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

California Supplier? A Minor Question Involving Stem Cell Millions

California lawmakers are barreling ahead with an effort to tell the state's stem cell agency how to define "California supplier," a move aimed at assisting the Golden State's biotech industry.

The legislation would ensure that California firms that make research tools and life science supplies receive a preference over out-of-state businesses in connection with CIRM-funded research. The potential benefit could run to tens of millions of dollars, if not hundreds of millions.

The measure – AB 2381 -- by Gene Mullin, D-San Mateo, unanimously cleared the Assembly last week (May 1) on a 70-0 vote and is now in the Senate, where its prospects appear good.

At the same time, CIRM directors are scheduled to consider their own action on California suppliers during their meeting Tuesday and Wednesday. However, the agency has not yet posted proposed definitions of the term on its web site.

The topic came before CIRM directors (the Oversight Committee or ICOC) last March. Two lawmakers made an unusual appearance before CIRM directors, urging them to move quickly on the matter.

Attorney John Valencia of Wilke, Fleury, Hoffelt, Gould & Birney of Sacramento, representing the stem cell firm Invitrogen, also reminded directors that the issue has been lingering for more than year. In January of this year, Valencia wrote a letter to the agency that led to the matter being placed before directors.

The issue centers on language in Prop. 71 that says:

"The ICOC (CIRM's board of directors) shall establish standards to ensure that grantees purchase goods and services from California suppliers to the extent reasonably possible, in a good faith effort to achieve a goal of more than 50 percent of such purchases from California suppliers."

However, the term California suppliers is not defined.

Mullin's bill, which is backed by at least one biotech industry group, would define supplier in this manner:

"any sole proprietorship, partnership, joint venture, corporation, or other business entity, the owners or policymaking officers of which are domiciled in California and whose permanent, principal office or place of business from which the supplier's trade is directed or managed is located in California."

CIRM directors appeared to make it clear at their March meeting that they wanted to move forward separately on defining California supplier. But Mullin's bill holds their feet to the fire.

If his bill passes and is signed by the governor, it would be the first legislation enacted that would affect CIRM, which enjoys special protection from legislative or gubernatorial tinkering. Prop. 71 requires a unique and unprecedented super, super-majority vote of both houses (70 percent) to enact an law dealing with the stem cell agency.

Presumably CIRM would go some extremes to prevent passage of the bill and avoid a precedent that would make it easier to pass more sweeping legislation involving the agency.

Has CIRM Funded Stem Cell Research that Bush Would Have Banned?

When California voters approved creation of an unprecedented, $3 billion stem cell research program more than six years ago, they were told the money would go to finance research that then-President George Bush had banned.

Has that actually happened? Yes, but mainly no, according to a research paper published in Nature Biotechnology in December 2010.

In the first-ever such analysis of CIRM grants, Aaron Levine, assistant professor in the School of Public Policy at Georgia Tech, reported that through 2009 only 18 percent of California's dollars went for grants that were "clearly" not eligible for federal funding.

Levine's finding has implications for another, multibillion-dollar bond ballot measure that CIRM Chairman Robert Klein has proposed. The campaign for such a measure would have to address the question of whether the promises of the 2004 ballot initiative that created CIRM have been fulfilled.

CIRM does not offer on its web site figures that can be compared to Levine's calculations. The agency does present some statistics about the amount of funding for embryonic stem cell research, but makes no effort to break out the percentage of grants that would not have received funding during the Bush years.

Levine's numbers on California were part of a broader look at state funding of stem cell research in recent years. He reported that by the end of 2009, six states had awarded nearly 750 grants totalling $1.25 billion. California accounted for $1 billion of the total. Per capita funding amounted to about $1 in Illinois and nearly $28 in California.

In all of the states, percentages were low for research that was clearly ineligible for federal cash under the Bush standards. Levine wrote,

"Most state hESC funding appears to have supported research also eligible for federal funding during the Bush Administration. This finding is surprising, given the explicit intent of several state programs to preferentially support science not eligible for federal funding, but likely reflects the nature of the grant proposals state agencies received, particularly given the number of grants states awarded to scientists relatively new to the field of hESC research.

Levine continued,

"Several factors could explain the relatively small share of grants that went toward clearly ineligible research. Some scientists who wished to pursue this research may have been unable to access the raw materials or acquire the intellectual property rights required to do so. Alternatively, these findings could simply reflect scientific interest. The discovery of induced pluripotent stem cells may, for instance, have reduced scientific interest in the derivation of new hESC lines. Finally, these findings may reflect a preference on the part of scientists to use well-established and well-studied hESC lines. This last explanation may be particularly relevant for new scientists entering the field of hESC research, as using recognized cell lines may give their initial research efforts greater credibility."

In California, another factor enters into funding for Bush-banned research, particularly given the 2004 campaign promises. CIRM makes overt decisions about what to fund. Its RFAs spell out what is acceptable and non-acceptable. The agency could have specified that it would not fund any research that would be eligible for federal funding. But whether that would have been "good science" is another question. CIRM also spent nearly $271 million on new labs at many of its directors' research institutions, diluting the percentage that would be construed as financing Bush-banned research.

We are querying CIRM concerning Levine's statistics.

Levine also reported that the state stem cell research efforts appear to have drawn new scientists into the field, with the largest impact occuring in California. He wrote that 42 percent of those funded in this state appeared to be fresh to the field.

In addition to the Nature Biotechnology piece, Levine has created an online database of state grants that he plans to update regularly. In an email to the California Stem Cell Report, he said,

"While CIRM already makes this information readily accessible, some of the other state programs do not and I hope this database will facilitate comparisons among the various programs and prove to be a useful tool for people interested in state stem cell programs. "

The Perils of Prop. 71: CIRM's Search for a Vote

Crafty. Ingenious. Resourceful. And dubious.

All of which describe the events Tuesday night at the meeting of the directors of the California stem cell agency.

As John M. Simpson of Consumer Watchdog of Santa Monica, Ca., put it, the board "essentially drafted a member from the audience" in order to achieve a quorum and to be able to act officially.

Simpson, a regular and longtime observer of CIRM, wrote on his organization's blog,

"Assembling a quorum for the 29-member ICOC is never easy. It's comprised largely of high-powered academic and industry representatives. Moreover, Prop. 71 requires a super-majority. A quorum is 19 members."

Tuesday night, board officials had expected the necessary number but for a variety of reasons, the panel was short.

Simpson continued,

"Then as the board broke for dinner, Jacob E. Levin, Director of Research Development at UC Irvine, who was in the audience, asked Board Executive Director Melissa King what was necessary to serve as an alternate member.

"His boss, board member Dr. Susan Bryant, was one of those who was unable to attend. Under the ICOC's rules, board members from universities and research institutions may appoint alternates if they can't make it. The designate must be an executive of the university or institution.

"The lawyers determined Levin met the requirements, staff caught up with Dr. Bryant by phone, who agreed Levin could be her designate and after dinner the board got down to business. Chairman Bob Klein noted that Levin had been present for all the agenda items that had been discussed."

In years of covering hundreds, perhaps thousands, of California governmental hearings, I have never seen anything quite like this. State lawmakers have occasionally been locked in their legislative chambers until their leadership gets a desired vote. Some lawmakers have been dragooned from their homes to come in for a vote. But nothing quite like the CIRM maneuver on Tuesday.

