Chiropractors, CIRM and Its Legislative Posture

The 120 men and women who sit in the California Legislature generally tend to think they have prime responsibility for writing the laws that govern the state. And they often get edgy when state agencies, even ones that have special constitutional status, seem to be straying from the governmental straight and narrow.

Such was the case recently with the California's chiropractic board, which is enshrined in the State Constitution. Gov. Arnold Schwarzenegger's appointees to the board became carried away in what a deputy attorney general described as a fit of "lawlessness." Now the board faces a serious legislative investigation that could include elimination of its $3 million budget.

While this is something of a minor tempest – although not for chiropractors -- the chiropractic board shares several things in common with California's much heftier, $3 billion stem cell agency. Both are written into the State Constitution. Both were created by initiative. Both have issues involving conflicts of interest. And both function in near obscurity except when they hand out buckets of money – in the case of the stem cell agency – or when a scandal erupts, as in the case of chiropractic board.

Obviously major differences exist between the two boards, including the quality of the appointees. But the case of the chiropractors illustrates how quickly matters can go awry in an insular agency and how quickly the legislature may move to step in. The case will also probably show how quickly the governor can put distance between himself and what The Sacramento Bee called a "laughingstock."

Last Sunday we discussed the sometimes acrimonious relationship between CIRM and the California legislature, particularly in the light of bipartisan legislation by the chair of the Senate Health Committee, Sen. Sheila Kuehl, D-Santa Monica. Her measure would inject the legislature into the difficult and touchy matter of how the stem cell agency decides to share the potentially enormous wealth from cures developed with state-funded research. After a shaky start with lawmakers, CIRM has moved to improve its legislative relations and keep lawmakers well informed.

Our piece, which appeared as an op-ed in The Sacramento Bee, was necessarily limited because of space. But we wanted to share more that we heard from CIRM and two longtime observers of the agency, who also have been critical of its performance from time to time and sometimes even more often. What follows are virtually verbatim comments.

First, from Dale Carlson, chief communications officer for the stem cell agency:

"We have an active government affairs program underway in Sacramento focused on legislators and statewide office holders, as well as their respective staff members. We want to keep them apprised of our efforts and progress, the status of key regulatory and funding initiatives, and the challenges we are confronting in pursuit of our mandate and obligations.

"The objective is to ensure that key decision-makers have current, accurate, and reliable information about CIRM's activities, the field of stem cell research, and related issues. We seem to receive reports of new scientific developments every week, and with more states committing funding to the field each year, it's likely that pace will accelerate. It's a challenge for us to stay abreast of the science, federal policy, and other states' emerging policies, all of which have an effect on our scientific project.

"We're very proud of the work we're doing, the processes we follow to engage the public in the development of policies and regulations that are required by the law, and the willingness we've demonstrated to adopt and apply good ideas from variety of sources. We want to be recognized as a credible source of information on all things stem cell, regardless of whether the question is directly related to CIRM's activities.

"Our legislative affairs program includes one-on-one meetings and group briefings. (Early in February), for example, ICOC Vice Chair Ed Penhoet and several CIRM staff held a session with staff from the Speaker's office and the Senate Health Committee and others, to review our IP policies for non-profits and for-profits. Both have been the subject of great interest and discussion in Sacramento (as well as throughout the state and in Washington, D.C.), with legislators offering many suggestions for how those policies might be crafted and strengthened. Our presentation described the progress we've made to date - emphasizing that the regulatory process is still moving forward and unlikely to be completed for several months - as well as a review of the issues we're struggling to address. "(Later in February), (CIRM President) Zach Hall, Arlene Chiu, and Mary Maxon (Chiu and Maxon are CIRM staff) conducted a broader briefing on the basics of stem cells, the progress we've made in our first two years, including on the IP policies, and the grants approved by the ICOC.

"Kirk Kleinschmidt, our Director of Legislation and Research Policy, has day-to-day responsibility for the effort. In addition to arranging these group sessions, he's regularly in the capital meeting with individual members. Gene Erbin from Nielsen Merksamer is on retainer to support the effort. Per the provisions of Proposition 71, (Stem Cell Chairman) Bob Klein oversees the legislative affairs program in consultation with the Legislative Subcommittee and the ICOC. He's in regular contact with federal and the statewide office holders as well as the legislative
leadership."

