Kanter weighed in this week on “big traps in small lapses.”

The case in point was the recent resignation of HP CEO Mark Hurd, a man who made more than $66,000 a day, because he fudged a $20,000 expense report.

Kanter asked,

“How can very smart, accomplished people do such stupid things?”

Kanter, whose 18 books have won her recognition as one of the 50 most influential business thinkers in the world, noted that Hurd has a fair amount of company.

“Hurd is not the first, and probably won't be the last, top leader to fall from grace over seemingly trivial and avoidable lapses of judgment.”

Citing several cases ranging from the US military to politics, she said the underlying causes include embarrassment (fear of disclosure), lack of attention and arrogrance.

Her bottom line:

“As is often said, the devil is in the details — and so is the angel. Signs of character are most visible when they are least visible — that is, demonstrated by what people do when they think no one is watching, such as following the rules or taking the moral high ground with no audience observing them. That's why the signals of a leader's judgment lies in the small things.”

Her comments apply to leadership in any organization.