It is one more example of the pitfalls of Prop. 71 and the perils of writing laws by initiative. The board of directors of CIRM is too large to run efficiently and the quorum requirements too high. Other problems exist as well, including a dual executive situation and built-in conflicts of interest. All of which are virtually impossible to change. That's because Prop. 71 altered the California State Constitution to require a 70 percent vote of the Legislature and the signature of the governor to amend the measure. The super, super-majority vote requirement is unprecedented and unique. It makes CIRM nearly immune from tinkering by lawmakers. But it also prevents changes that would enhance CIRM's mission and fix problems that arise when laws are put together in private by special interests.

Will CIRM Withhold Economic Data?

The California stem cell agency today left open the possibility that the basic data gathered during a proposed $300,000 economic impact study will be withheld from the public and outside researchers.

The question of whether CIRM considers the information a public record arose in connection with the proposed contract with LECG of Emeryville, Ca., which comes before the CIRM directors' Governance Subcommittee during a teleconference meeting Tuesday.

Earlier today, we pointed out that none of the CIRM documents currently available on the proposed study provide assurances that the basic information, which will be gathered at taxpayer expense, will be considered open to the public and made available in a non-proprietary format.

We asked CIRM in an email,

“Will the data gathered under the economic impact study proposal to be considered tomorrow be public record? Will it be available in a non-proprietary format?”

Here is the verbatim response from Don Gibbons, CIRM's chief communications officer.

“We don’t quite have a final contract yet.”

CIRM's best interests would be well served in being very explicit that the data are public. The agency holds an unprecedented position in state history and is engaged in activities that reach deep into the scientific community, academia and the biotech industry. To draw a curtain over information that would allow truly independent study of CIRM's impact would be a disservice to California taxpayers and to those who would study CIRM in the future.

Just as scientists test the results of research by attempting to replicate published results, it is only appropriate to apply the same standard in the case of the CIRM economic study. That means that the basic data must be available to all researchers or interested parties, not just those consultants hired by CIRM.

More than $9 Million Approved for California Stem Cell Training Programs

Directors of the California stem cell agency today approved $9 million to continue its state and community college training program after supporters  hailed it as “truly transformative” and a valuable addition to the research field.

The agency extended the "Bridges" effort for one year, which has cost the state $51 million already. The college program has trained 782 young people.

The agency also approved $550,000 for a one-year extension of its high school internship program, which has involved 200 persons over the years.

The actions came despite increasing financial sensitivity on the part of directors of the $3 billion research enterprise as the program nears its 10^th anniversary. It faces increasing expenses because of its desire to become more heavily involved in the costly clinical trials that are needed to actual put stem cell treatments into the clinic. Its cash is dwindling at the same time.

Susan Fisher, director of the human embryonic stem cell program at UC San Francisco, told the board in a letter that the state college training program  “offers unprecedented value in terms of the dollars that are spent.”

She said,

“It is very hard for me to put into words the transformative experience that the Bridges Program provides to trainees. They enter UCSF very uncertain of their place in a major research enterprise. To a person, they leave with boundless enthusiasm for a career dedicated to advancing the goals of the CIRM research agenda. Moreover, this life-changing experience is being offered to students who have traditionally not had these sorts of opportunities, making the program even more valuable.”

CIRM's Conflicts: Beware the WARF Syndrome

The California State Auditor has freshened the debate over public disclosure of the economic interests of the men and women who review the applications of scientists and others seeking hundreds of millions of dollars in grants from the state of California.

The auditor's report Tuesday recommended that the California stem cell agency seek an attorney general's opinion on whether its policy is appropriate. CIRM does not require the grant reviewers to disclose publicly their economic and other interests. But it does require them to disclose confidentially to CIRM.

The position of the California Stem Cell Report is that the reviewers make de facto decisions on the grants and that they should disclose their economic interests. Others advocate disclosure as well, including The Sacramento Bee and the San Jose Mercury News.

We are presenting here the text of what the auditor had to say and CIRM's response along with a related paragraph from the Court of Appeal Monday. CIRM has not yet decided whether to seek an AG's opinion. We should note that Jerry Brown, the attorney general, decades ago sponsored the Political Reform Act mentioned in the discussion below, an initiative he touted as a much-needed good government measure.

We have written much on this subject, but would like to add a few additional comments at this point. CIRM is in danger of falling prey to the WARF Syndrome. We refer to the Wisconsin Alumni Research Foundation, which last year told California that it had to cough up royalties for its state-financed stem cell research. The position triggered a flap that only ended with WARF declaring that it would not require the royalties after all. WARF, a nonprofit organization with a longstanding record of supporting science, finally did what was right, rather than focusing narrowly on self-interest and protecting its patents. In this case of reviewer disclosure, CIRM is narrowly focused as well. Various interests obviously have to be balanced. But CIRM has tilted too far in protecting its reviewers from public scrutiny, justifying its position on the untested, hoary premise that the secrecy is the only way to generate "good science." This is a case where CIRM should let the sun shine in. Billions are literally at stake along with public trust in the agency. Public disclosure is the right position. It not only reflects the public's best interests and the best interests of good government, but it helps to protect CIRM itself from the possibility of a truly nasty scandal.
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Here is what the auditor had to say:

Although the institute developed a Conflict of-Interest code and policies, improvements are needed to ensure that they are followed

With certain exceptions, committee members and institute employees are subject to the requirements of the Political Reform Act of 1974 (Political Reform Act). The purpose of the Political Reform Act, in part, is to ensure that public officials perform their duties impartially, free from bias resulting from their own financial interests or the financial interests of those supporting them. In response, the committee adopted a conflictof-interest code—a set of rules intended to identify and prevent conflicts of interest that institute employees and committee members might have with entities with financial interests in the stem cell research program, as required by the Political Reform Act and state regulations pertaining to the Fair Political Practices Commission (FPPC).

To supplement the code, the committee also adopted policies designed to ensure that committee members and institute employees avoid conflicts of interest, and that the public views its conduct as open, fair, and free from bias. In addition, the committee adopted conflict-of-interest policies for the working groups that advise and assist it in establishing policies and standards, as well as evaluating grant applications. However, the FPPC has raised questions about the applicability of the Political Reform Act to the institute’s working group members, and improvements were needed in the committee’s conflictof-interest policies, as well as its procedures, to ensure that the policies are followed.

The FPPC Has Questioned the Exclusion of the Working Groups From the Institute’s Conflict-of-Interest Code

The institute formulated and the committee adopted a conflict-of-interest code. With certain exceptions, the institute’s act requires that the committee and the institute comply with the Political Reform Act, which includes the requirement to prepare a conflict-of-interest code. The Political Reform Act also specifies the required contents of such a code. The key requirements are presented in the text box.(See item at the end of this statement.) To provide information on employees designated as decision makers that may affect financial interests and the types of financial interests those designated employees must disclose, government agencies that do not wish to draft their own conflict-of-interest codes may adopt a model code provided by state regulations. This model code may be modified to designate the employees who must disclose financial interests and the extent to which they make disclosures. The committee adopted a modified model code.