Carlson also said that Klein, Penhoet, Kleinschmidt and Patricia Olson, who led development of the CIRM strategic plan, had a 90-minute meeting with Kuehl last Wednesday.

Carlson said it was a "detailed discussion of our IP policies, the drug/therapy development process and the extensive public process we've followed."

"This is the kind of relationship we want with the legislature. Respectful and substantive. We want them to be assured that we're going about our responsiblities thoughtfully and carefully, and that we welcome good ideas and the opportunity to discuss our efforts."

Carlson said the CIRM board will meet in Sacramento April 10 and expects to finish its meeting in time for board members to visit with legislators in the afternoon.

Jesse Reynolds, project director on biotechnology accountability for the Center for Genetics and Society in Oakland, has followed CIRM closely during the last two years as well as the Prop. 71 campaign.

Here is what he had to say in response to our query:

"Prop. 71 is a deeply flawed set of laws, with numerous exemptions to the norms of transparency, oversight and accountability....

"Hopefully, the leadership of the CIRM won't be as hostile to much-needed reform as it was during previous attempts. Then, the state's 'stem cell czar,' Robert Klein took the unprecedented step of hiring a lobbyist with taxpayer funds. What's more, while serving as chair of the CIRM's governing board, he simultaneously headed up a private lobbying organization, which advocates for more funding and less oversight of stem cell research. These actions are not appropriate for the head of a state agency.

"Klein's statements that 'the Legislature is not needed' and that then-Senator Ortiz was 'an ongoing threat' are not only wrong, but highlight his cavalier attitude in his role as a public servant. As the people's elected representatives, the Legislature certainly has a critical role in overseeing a multi-billion dollar program. As a senator, Ortiz did more for stem cell research and Proposition 71 than any other elected official."

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumers Rights in Santa Monica, Ca., is another longtime follower of CIRM matters. He said,

"Key to any IP policy are provisions that ensure affordable access for all Californians to any cures or treatments resulting from stem cell research they funded. The ICOC originally envisioned meeting that goal by requiring treatments purchased with public funds to be sold at the federal Medicaid price and that there be a plan in place that would provide access to the treatments for uninsured people.

"In drawing up the actual regulatory language to implement those policies, the ICOC has softened those proposals.....

"I think Kuehl's bill would increase payback to the state, but doesn't do enough to ensure affordable access for all Californians. There should be a provision that if there are unreasonable prices the attorney general can intervene. I cite Genentech's Avastin as an example of what cannot be allowed. The drug was developed with $44.6 million in public funds from the National Cancer Institute yet Genentech charges $100,000 a year for it.

"I'd also like to see action on governance and accountability issues. I don't know what Sen. Kuehl's plans are in this regard. Members of the various working groups should be required to file public disclosures of their interests. All applicants and their institutions should be identified, not just recipients. Finally the ICOC is too large. It should be trimmed from the 29 members who now have seats.

"Another thought: ICOC members themselves have expressed concerns about some provisions of Prop 71. It might be useful for both CIRM and the legislature to attempt to identify such areas and agree on making those changes."

CIRM Lending Plan Resurfaces, State Pension Funds Eyed

California stem cell Chairman Robert Klein Tuesday said $3 billion for stem cell research is not enough and touted a loan plan to leverage the state's investment.

Klein proposed lending a portion of CIRM's funds, which, when they were paid back with interest, could either be loaned once more or used as grants. He also suggested that the mammoth California state employee and teachers pension funds could be tapped for additional investments in stem cell companies and research.

Declaring that CIRM's goal is to develop cures, Klein said, "Three billion dollars is not going to get us there."

Some time ago, a CIRM committee briefly addressed the issue of making loans but put off any additional discussion to deal with more pressing matters.

Klein addressed the loan issue in the context of providing financial assistance for clinical trials, which can be very expensive. He said loans allow money to be "recycled" and increased through collection of interest. He suggested that they would be issued in the form of subordinated debentures to make them more palatable to the businesses involved.