The Political Reform Act requires that the institute submit its conflict-of-interest code to the FPPC for review and approval. The FPPC must review the code to determine if it provides reasonable assurance that all foreseeable conflicts of interest will be disclosed or prevented, all affected persons have clear and specific statements of their duties under the code, and the code differentiates between designated employees with different powers and responsibilities. The institute submitted its code to the FPPC in July 2005, and after an exchange of correspondence between the FPPC and the institute, the FPPC approved the institute’s code in May 2006. Subsequent to FPPC approval, the institute submitted the conflict-of-interest code to the Office of Administrative Law for its review and inclusion in state regulations. The Office of Administrative Law approved the institute’s code in September 2006.

However, the FPPC has raised questions about the exclusion of the working groups from the institute’s conflict-of-interest code. The FPPC believes that members of working groups, who perform duties such as advising the committee on standards and policy or evaluating grant applications and making award recommendations to the committee, may need to be included in the conflict-of-interest code. Specifically, the FPPC believes that, under state regulations, working group members may act as decision makers if they make substantive recommendations that are, over an extended period, regularly approved without significant amendment or modification by the committee. Thus, as decision makers, working group members would need to be subject to the conflict-of-interest code. This would mean that working groups would be subject not only to the financial disclosure requirements of the Political Reform Act but also to the prohibition against a member participating in a government decision in which that member has a disqualifying financial interest and may be subject to the penalties that may be imposed on individuals who violate that act.

In response to the FPPC, the institute stated that members of the working groups are not subject to the pertinent requirements because the language in the institute’s act expressly exempts those members from the Political Reform Act, even when the recommendations of a working group are approved over an extended period. Therefore, according to the institute, it is not necessary to engage in ongoing analysis to determine whether, over time, the committee routinely approves the working groups’ recommendations. The FPPC responded that the language of the act “is no basis for exempting working group members from the [Political Reform Act’s] most fundamental disclosure rules if it becomes apparent that the working group’s role in governmental decisions is more than purely advisory.” It concluded that this issue may need to be revisited in the future.

The institute requires working group members to make financial disclosures (as discussed later). However, there are some differences between the Political Reform Act and the institute’s requirements for working group members that would apply if the FFPC’s view were correct. One key difference is that, under the Political Reform Act, the financial disclosures must be made public; the institute’s requirements keep the disclosures private. Also, an individual who is subject to the Political Reform Act may be subject to certain penalties if the individual violates the requirements of that act. As of December 2006, it was too early to assess whether the working groups will make recommendations on grant funding or other substantive recommendations that the committee will accept without significant amendment or modification that might result in a challenge to the institute’s interpretation.

The committee chair commented that the Superior Court of the County of Alameda, when it ruled in May 2006 on the legal challenge to the constitutionality of the institute’s act, considered the question of whether the grants review working group was a decision-making body. The court, based on the evidence presented at trial, including testimony of committee members and the experiences at the one grant award meeting that had been held, concluded that the committee is the “ultimate decision-making body” and not the working group. However, this ruling is not binding as the case is pending appeal.

Our legal counsel advised that, although a court will give deference to the institute’s interpretation of the act, ultimately only a court of law can make the determination of which interpretation is correct. Our legal counsel also noted that other provisions governing conflicts of interest that the act specifically references, and that the institute believes the act also exempts working groups from, may be implicated if the FFPC’s interpretation is correct. For example, California Government Code, Section 1090, prohibits a public official from being financially interested in any contract made in his or her official capacity. Various judicial decisions have held that Section 1090 also applies to those who advise the members of the governing body. The attorney general has opined that an adviser who has a financial interest in a contract or grant must abstain from giving any advice on that matter to avoid a conflict of interest. A violation of Section 1090 may result in a felony conviction and void a contract.

In view of the seriousness of a violation of conflict-of-interest laws and the concerns raised by the FPPC, we believe that it would benefit the institute to seek a formal opinion from the attorney general regarding whether the exemptions created for working groups from conflict-of-interest laws are intended to exempt them from the conflict-of-interest provisions that apply if the recommendations of an advisory body are adopted routinely and regularly by the decision-making body to whom they are made.

Conflict-of-Interest Code as Specified by the Political Reform Act

• Agency positions, known as designated employees, that participate in making decisions that might materially affect their financial interests.

• The types of investments, business positions,real property interests, or sources of income that might be materially affected by decisions made by designated employees. These are considered reportable financial interests.

• Requirements that designated employees periodically file Statements of Economic Interest disclosing their reportable financial interests.

• Specific circumstances that would require designated employees to disqualify themselves from making decisions or influencing the making of decisions. Disqualification is required when a designated employee has a financial interest that could be affected materially by the decision.

The Institute Has Established Processes to Disclose Financial Interests

Committee members and institute employees are requiredto disclose their financial interests, such as investments and incomes, that meet thresholds identified by the Political Reform Act. These financial interests are reported on Statements of Economic Interest, which are public documents. The Political Reform Act sets timelines for public officials to file these forms. Committee members are required to file within 30 days of assuming office, annually thereafter, and within 30 days of leaving office. All committee members and their alternates filed their Statements of Economic Interest from 2004 to 2006. We found 10 occurrences of late filings by members and alternates during 2004 and 2005. The number of late filings decreased to four in 2006.

Institute employees were not required to file their initial Statements of Economic Interest until 30 days after the conflict-of-interest code became effective. However, to promote transparency, the institute asked its employees to file their statements before the required date. After the conflict-of-interest code became effective, institute employees filed their statements again, within the required time frame.

Although the institute maintains that working group members are not subject to the Political Reform Act, the institute’s act requires the committee to adopt conflict-of-interest rules for noncommittee members of the working groups, such as scientists and other experts. These rules must be based on standards applicable to members of scientific review committees of the NIH. NIH standards require reviewers to alert officials to any possible conflict of interest and, before and after every meeting, identify any application on which they have a conflict of interest and certify that they will not be, and have not been, involved in the review of any application in which their participation constituted a conflict of interest.

In response to the act’s requirements, the committee has adopted conflict-of-interest policies modeled after the NIH for its two working groups that review grants. The standards used for the rules of the third working group are described in the next section. In addition, although not required by NIH standards, the noncommittee members of the three working groups are required to file confidential financial disclosure statements signed under penalty of perjury. The institute considers these conflict-of interest policies to be so significant to the public interest that it has submitted them to the Office of Administrative Law to have them included in the institute’s regulations.

During the public comment portion of this rulemaking process, members of the public expressed concern that the act does not preclude the institute from publicly disclosing the working group members’ confidential financial disclosure statements and urged the committee to require public disclosure. The committee disagreed with the suggestion. According to the institute’s president, making the financial disclosure statements public would deter scientists from joining the working groups because grant reviewers feel that a public disclosure is an invasion of their privacy. Further, the institute’s president stated that grant reviewers consider the confidential disclosure statements to be sufficient because they sign them under penalty of perjury, and they believe their work is an act of “good will” because it helps their competitors get funded and because their per diem rate is low.