Klein appeared at the Burrill & Company stem cell conference on a panel discussion that was entitled "The CIRM Strategic Plan: Corporate Perspectives."

The panel was chaired by David Gollaher, president of the biomedical industry group, the California Healthcare Institute. The group has expressed displeasure with CIRM's efforts concerning intellectual property, declaring that they threaten commercialization of stem cell therapies.

Gollaher did not specifically cite the CIRM rules or related legislation (SB771 by Sen. Sheila Kuehl, D-Santa Monica) but he warned against placing barriers to development of products. Klein said it was important to provide economic incentives. He said that "preferential pricing has to be modulated and balanced against the primary mission" of the agency, which is to develop cures.

Bruce Cohen, president of Cellerant Technologies, said CIRM's royalty rules are "painful but we can live them." He described them as "measurable and capped." But he said rules dealing with pricing make businesses "very, very frightened." He said they could have a "chilling effect" on a decision whether to take CIRM funds. Cohen noted that many medical firms already have plans to provide access to their products by low income persons.

Uniform ESC Research Standards, More Federal Funding? Lower Your Expectations

The "bizarre patchwork" of embryonic stem cell regulation across the country is not going to disappear regardless of what happens in the presidential election in 2008, several speakers said today at a stem cell conference in San Francisco.

It was not a message that the audience of 500 persons from throughout the world necessarily wanted to hear. Their preference would be for unified standards with ample predictability, ideally at the federal if not global level.

But Nancy Forbes, an attorney with Ropes & Gray of Boston and San Francisco, said "The genie is not going to go back in the bottle." She said she has never seen a governmental body roll back its jurisdiction.

It was a theme echoed by others on the panel discussing "The Un-United States: Cell Lines Border Lines and The Law" at The Stem Cell Meeting, sponsored by Burrill & Company.

Ken Taymor, an attorney with MBV Law of San Francisco and who has followed California stem cell issues closely, also noted that there is little likelihood of a flood of federal ESC research funding following the 2008 election.

He said the NIH, in fact, may look at all the state and private research efforts underway and decide that it does not need to spend its limited funds in the area, an ironic negative effect of state activity aimed at beefing up stem cell research funding.

Russell Korobkin, a UCLA law professor, tackled what he called the "most problematic" aspect of the the stem cell laws across the nation – the bar against compensating women who donate their eggs. He said that compensation is permitted for donation of eggs for in vitro fertilization, which is identical to the process for donating eggs for research.

Korobkin dissected the argument for the compensation ban. He said it does not prevent coercion of women; rather it is actually coercive by limiting what women may do. The argument also assumes that "women cannot make the best decision" concerning egg donation and need to be protected by the state. If the process is too risky, he said, it should be banned regardless of payment or lack of payment. And it is not clear that the ban protects society as a whole, Korobkin argued.

Underlying the argument for compensation prohibitions seems to be "a wish that there were no women so poor that they would be motivated by their eggs," the law professor said.

Korobkin, however, did not deal with the politically touchy nature of repealing the ban on compensation. The subject is freighted with emotions that are fueled by the nightmarish visions of some of egg factories in poverty-stricken corners of the country or the world. Few lawmakers are inclined to support the repeal of compensation lest they get tarred with a brush from that very same vision.

Not Coming Up

Earlier I advised that more would be coming today on relations involving CIRM and the California legislature. However, other matters have intervened. Look for the stuff on Wednesday.

Do Stem Cells, Go to Jail

A Stanford law professor Monday told a group of stem cell scientists and businessmen and women in California that some of them would be subject to hard time in prison if they were sitting in South Dakota.

Henry Greely used the example to illustrate the "bizarre patchwork" of stem cell regulation in the United States, which varies widely from state to state. Greely said that some of the stem cell activities that some members of his audience are engaged in would be illegal in South Dakota.

Greely, who heads a California advisory panel on stem cell regulations, pointed out that regulations and patent law vary widely also from country to country, posing possibilities for confusion and "offshore production" of stem cell products.

Speaking to The Stem Cell Meeting in San Francisco sponsored by Burrill & Company, Greely indicated that a Stanford researcher collaborating with a British scientist could possibly be breaching Stanford research rules -- if the British scientist did not have the same set of research standards. Failure to abide by Stanford's rules could result in professional discipline at the university.