The financial disclosure statements for working group members require information similar to what is required from the committee members and institute employees, such as sources of income of $5,000 or more from biotechnology and pharmaceutical companies, as well as California-based academic or nonprofit institutions. All noncommittee members of the Scientific and Medical Accountability Standards Working Group (standards working group) and the Scientific and Medical Facilities Working Group (facilities working group) who participated in committee meetings, as well as all the members of the grants review working group who reviewed training grant applications, filed confidential financial disclosure statements, as required.

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Here is what CIRM had to say concerning the recommendation that it seek an attorney general's opinion on its disclosure policies for grant reviewers:


CIRM is committed to ensuring that the evaluation of grant applications is free from both real and apparent conflicts of interests. For this reason, the ICOC has adopted conflict of interest policies for members of the working groups that go beyond the requirements of the Political Reform Act (“PRA”). As the audit notes, however, CIRM disagrees with the FPPC’s opinion that members of CIRM’s working groups might be subject to the PRA at some point in the future.

Although we believe that Proposition 71 clearly exempts the working groups from the Political Reform Act, we understand the merits of seeking an opinion from the office of the Attorney General and we will seriously consider the recommendation to do so. But for the record, it is important to consider what is not in dispute.

First, even under the FPPC’s interpretation of the law, the members of CIRM’s working groups are not currently subject to the PRA’s economic disclosure and disqualification requirements. As the Alameda County Superior Court found, the ICOC made significant changes to the Grants Working Group’s recommendations regarding the training grants. The ICOC, the Court concluded, is the ultimate decision-making body, not the Grants Working Group. Second, as required by Proposition 71, the members of CIRM’s working groups are currently bound by conflict of interest rules adopted by the ICOC. These rules, which are modeled on the National Institutes of Health and National Academies of Science’s conflict provisions, require disclosure and disqualification, but unlike the Political Reform Act, they also extend to “personal” and “professional” conflicts of interest. Because the FPPC’s opinion may lead to the erroneous belief that working group members are not currently subject to conflict of interest rules, or that the PRA’s provisions are stronger than those adopted by the ICOC, we believe a brief discussion of the law and the ICOC’s policies and regulations is warranted.

Health and Safety Code section 125290.50, enacted by Proposition 71, requires the ICOC to adopt conflict of interest rules for the working groups based on standards applicable to members of scientific review committees of the National Institutes of Health (“NIH”) and to appoint an ethics officer from among the staff of the institute. Importantly, it also exempts members of the working groups from the PRA and other Government Code provisions:
“(3) Because the working groups are purely advisory and have no final decisionmaking authority, members of the working groups shall not be considered public officials, employees, or consultants for purposes of the Political Reform Act (Title 9 (commencing with Section 81000) of the Government Code), Sections 1090 and 19990 of the Government Code, and Sections 10516 and 10517 of the Public Contract Code.”

These provisions establish a regime by which the members of the working groups are covered by conflict of interest rules based on the NIH standards as opposed to the PRA. This makes sense for two reasons: First, the working groups are closest to the peer review committees of the National Institute for Health; no similar body exists under state law. Thus, it is logical to look to federal conflict of interest policies as the model for CIRM’s working groups. Second, the PRA would impose narrower conflict of interest rules on the working groups and it would impose such rules only after certain requirements are satisfied, i.e., if a working group makes substantive recommendations that are, and over an extended period of time have been, regularly approved without significant amendment or modification by the ICOC (FPPC Regulation 18701). If these conditions were never met, the working groups would not be subject to PRA conflict of interest rules. Furthermore, because FPPC Regulation 18701 requires an analysis of past conduct, it necessarily draws a line that is visible only after it is crossed.

Section 125290.50 avoids this uncertainty by declaring that the working groups are advisory, exempting them from the PRA, and by imposing separate and more extensive conflict of interest rules on working group members. In so doing, this section ensures that conflict of interest disclosure and disqualification rules are in place from the outset of working groups’ work.

As stated in the audit report, the success of the CIRM research program and its ability to maintain the confidence of the people of California depends critically upon the agency’s ability to fund the highest quality research proposals, chosen without bias. Strong CIRM conflict of interest policies are therefore essential. Thus, the ICOC adopted conflict of interest policies in 2005 to apply to each working group. These rules were inspired by policies of the National Institutes of Health, as required by Health and Safety Code section 125290.50, subdivision (e)(1). The ICOC did not stop there - the ICOC has taken the unprecedented step of codifying these policies in regulations. Unlike the Political Reform Act, these regulations encompass not only financial sources of conflicts but also address professional and personal sources. Thus, the working groups, under Proposition 71 and the policies and regulations adopted by the ICOC, are subject to more stringent rules than nonadvisory public officials under the Political Reform Act.

Moreover, the members of the two grants working groups, research and facilities, undergo a pre and post-award review of their required disclosures and the potential sources of conflict, and attest under penalty of perjury that they have not participated in review of any application for which they might have a conflict of interest. This is not required of any public official under the PRA. CIRM will maintain appropriate records of the disclosures and participation of working group members to make them available for audit AND will report to the Legislature any violations of the rules AND describe corrective actions taken to prevent future occurrences. Neither the report nor corrective action is required under the Political Reform Act.

These regulations strike the proper balance between the privacy of volunteer advisory body members and the public’s desire for information about the individuals. The review by staff and independent auditors, and the records that substantiate those reviews, ensure that the utmost vigilance will be maintained to ensure the integrity of the working groups’ efforts. As a result, the Institute has in place conflict of interest regulations and policies that are stronger than either the PRA or NIH standards.
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Here is what the Court of Appeals had to say regarding decision-making by grant reviewers:

The Council (editor's note: meaning CIRM opponents) contends that if the more general statutory and common law conflict of interest provisions are not applicable to the ICOC members, they should nonetheless apply to members of the grants working group. This argument is based on the incorrect assertion that the grants working group is a decisionmaking rather than an advisory body. However, section 125290.50, subdivision (e)(3) provides that '[b]ecause the working groups are purely advisory and have no final decisionmaking authority, members of the working groups shall not be considered public officials, employees or consultants for purposes of the Political Reform Act' and other conflict of interest statutes.

Changes Upcoming in $500 Million State Biotech Loan Program?

California biotech firms looking to dip into a new $500 million source of capital would be well-advised to sit in on a meeting next week of the state's stem cell agency.

A group of its directors – the Loan Task Force – meets next Wednesday at noon on the Stanford University campus to discuss the state of the unprecedented lending program and, more specifically, the loan terms. The session offers a golden opportunity to learn about the program, influence its direction and chat with key figures at the $3 billion funding agency.

The loan program is clearly in its formative stages. CIRM only approved its first loan --- $20 million loan to Novocell, Inc., of San Diego – a little more than a month ago.

Curiously, while CIRM has embarked on an effort to become more friendly to the biotech industry, it has provided little public information about the specifics to be discussed next week. That's the sort of stuff, however, that is needed to draw busy executives to the task force meeting to provide valuable input on the program and to encourage them to seek funding.

With three business days left before the task force meeting, the agenda states only that the panel will hear a presentation and discuss loan terms.

In order to provide more information to businesses, the public and other interested parties, the California Stem Cell Report yesterday queried Duane Roth, chairman of the task force and vice chairman of the stem cell agency, about next week's meeting.