Hope for standardized regulations is dim in the short term, he indicated. Even if a new president in 2009 liberalizes federal stem cell research rules, variations will continue to exist from state to state unless Congress passes a strong new law regulating the science.

Greely said the best hope for something like universal acceptance of embryonic stem cell research would be a well-publicized cure. Then, he said, "political and moral objections will evaporate like the morning mist."

Meanwhile, Greely advised his audience to consult their attorneys, pay careful attention to details and pool information about stem cell research.

The Multibillion Dollar Stem Cell Market and Its Challenges

Today's market for stem cell therapies in the United States currently runs around $100 million but is expected shoot up to $710 million in three years, venture capitalist Steve Burrill said Monday.

By 2016, the market could hit $8.5 billion, he told about 500 persons attending The Stem Cell Meeting at the UC San Francisco Mission Bay complex.

The event, sponsored by Burrill & Company and which drew attendees from throughout the world, focused on both the science and business of stem cells.

Access to capital for fledgling stem firms was the topic of one panel Monday morning. Speakers from stem cell company indicated that funds are still tight, but that some loosening seemed to be occurring that was related to the more favorable political climate in Washington, D.C.

Burrill said a "reasonable amount of money" is available around the world, but different investors have different appetites, depending on the perspective from their countries.

He asked a panel of stem cell business executives about the biggest challenges for the stem cell business. One replied that predictable manufacturing processes were needed. Another said bigger companies with larger resources were necessary. William Caldwell, head of Advanced Cell Technology of Alameda, Ca., said the key was "curing the first patient."

Zach Hall, president of the California stem cell agency, echoed Caldwell during his overview of the status of the state's $3 billion research effort. To do that, Hall said CIRM expected ultimately to partner with the private sector.

Hall said the agency will have awarded about $190 million in grants to nonprofit agencies by sometime this summer with research being financed in about 100 labs throughout the state. Hall said CIRM hopes to build a "very strong pipeline" for research. That's because of the high disappointment rate involved in research. Hall noted that only one out of every eight to 10 clinical trials results in a viable product. And those trials occur at an advanced stage in the development of a therapy or cure.

We will have continuing coverage of the Burrill stem cell conference today and Tuesday.

Two Days of Stem Cells: Founder Flight to Hyperventilation

Christopher Thomas Scott, executive director of Stanford's Program on Stem Cells in Society, is scheduled to set the scene Monday for a two-day international conference on stem cells in San Francisco.

"The business issues are profound," he says, "including access to patients, fragmented intellectual property and a new calculus of investment risk that includes whether the research is illegal and how to mitigate against 'founder flight' as entrepreneurs seek permissive jurisdictions to launch their businesses."

We asked Scott, who is co-chair of the conference sponsored by Burrill & Company, for a preview of his remarks. Here is what he supplied.

"No one can deny the promise of regenerative medicine. But the field has its shaky spots: an astonishingly young science, polarized politics, and fraught with ethical worry. Yet stem cell biology has been on a tear lately. In just a handful of years, the science has moved from hunting stem cells to the arcane secrets of signal transduction. The hyperventilation about which stem cells--embryonic or adult--will be clinically useful is largely lost on scientists. The questions facing them are more elemental: can stem cells be chemically reprogrammed to earlier, more powerful versions of themselves? On which branch of the family tree does a new stem cell rest? What gene signals cause a stem cell to make more stem cells, or change into the next cell type down the line? The last question is on every researcher’s mind, because signal pathways are critical to understand how a certain type of cell can be made from an embryonic stem cell line, or how millions of adult stem cells can be made from a just a few to treat disease.

"2006 was a watershed year in other ways. Most Americans support embryonic stem cell research, and so does Congress. Despite a vote in the House and Senate that would overturn a restrictive presidential mandate, it wasn't enough to override George Bush's first-ever veto. California pushed through a thicket of lawsuits to shake loose billions of dollars for regenerative medicine. Now, finally, there is light at the end of that tunnel. Legislation in other states is moving so quickly it's difficult to keep track: just last week, Illinois, Iowa, Minnesota signed laws to permit all types of stem cell research. As political winds fanned the flames stateside, stem cells went international, creating a different kind of global warming. In a mighty push, Australia overturned a ban on nuclear transfer. The world's researchers had a banner year, with Japan, Germany, Norway and others announcing major discoveries. Not all the offshore news was good, however. The heat created a conflagration with the biggest scientific fraud in memory, the South Korean scandal.