Roth, a San Diego businessman, told us that the meeting will include a review of the initial loan policy and terms in light of feedback from potential applicants. He indicated that the session will focus on items that need further review or adjustment. Those specifics and any others identified at the meeting would come back to the task force and then the full CIRM board for action on later dates. It is fair to say that significant changes could be in the works.

The biotech loan program is significantly different than ordinary commercial lending. It specifically targets firms that otherwise could not raise cash or secure conventional financing. The idea is provide help to firms that are in what is known as the financial “valley of death.”

For more on the biotech loan program, click on the label “biotech loans” at the end of this article. You can find a list of members of loan task force here.

Engineering Stem Cells on the Ballot: Chuck Winner and the California Stem Cell Agency

Chuck Winner is a name that doesn't surface often in connection with California's $3 billion stem cell research effort.

Chuck Winner (left) at USC in 2006
USC Photo

In fact, he rarely appears in the news. Winner's name, however, did surface yesterday when Gov. Jerry Brown appointed him to the state's horse racing board. Most of the stories about the appointment were in horse racing publications. But none, including The Sacramento Bee's, mentioned the Prop. 71 campaign managed by his firm, Winner & Mandabach Campaigns of Santa Monica, Ca.

Nonetheless, he and his firm were the key to winning approval of the 2004 ballot measure that created the California Institute of Regenerative Medicine, an enterprise that is unprecedented in state or national history.

The firm's $35 million campaign for Prop. 71 attracted 59 percent of the vote. That same year, the firm also successfully managed four other ballot measures in the Golden State. Its lifetime average is remarkable. The firm's web site says it has won 90 percent of the 150 ballot measure campaigns it has run throughout the country.

Winner-Mandabach has this to say about how it pulled off the Prop. 71 campaign:

"Surveys (in 2003-04) showed that most voters supported the basic concept of expanding stem cell research. However, because of the state’s serious budget and debt problems, it was also clear that passing such a huge bond measure for any purpose would be a major challenge.

"The campaign overseen by Winner & Mandabach to overcome those odds involved a year-long coalition building effort that ultimately recruited over 40 Nobel Prize winning scientists and more than 100 patient groups, disease foundations and business groups – the largest, most diverse coalition of its kind ever formed to support a state ballot measure. The supporting groups helped mount an intense grassroots outreach and activation effort to their members, who numbered in the millions."

Winner-Mandabach continued,

"The TV advertising developed by the firm featured award-winning scientists, patients and their families, and highly-respected patient advocates like Michael J. Fox and the late Christopher Reeve. The ads focused on the potential for cures that could save millions of lives. Details of the initiative and economic issues were addressed through in-depth mail pieces and earned media efforts that included the release of an economic study showing that stem cell cures would help reduce the state’s skyrocketing health care costs. Prior to the implementation of the paid media campaign in late-September, polling showed Proposition 71 below the 50% threshold. But after an intense 6-week advertising, earned media and grassroots campaign, Prop. 71 steadily gained support, even in the face of final attacks by conservative groups and activists like Mel Gibson, and attacks from the left by some anti-biotech groups. Because of its precedent-setting nature, the Prop. 71 campaign became the most watched ballot measure campaign in the nation and generated worldwide press attention. On election day, it was approved overwhelmingly by a vote of 59% to 41%."

The key to success on any ballot measure is a firm like Winner-Mandabach, although high profile individuals – in the case of Prop. 71, Robert Klein, who became the first chairman of the stem cell agency – are often given complete credit. Top notch campaign firms have a keen understanding of voters, appropriate political timing and effective PR and TV advertising campaigns. Without Winner-Mandabach – or a firm with the same skillset – the California stem cell agency would not exist.

Chuck Winner, however, does not have an uncritical view of the ballot initiative process, which has resulted in much expensive mischief in California. He told a USC audience in 2006,

"It’s abused time and again. My opinion is that when you circumvent the legislative process or representative democracy to solve a problem, you can take it to an extreme and that extreme becomes, in some ways, worse than the problem you were trying to solve in the first place. Single-issue up or down initiative votes are very often not the best way to govern."

As for the horse racing business, Winner, a Beverly Hills resident, has been involved in horse racing since 1986. His partner, Paul Mandabach, is also involved in the sport of kings. Their firm has not disclosed their record at the track.

(Click here to see two powerful ads developed for the 2004 campaign, including the famous Christopher Reeve spot.)

The Afterlife of the California Stem Cell Agency: Venture Philanthropy and Big Pharma

The $3 billion California stem cell agency, which is facing its possible demise in five years, is exploring an afterlife that dips into "venture philanthropy" on a national level as well as investment ties with Big Pharma.

The Golden State's unprecedented research program laid out those possibilities in a "transition plan" sent this week to Gov. Jerry Brown and the state legislature. The plan was required under a law passed two years ago. The agency's future direction was also aired at a meeting last month in Los Angeles.

The California Institute for Regenerative Medicine(CIRM) will run out of funds for new grants in 2017. Its only real source of funding is cash that the state borrows (bonds). CIRM says that only $864 million remains for new research awards, and some of its recent grant rounds exceed $200 million. The current position of the agency is that it is "premature" to consider asking voters in financially strapped California to approve another multi-billion dollar bond measure.

The venture philanthropy effort involves creation of a nonprofit organization. CIRM Chairman Jonathan Thomas said in January that he is "test-driving (the proposal) with some high net worth donors we know to be interested in the stem cell space." Thomas was addressing the Citizens Financial Accountability and Oversight Committee, the only state entity specified charged with overseeing the agency and its directors. He said,

"We're busily putting together in conjunction with a national organization called the Alliance for Regenerative Medicine the plans for a nonprofit venture philanthropy fund."

He said it would "would accept applications for awards from researchers and companies all over the country, not just those funded by CIRM, but those funded by NIH or the New York Stem Cell Foundation or the state of Maryland or whatever."

The Alliance for Regenerative Medicine is an industry-dominated lobbying group, based in Washington, D.C.  The group's executive director and co-founder is Michael Werner, a longtime pharma and health industry lobbyist, who is also a partner in the influential Washington law firm of Holland and Knight.

The "biopharma investment fund" proposed by CIRM is less well developed. CIRM said it plans to explore opportunities with companies to fund stem cell research in California. The transition document uses as an example an $85 million deal between Pfizer and UC San Francisco, which gives the company special access to biomedical research.

The transition plan also touches on other issues such as winding down grants after its new grant money runs out, along with protecting intellectual property.

The plan could be considered a marketing tool for the agency's afterlife efforts. The document devotes a good portion of its nine pages to recounting the history of CIRM and touting its accomplishments.

Thomas used the occasion of the submission of the plan as a springboard for a piece yesterday on the CIRM research blog.He concluded his item by quoting from the plan itself. CIRM's achievements during the past seven years, he wrote, "will allow California to continue world (stem cell) leadership in the coming decades."

CIRM Adheres to Core Mission but Future is Challenge

The California stem cell agency has "overcome startup challenges," drawn scientists to the Golden State, and its actions will have a "significant" impact on commercial and academic biotech research in the United States, according to an article in the American Journal of Public Health.

Nonetheless, the report by Joel Adelson and Joanna Weinberg (see photos) of UC San Francisco, said,

"Measuring the CIRM’s success by its highly ambitious goals for research and cures is a challenge for the future."

Robert Klein, chairman of the stem cell agency and head of the Prop. 71 political campaign, publicly hailed the article. On Jan. 15, he also told CIRM directors in an email,

"This group (the report's two authors) started out 4 years ago as complete disbelievers in the ability of this agency to fulfill its mission. Our performance has clearly convinced them we will have (and already have had) an effect on the future of biomedical research and its funding structures."

CIRM issued a release that said the article demonstrated that "CIRM has been successful in carrying out its core mission of accelerating research, creating jobs and fostering economic growth in California."

The CIRM announcement quoted Klein as saying, “The NSF (National Science Foundation) study provided strong validation of the major research jobs and medical leadership future of California, driven by Proposition 71 funding,"

The study's authors are associated with the Institute for Health and Aging at UC San Francisco. Adelson is chief of the Integrating Medicine and Public Health Program. Weinberg is associate adjunct professor, Institute for Health and Aging and adjunct professor and director, Law, Science and Health Policy Coordinator, Hastings College of Law. Their article was funded by the NSF and published in the January 2010 edition of the American Journal of Public Health. UC San Francisco has received $103 million from CIRM. A footnote on the article noted that UCSF has received CIRM cash. It also said Adelson and Weinberg received no funds from the stem cell agency.

In a summary attached to the article, "The California Stem Cell Initiative: Persuasion, Politics and Public Science," the authors said,

“The initiative has been highly controversial among stakeholders and watchdog groups concerned with organizational transparency, accountability, and the ethics of stem cell research....We found that the CIRM has overcome start-up challenges, been selectively influenced by criticism, and adhered to its core mission.”

The article said,

"It is difficult to find anything quite like the California stem cell endeavor—the rationale for its origin, its enabling ballot initiative, the extent of state funding for research, and the public’s vigorous engagement with the process are all unprecedented. We found that the CIRM, after a difficult beginning, and despite institutional turbulence, economic uncertainty, and constant public scrutiny, has become well-established and has both maintained and strengthened its core mission, partially aided by the pressures and criticism."

Adelson and Weinberg wrote,

"Since the initiative passed, continuous criticism and scrutiny has come from sources opposed not to stem cell research itself but rather to other aspects of the endeavor. Some critics raised concerns about the protection of egg donors (for somatic cell nuclear transfer), others about limited attention to donors’ physical health and potential exploitation because of their economic status. Strong objections have been raised to the manipulation and commercialization of human genes."

The article continued,

"Perhaps the closest attention to the conduct of the CIRM’s affairs has been paid by individuals and groups concerned about the CIRM’s potential conflicts of interest and lack of transparency. Watchdogs and consumer advocates have kept steady pressure on the CIRM to maintain transparency in spending taxpayers’ funds, including awarding of research grants, and to be publicly accountable for adherence to ethical and other standards. The CIRM, which may only fund research to be conducted in California, also had to address several potential conflicts of interest in funding decisions. The relatively narrow composition and size of the ICOC(the CIRM board of directors), and the limited number of institutions qualified to conduct CIRM-funded research, guarantee a large overlap among those seeking and those awarding funds. Many potential grantee institutions have representatives on the ICOC, because the initiative requires the appointment of representatives from 5 University of California campuses and from other California research institutions."

Adelson and Weinberg said,

"In its short history, the CIRM has taken on a vigorous life of its own. It is apparent that the shift of a major focus for stem cell research to California will have a significant effect into the future on the geographic distribution of biological science and biotechnology infrastructure in the United States; on the location of university, biotechnology, and pharmaceutical research and start-up firms; and on the investment of venture capital. Evidence for this is the $300 million the CIRM has invested in stem cell facilities, already leveraged to more than $1 billion in linked donations. The CIRM has also directly stimulated the formation of a consortium of otherwise separate institutions to meld resources and facilities in San Diego, and has begun to develop international collaborative partners. California is host to a steadily growing cadre of world-class scientists, dedicated state-of-the-art facilities, training programs, and support programs, such as a large-animal facility for the testing and development of drugs to facilitate the translational pathway leading from basic stem cell research findings in the laboratory to treatments and cures."

'A Good Deal?' -- California Stem Cell Research, Rosy Expectations and Billions of Dollars

Highlights
$6 billion from the Golden State
$1.1 billion in royalties?
40 new clinical trials projected

"Are taxpayers getting a good deal?" That's the question that was raised nationally this week by the New York Times in connection with federally funded research dealing with life-saving treatments.

The same question can be raised concerning the roughly $6 billion, including interest, that California is spending -- unsuccessfully so far -- to generate a stem cell therapy that can be widely used.

In the case of the Times, the article by Matt Richtel and Andrew Pollack dealt with cancer immunotherapies and the soaring business and medical enthusiasm for the treatments. The two writers started their lengthy piece with the example of Kite Pharma, which they said "has struck gold." The company's stock has soared from $17 a share two years ago to about $50.

The Times wrote that excitement over the treatment speaks "volumes about the value of Kite's main scientific partner: the United States government."

California too is partnering with researchers and companies to develop blockbuster treatments, including immunotherapies. It has awarded more than $2 billion for research into possible treatments ranging from arthritis to extremely rare diseases that affect only a few thousand people.

The state is financing its research via the California Institute for Regenerative Medicine (CIRM), which is more informally known as the state stem cell agency. The agency has only $692 million left before its money for new awards runs out in 2020.

CIRM is funded by $3 billion that state borrows (bonds). The interest on the bonds roughly doubles the cost of the research compared to pay-as-you-go financing, which the federal government basically relies on. Like the federal government, CIRM depends on the private sector to actually bring potential therapies into widespread use.

The stem cell agency was created by voters in 2004 when they approved a ballot initiative. The campaign raised rosy expectations that cures were right around corner for afflictions that reached into nearly 50 percent of California families. And supporters also said that the state could expect as much as $1.1 billion in royalties. But royalties and commercial therapies have yet to appear.

The Times piece laid out arguments concerning federal research that apply equally to California's research effort, which is unprecedented in state history and which operates outside of the control of the governor and the legislature.  The Times piece said,

"Defenders say that the (public/private) partnership will likely bring a lifesaving treatment to patients, something the government cannot really do by itself, and that that is what matters most.

"Critics say that taxpayers will end up paying twice for the same drug — once to support its development and a second time to buy it — while the company reaps the financial benefit."

The Times article continued,

“If this was not a government-funded cancer treatment — if it was for a new solar technology, for example — it would be scandalous to think that some private investors are reaping massive profits off a taxpayer-funded invention,” said James Love, director of Knowledge Ecology International, an advocacy group concerned with access to medicines."

California's stem cell agency has yet to find a financial source to continue its work beyond 2020. Some talk has surfaced about another bond measure in 2018, but political observers give such an effort slight chance of success unless the agency can produce a therapy that will resonate with voters. If the Trump Administration, however, imposes restrictions on stem cell research, similar to those of the Bush Administration in 2004, that could create an impetus for passage of another measure.

Bob Klein, the first chairman of the stem cell agency, used to like to trot out the hundreds of scientific journal articles that were published by CIRM-funded researchers as a sign of success. "So what?" was the private comment to the California Stem Cell Report by one former CIRM staffer, alluding to the lack of impact of the journal articles. 