"One thing is certain--international politics and the legal landscape has altered the way we do biomedical research. Thomas Friedman's "global flattening" doesn't apply here. A mosaic of legislation and national policy means uneven terrain for funding, infrastructure and accessibility to embryos and lines. The business issues are profound, including access to patients, fragmented intellectual property and a new calculus of investment risk that includes whether the research is illegal and how to mitigate against "founder flight" as entrepreneurs seek permissive jurisdictions to launch their businesses. The vacuum in Washington has shattered the state legislative landscape. In one state, a scientist can go to jail for doing embryonic stem cell research. In another, embryos can't be used for research, but it is fine to ship them in across the border. And who would have predicted this in 2001, the year of Bush's pronouncement: once funding from California, Wisconsin, New Jersey, Connecticut, Illinois, Maryland, Massachusetts, and other states is fully unleashed, it will surpass by a wide margin any dedicated federal dollars, restricted or otherwise.

"With all the moving parts, it made sense to assemble a group of experts and scholars from many disciplines to address issues at the interface of science, business, economics, law, and policy. I was delighted when Burrill & Company asked me to develop an agenda that would explore these connections. As a rule, stem cell conferences tend to be monolithic, in part because the reach of regenerative medicine is too broad to be addressed in two or three days. But to my knowledge, no conference tackles these questions from an international perspective. I'm excited to learn what this stellar group has to say, and how the glimmering edge of biology's most promising frontier will look in 2007 and beyond."

We will attending the conference both days. Watch for continuing coverage of the event.

Klein on Clinical Trial Problems with ESC Research

California stem cell Chairman Robert Klein is concerned about "tragedies" during clinical trials of cures developed with funding by the state of California.

He made the comment in a question-and-answer interview with reporter Steve Johnson of the San Jose Mercury News.

Klein was asked about his main concerning clinical trials funded by CIRM.

He replied:

"We need to work with the patient advocacy groups and the public so they understand that as we start trials there will be great victories, there also will be tragedies. They need to understand this is part of the process we need to go through. Because if the public is not broadly informed, there could be a reaction that could shut down the trial."

However, any clinical trials are years away. CIRM also may not be involved in their direct funding, although the cures may be based on state-funded research.

CIRM IP Legislation Faces Tall Hurdle

The following – written by yours truly -- appeared today in The Sacramento Bee as an op-ed piece. We will bring you more details of CIRM's current legislative efforts on Monday.

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Nearly three years ago, California voters created a unique and nearly autonomous agency that set the state on a $3 billion foray into embryonic stem cell research. Under the terms of Proposition 71, voters told the new California Institute for Regenerative Medicine to hand out $300 million annually in hopes that the grants would lead to cures for everything from diabetes to cancer.

Voters also told legislators not to mess with the institute at least for three years. Now that time is nearly up. And two powerful legislators are mounting the first effort -- under the terms of Proposition 71 -- to intervene in the institute's affairs.

The stakes are enormous and involve potentially billions of dollars of profits from stem cell therapies and cures.

The legislation was introduced last month by the chair of the Senate Health Committee, Sheila Kuehl, D-Santa Monica, and the Republican caucus leader in the Senate, George Runner of Antelope Valley. Their Senate Bill 771 is aimed at ensuring that California receives a healthy return on its investment and that state-funded cures are affordable and accessible.

But the senators face an extraordinary obstacle. Under Proposition 71, their legislation requires not just a majority vote to pass -- not just a supermajority vote (two-thirds) -- but a super, supermajority vote of 70 percent. That means 13 senators can kill the bill.

California's biotech industry and the institute are probably already compiling a list of their 13 best friends in the Senate. The state's leading biomedical organization, the California Healthcare Institute, is unhappy with the stem cell institute's intellectual property rules for sharing the wealth, declaring that they provide "a substantial disincentive" for creating commercial cures.