The agency's record, however, is picking up. Last week it cited 70 new projects, 10 new clinical trials plus a $30 million stem cell "pitching machine."  At at an emotional meeting, the agency's governing board also heard a mother thank the agency for saving the life of one of her children. Randy Mills, the president of the agency, is pushing hard and is looking for 40 additional clinical trials in the next several years. 

But the fundamental question remains: Will California taxpayers get their money's worth -- "a good deal" -- for the billions they are spending on stem cell research.   

California Pumps $5 Million into Search for Stem Cell Treatment for Covid-19

Coronavirus

California's stem cell agency, in an emergency action, has allocated $5 million for research into treatments for Covid-19 and set the deadline for the first applications for one week from today. 

The agency, formally known as the California Institute for Regenerative Medicine (CIRM), approved the funding last Friday during an emergency meeting of its governing board. 

In an item yesterday on the CIRM blog, Maria Millan, CEO and president, said,

"California researchers have made us aware that they are pursuing potential stem cell based approaches to the Covid-19 crisis, and we felt it was our responsibility to respond by doing all we can to support this research and doing so as quickly as we possibly can."

The agency set accelerated timetables for action, both by the agency and applicants. It said it would expect winning applicants to begin work within 30 days of being approved. 

CIRM's move comes as itself is facing a mortal financial threat. It was created by voters CIRM in 2004 with $3 billion. It is now down to its last $27 million and is hoping voters will approve $5.5 billion more via a proposal that is yet to qualify for the November ballot. Otherwise CIRM's doors will begin to close in the fall. 

Presumably, billions of private and public dollars are already pouring globally into the search for various aspects of Covid-19, so the $5 million is a relatively tiny amount. CIRM has developed a speedy process, however, for bringing funds to bear on research and is acting to accelerate that even further. 

Jonathan Thomas, chairman of the CIRM board, said, 

"The coronavirus is creating an unprecedented threat to all of us and, as one of the leading players in regenerative medicine, we are committed to doing all we can to develop the tools and promote the research that will help us respond to that threat." 

The campaign to qualify the $5.5 billion initiative for the ballot released a statement heralding the action by CIRM. Robert Klein, the Palo Alto real estate developer behind both the original ballot measure and this year's funding initiative for CIRM, said, 

"The investment by California’s stem cell institute to combat Covid-19 highlights the remarkable potential of this research and therapy development to impact the lives of every Californian. ...We urge Californians to think back on this moment, when they decide the fate of future life-saving stem cell discoveries and treatments come November."

The campaign said 10 days ago that it has suspended the gathering of signatures. It is not clear whether it has enough to qualify for the fall ballot. More than 600,000 valid signatures are required. 

Here are links to additional CIRM information on its Covid-19 program:

• Concept statement
• Application information and timetables
• Presentation slides from last week's meeting
• CIRM's news release

California Stem Cell Agency Launches Five-Year Push for Cures

The $3 billion California stem cell today officially embarked on a course that will mean closer ties to the biotech industry in hopes of fulfilling the campaign promises to voters to turn stem cells into cures.

On a unanimous voice vote, directors approved changes in the seven-year-old agency's strategic plan. The action will likely mean less money for some activities that enjoyed more cash in the past,  but directors put off action until at least late July.  The plan also sets the course for what may be the last years of life for the unprecedented state research program. Authorization to borrow more money (state bonds) for its grants will run out in about 2017.

During a brief discussion of the plan, which has been debated for some months, CIRM Director Jeff Sheehy noted that the agency has now entered "the realm of trade-offs."  Ellen Feigal, CIRM's senior vice president for research and development, told the board that the plan will require hard decisions and sharp focus on priorities. 

Among other things, for first time CIRM overtly set a goal of creating 20 programs that include outside investment that focus on products. Another five-year goal explicitly calls for financing at least 10 therapies in early-phase clinical trials, affecting at least five diseases. Overall, the plan seeks to achieve clinical proof-of-concept for stem cell therapies.

In contrast to the Proposition 71 campaign rhetoric, CIRM's strategic plan acknowledges that developing therapies takes a very long time, often decades.

Two scenarios were presented to the board for spending the agency's remaining $836 million for grants and loans. One would allocate $506 million for development research, $195 for translational research and $135 million for basic research, but nothing for training and "facilities/core resources."

The other scenario calls for $486 million for development research, $160 million for translational research, $105 for basic research, $60 million for training and $25 million for "facilities/core resources."

The first scenario would mean a $85 million cut in training and shared lab programs – cash that helps to finance researchers and that benefits the many institutions that have representation on the CIRM board. The board put off action on either scenario after CIRM President Alan Trounson said he wanted more time to prepare a complete analysis of the scenarios. 

The plan also calls for creation of a platform to enable grantees, disease foundations, venture capitalists and others to purse CIRM's mission when its state bond funding runs out. The possibility exists that another bond measure would be submitted to voters. But in either case, CIRM will need a solid record to attract support. 

Credibility Damaged and Foes Aided: No Upside on CIRM's Ban on the Public

The California stem cell agency's ban on the public during the most sweeping review ever of its operations promises little upside for the $3 billion enterprise and plenty of downside.

That's not to mention the fact that the ban is poor policy and is not likely to achieve its stated purpose – candor from those testifying before the blue-ribbon, international panel that has scheduled three days of hearings in San Francisco beginning Oct. 13.

The “external” review, as CIRM has labelled it, is called for by the agency's strategic plan of 2006. That document recognized the need to revise the plan as conditions changed. It was prepared with substantial comments from the public and a number of open hearings,

CIRM has devoted about 2,000 hours of staff time preparing for the the latest review, which will be critical in determing how the agency will spend its remaining $2 billion. The eight-member panel, which includes a Nobel laureate, is expected to prepare a report that will be considered by the CIRM board in December.

The strategic review comes as CIRM Chairman Robert Klein is publicly discussing presenting to voters a $5 billion bond measure to continue CIRM's activities. A bond measure is necessary because the agency's only real source of funding is cash that the state borrows (bonds). Klein's new bond proposal places the agency's efforts squarely in the context of a political campaign, which could come as early as two years from now.

Last week CIRM told the California Stem Cell Report that members of the public would be barred from attending the agency's external review. CIRM also has made no public effort to solicit comment from California citizenry, which is paying $6 billion, including interest, for the research program. Nor has CIRM notified the public via its Web site that an important evaluation of CIRM will take place.

Don Gibbons, spokesman for CIRM, said the closed-door sessions were necessary so that “reviewers can ask tough questions and receive candid, unfiltered responses” from CIRM staff, biotech executives and some CIRM board members who are scheduled to appear before the review panel.

The reality, however, is much different. CIRM staffers who want to keep their jobs are not going to say anything to reviewers that they haven't already told their superiors. Biotech executives who want to receive grants or loans from CIRM are unlikely to be sharply critical of the agency. And CIRM board members are more than likely to be circumspect, given that they have to make the final judgment on whatever the panel comes up with.

Only a “small number” of the 29 board members have been invited to make comments to the panel. Their identities and topics are yet to be disclosed.