The rules determine who owns the results of the state-funded research, in other words, the intellectual property. They also determine how the intellectual property may be used and who, including the state, will receive royalties and under what conditions.

The California Healthcare Institute has not taken a position on Kuehl's bill but has indicated that it does not want to be hamstrung.

Runner and Kuehl, however, have an unlikely source of support. That's the legacy of the less-than-adroit legislative maneuvers by California stem cell Chairman Robert Klein. Much as President Bush's decision to limit funding for stem cell research spawned Proposition 71, Klein's actions ironically have fostered an environment conducive to the Kuehl bill's success.

Klein not only irritated some lawmakers, but some members of the stem cell institute's Oversight Committee as well. They were not pleased by his broadsides, such as denouncing the former chair of the Senate Health Committee, Deborah Ortiz, D-Sacramento, as an "ongoing threat." That message was delivered last year in a widely disseminated e-mail to patient groups via Klein's nonprofit advocacy group, Americans for Stem Cell Therapies and Cures.

The stem cell institute has attempted to strengthen its legislative ties. It took the unusual step, for a state agency, of hiring a private lobbyist, the well-connected Nielsen, Merksamer, Parrinello, Mueller & Naylor for $4,100 a month. More recently, the institute reached out to lawmakers and legislative staff, sending delegations to Sacramento twice last month, including Zach Hall, the institute's president, and Ed Penhoet, vice chair of the Oversight Committee and head of its intellectual property task force.

Kuehl has a tall hurdle to clear -- the 70 percent vote, not to mention the governor. She is stepping into a complex arena -- intellectual property -- where little unanimity exists, as the institute has discovered. But even if the bill fails, it will help to provide broader input on policies about intellectual property, developed during sparsely attended hearings. The measure additionally will serve as an important test of the institute's openness and political savvy.

While the agency is uniquely independent, California lawmakers are capable of creating much mischief when they feel their constituencies have been slighted. And that is mischief that the institute should avoid, so it can focus on its primary mission, as the institute proclaims, "turning stem cells into cures."

Robert Klein's Unseemly Position

The PR drums are beginning to sound for next Friday's $80 million stem cell giveaway in Los Angeles.

This time the flashbulbs and lights will be for a Democrat – not a Republican. He is Assembly Speaker Fabian Nunez of Los Angeles. As you may recall, California's Republican governor appeared last month for the hoopla when the California stem cell agency awarded its first-ever research grants.

Interestingly, announcement of the "CIRM press event" came not from the California Institute for Regenerative Medicine but on stemcellbattles.com, the blog of patient advocate Don Reed.
The announcement also carried the name of Amy Daly, executive director of Americans for Stem Cell Therapies and Cures, which is the private lobbying organization headed by Robert Klein. Klein is also chair of the state stem cell agency, which is giving away the money next week – part of $3 billion in state funds that intends to hand out over 10 years.

No mention of the "CIRM press event" could be found Saturday on the CIRM web site. Of course, anyone can call a news conference. But it is in the same location as the meeting for the agency, the Harvey Morse Conference Center at Cedars-Sinai Medical Center in Los Angeles, and would require the permission of that institution.

What does all this mean? It means continuing confusion about Klein and his role. Is he a lobbyist and private advocate for embryonic stem cell research? How does that fit with his role as a state employee and chair of the CIRM Oversight Committee? Can he separate those functions?

Last year, as head of the Americans group he denounced the leading voice for embryonic stem cell research in the state legislature as an "ongoing threat" to CIRM. The state agency, however, declined to comment on Klein's statement, saying he prepared it on his own time.

Klein has testified in court that he does not consider himself a state employee. In 2005, he refused to appear before the legislature for a hearing into issues involving CIRM. A millionaire businessman, he does not accept a salary as chair of the Oversight Committee.

Normally announcement of a news conference is aimed at notifying the news media for possible coverage. In the case of the announcement from Klein's lobbying group, it was aimed more at generating attendance by those would benefit from possible cures developed as the result of state-funded research. Their attendance provides better visuals and interviews for TV, radio and print reporters than the talking heads of state officials.