The closed-door proceedings pose a problem for any CIRM board members who might want to sit in on a session or two. Essentially, they must ask permission of the CIRM staff to attend. That's because if too many of them attend, they could run afoul of the state's open meeting law by either constituting a quorum or creating what is known as a “serial meeting.”

Board members have sometimes complained about having to act with too little information. The primary example is appeals on grant applications. The board has repeatedly been asked to overturn negative decisions by grant reviewers, but cannot actually examine the actual applications. In January 2009, the board was caught by surprise when its bond funding was endangered. That particular problem was in evidence to knowledgeable persons well prior to that meeting and could have been disclosed to the board earlier. Limiting directors' attendance at the external review distances the board even more from key aspects of CIRM operations.

Last week we polled CIRM directors about whether they thought that the external review should be open. While we can't say our email reached all directors, we believe most saw it. Four responded. Only one director, Jeff Sheehy, said yes. Others may feel likewise while some are opposed, but at the same time feel constrained about responding via our query.

Director Floyd Bloom, former editor of Science magazine, said he did not see a need for the public to able to attend the review, He said the panel's report will be considered later by CIRM directors, and the public could comment then. (You can read all of the results here of the query including comments from some directors.)

CIRM has yet to provide a legal justification for closing the review. However, little doubt exists that the agency believes the ban on the public is lawful. Presumably CIRM would make a similar argument to one presented last July in connection with another CIRM meeting that barred the public.

However, those arguments fail to take into account a major change in the state Constitution in 2004 that guaranteed the public a broadly construed right to access to governmental affairs. The state's open meeting laws were written before that change and have not yet been amended to reflect its broader constitutional access provisions.

From a political and good government perspective, the ban on the public, coupled with continuing complaints about a lack of transparency at CIRM, unnecessarily provide major ammunition to its foes along with the foes of hESC research across the nation. Closed-door proceedings breed suspicion, even on the part of a public inclined to support stem cell research. They provide a fertile ground for the worst sort of rumors and add evidence that CIRM is an “insiders club,” as others, including Nature magazine, have complained. No doubt exists that Klein's $5 billion bond measure campaign will have to confront severe criticism about the lack of openness at CIRM.

One reader of this report, who is knowledgeable about CIRM affairs but who must remain anonymous, told us,

“The failure to provide any opportunity for public input in the process diminishes its credibility and utility. This is a hand-picked body following a pre-determined agenda that was defined  by CIRM. CIRM (i.e. Klein) decides what's presented and what's considered. The outcome is predictable.”

CIRM carries a special burden in connection with openness and transparency because of its unprecedented nature. As opposed to other state departments, it is not subject to normal oversight by the governor and the legislature. Funds flow to it unaffected by the financial crisis that is damaging public education and medical assistance to the poor in California.

Gov. Arnold Schwarzenegger has been advocate of more openness throughout state government and also a strong supporter of CIRM's operations. He has opened up other state departments' activities, including executives expense accounts, to public scrutiny. He said some time ago,

“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.”

CIRM should reconsider its position and open the external review to the persons who are actually financing its operations.

Were Some Scientists' Concerns about CIRM's Claims Worthy of Note?

If the California stem cell agency had its druthers, no one would know that there is a dissenting view about its role in the San Diego research that led to clinical trials on a treatment for a blood disorder.

The $3 billion agency has stoutly defended its claim and bolstered its statement with additional evidence, following questions by the California Stem Cell Report.

However, the agency would have preferred that no complaints were publicly raised and nothing written about them if they were.

We first reported the matter on April 15. We are writing today not to rehash the substance of the complaints, but to share with our readers some of the reasoning behind our decision to report the story and to discuss a few of the nuances of how the media work.

CIRM's position is that our item concerning CIRM's original statement relied on a single, anonymous source and would not have been carried by most newspapers. They are partially correct on that point. We did use one anonymous source – "at least one well-regarded, California stem cell researcher" was the phrasing. We had two, but the other one did not go into the details of the issue. We did not want to characterize both as having identical positions. The item also referred to "concerns among some stem cell scientists." But because of the use of a single, anonymous source, many newspapers would not have carried the story as matter of policy.

Anonymous sources usually have an agenda, sometimes one that is hard to detect. Anonymity protects the source from having to take public responsibility for his or her words. We weighed the possibility of not writing about the concerns of these scientists, but decided to proceed.

The scientists' position was supported by evidence; it was not just one person's opinion. If these two were concerned, undoubtedly many others were as well. There is an axiom in business that for every one complaining customer, nine more exist who are unhappy but who are silent. That axiom seems to apply in this case. Finally, California researchers are loath to publicly criticize CIRM. Who wants to offend the three-billion-pound gorilla and risk losing its financial support?

The question appeared significant as a part of the culture of science. It dealt with the credibility of the agency. CIRM's role was regarded as so important that it merited enthusiastic comment from Gov. Arnold Schwarzenegger -- a move presumably promoted by CIRM. The issue also went to the more general question of hype involving embryonic stem cell research. The agency itself, stem cell research advocates and opponents all have warned repeatedly about dangers of exaggeration and promising too much in this highly charged field.

Since the story has appeared, we have learned of more scientists who agree with the essential points made by our sources.

One said,

"The problem with the original CIRM (statement) is that it referred to the SEED grant, which was funded only weeks before the paper was submitted and dealt with an entirely different disease and... was specified by the RFA to be specifically for human embryonic stem cells which are not at all involved in the UCSD experiments....

"They (CIRM) did overstate it and ... it is embarrassing that the Governor's office picked this up as a first example of CIRM's success. It would have been much better to say that CIRM is proud to be associated with such an outstanding success and to feature something about the trainee."

Another said,

"It does all of us a disservice to pretend that CIRM was responsible for the initiation of a clinical trial when every scientist and biotech manager knows that it is simply untrue."

As mentioned earlier, many newspapers would not have carried the story because of policies regarding the use of anonymous sources. Over decades of experience as a newspaper editor and reporter, we have seen those policies, along with others, paralyze newspapers. They know a story is factually accurate, but because people are afraid to speak up and the subjects of stories stonewall and delay, the stories never run. As a result, the public debate suffers. In the case of the CIRM statement, however, the story would not have reached that level. The subject would not have been pursued by mainstream newspapers because it would have have been deemed too arcane and picayune for the general public. However, the issues raised by our sources are important to our tiny, but deeply involved band of readers, who range from Korea to the United Kingdom.

The California Stem Cell Report is a blog and fundamentally a matter of the opinion of yours truly. Many blogs are nothing more than opinion. Over the years, however, we have taken to reporting stem cell news in a more traditional fashion because of the lack of hard information in the media about CIRM affairs. We have also engaged in analysis and commented negatively and positively about how CIRM is spending $3 billion of public money, virtually free from normal governmental oversight. It is a unique endeavor that has had a far-reaching and positive impact on the national and international stem cell scene.

We think California's unprecedented program is worthy of considerable attention. We will continue to offer a home to those who are willing to make thoughtful comments on its performance – even anonymously.

(We provided an advance copy of this commentary to CIRM and told the agency that we would carry its comments verbatim, if it chooses to offer any. Providing advance copies of articles and offering opportunities for verbatim responses are virtually unheard in the mainstream media.)