Building support for ESC research and generating news coverage for CIRM's work seems a worthwhile endeavor. But unseemly is a better word for Klein's current position astride both a state agency and the lobbying effort.

Better Than a Jet Plane

Larry Lokey, the former editor of the Stanford Daily who gave $33 million to Stanford University for stem cell research, says that giving away the money is more exciting than owning a jet plane.

His gift is also part of the growing momentum for private giving for stem cell research. CIRM's requirement for hefty matching on its building grants is likely to stimulate the giving even more.

Reporter Lia Hardin of the Stanford Daily reported Lokey's comments on jet planes, noting that he is also going to help fund a new building for the campus paper. Here is Stanford's press release on the gift.

Sewell Comments on CIRM Executive Changes

One of the Oversight Committee members for the California stem agency – David Serrano Sewell – has commented on the "Worst Enemy" item below. He also serves on the Governance Subcommittee and was present for the meeting discussed in that item.

Here are his verbatim comments emailed to the California Stem Cell Report:

"You make some interesting points concerning the adoption of the Internal Governance Policy, which is basically a MOU for Bob (Klein) and Zach (Hall). The ICOC tasked Ed (Penhoet) with the assignment of drafting this policy, and he did a great job. It's not perfect, but it works for now. This document is a reflection of the working relationship between Bob and Zach. I'm not passing judgment on that relationship, but we had to deal with it.

"I don't agree with Zach's comments. We're not in a situation where we're going to get as our next President either Bartelby The Scrivener or Dr. Dynamic because of the policy. Again, it's in place for Bob and Zach. Once we get further along the process in selecting our next president, the policy will likely change. Others may disagree, but that's how I view the situation.

"As for Prop. 71 itself. People wanted an active board, and that's what they got. We're engaged and listening to the public. Most of our operating structure is embodied in 71, including making any changes (which require the approval of the legislature and governor). If people don't know that, especially ICOC members, they ought to read 71."

CIRM's Worst Enemy? Maybe Prop. 71

The talk was of a "dog's breakfast," personal chemistry, schizophrenia and micro-management. The overseers of California's $3 billion stem cell agency covered it all last month as they attempted to produce a new management structure and enhance their ability to recruit a new president for CIRM.

The occasion was consideration of changes that will now come before the institute's Oversight Committee next week. The group is seeking to create more of a non-executive chair for the agency and shift more authority and responsibility to the president.

Sitting in on the meeting Feb. 21 of the institute's Governance Subcommittee were the two men filling the positions most directly affected – CIRM Chair Robert Klein and outgoing President Zach Hall.

The discussion did more than lead to approval of the restructuring. It focused a bright light on failings of the initiative process that created the agency, including micro-management language in Prop. 71 that now hampers the flexibility of agency. That is not to mention the difficulties of running any organization with two chief executives.

Prop. 71 stands at the heart of the issue. The ballot measure enshrined -- in state law and the State Constitution -- management minutia that has no place in legal codes, such as specifying that chair of CIRM's Oversight Committee must supervise preparation of its annual report. That requirement – or any other element of Prop. 71 -- can only be changed by another vote of the people of California or by an extraordinary, super-majority vote (70 percent) of both houses of the legislature and approval of the governor.

One member of the Governance Subcommittee, Brian Henderson, dean of the USC Keck School of Medicine, seemed astonished when he learned last month of the difficulty in making what should be routine changes. "Wow," was his comment.

The "dog's breakfast" comment came from Richard Murphy, CEO of the Salk Institute, during a discussion about why three executive committees are needed for CIRM when it has something over 20 employees. Not mentioned was the large size of its Oversight Committee, which has 29 members.

Here is how it went:

Hall: "Well, as Ed (Penhoet) said, I think it's working. I think on paper it looks like a mess."

Murphy: "It looks like a dog's breakfast, yeah."

Hall: "What I'm trying to say is that if I were looking at this, say wait a minute. I'm going to be over 25 people. and, my God, we've got two executive committees and a senior management committee."

Henderson: "It's ridiculous."

At one point, Hall added,

"If it were a traditional organization, it would be crazy to have the board sitting here trying to tell the president or the CEO how they should organize the internal workings of the organization."

Hall's comments at various points during the meeting best summarized many of the underlying problems with the dual executive structure at CIRM. He noted that he did not have "a horse in this race" referring to changes which largely would affect his successor. They are changes that are subject to revision if the presidential search committee finds a candidate who wants them modified again.

Hall said Prop. 71 does not give a "very high degree" of authority to the president. As an example, he cited the activities of the Governance Subcommittee as he was speaking to them. Hall noted that the president does not sit on the CIRM oversight board, as is customary in many organizations. He has no say in grant funding and no mechanism exists for the president or the CIRM staff to make suggestions regarding which grants to fund.

"The institute has a very powerful board that makes all funding decisions and keeps the president and staff on a pretty short string."

Hall continued,

"One could make a perfectly good case that CIRM would be best served by someone who's a good manager, a good administrator, a member of the staff -- the president is often referred to as staff in this context -- whose function is not to be a source of ideas along with the board, but to implement the ideas that the board generates. I think it's a perfectly good model, and I think it's one that might work very well....(T)here needs to be congruence between the kind of person you want and the responsibilities that this person is expected to fulfill within the organization.

"If you hire a manager and have a structure that calls for a leader, I think you're in trouble. Correspondingly, if you have a structure that calls for a manager and require someone who is a leader, I think you're also going to be in trouble."

Later Hall said,

"The point that we're left with, which is a very, very difficult one, is that within a very small organization, there are two leaders. And I think that is a problem....(I)nsofar as the president is a strong person who wants to do things their own way and has ideas and wants to feel they have some authority and control, I think it is going to be a problem to fit that person into this structure. I certainly have had problems, and I think of myself as in that category. I may be different from others like that, but I think it's generic."

Hall continued:

"...(Y)ou can say very frankly there's a kind of schizophrenia here. There's a very powerful board and there is an institute which sometimes is treated like the staff...(but occasionally)is the important organization with a board that has oversight. There's a real tension between those two structures and those two visions....

"I think the solution that's in this (restructuring) document, while admirable in many ways, looks very complicated to me...(F)or example...the job descriptions of the chair and vice chair...emphasizes that in this small group the president is No. 3 in the organization, and I have to say that's not a very attractive proposition."

Philip Pizzo, dean of the Stanford University School of Medicine, brought up the personal dynamics issue.

"If the chemistry works, then that can oftentimes overcome organizational imperfections. If the chemistry doesn't work, it doesn't overcome almost any kind of organizational imperfection."

Klein voted for the changes to make his position more of a non-executive post. He retains substantial authority over financing – public and private – as well as litigation, and supervision of CIRM's financial plan along with authority to set the board's agenda. Klein described the changes as "reoptimizing" CIRM for a new president to give him or her "the kind of structure and mix that works optimally to serve their needs."

Sherry Lansing, chair of the Governance Subcommittee, said the plan, presented by Oversight Committee Vice Chair Penhoet, was "excellent," and she pushed hard for its adoption without significant changes. Lansing is a former top Hollywood film executive and has undoubtedly experienced more than her share of touchy management issues.

Despite its "dualing executive" – our words, not Lansing's – she noted that CIRM pumped out $45 million in grants last month and will pump out $80 million more next week, a record not to be sniffed at.

CIRM's performance, after a particularly difficult start-up year, has improved greatly. That is the result of sharply focused, hard work and long days from a tiny staff. Whether that pace can be maintained is doubtful. CIRM needs to perform its routine work routinely. That will leave it ready for the truly exceptional tasks that inevitably pop up. The new president, the new structure and Robert Klein are the keys to that effort.

As for more permanent restructuring eliminating overlapping responsibilities, the Oversight Committee does have the option of going to the Legislature and asking for changes in Prop. 71. But in addition to the difficulty of hurdling the 70 percent barrier, such a move would open the door to possible changes that might not be palatable to the institute.

(Editor's note: The quotations are all drawn from the transcript of the Feb. 21 meeting, which can be found at www.cirm.ca.gov.)

The $80 Million Stem Cell Grant Proposals

The public summaries and scores of the applications for $80 million in embryonic stem cell research grants are now available on the web site of the California Institute for Regenerative Medicine.

You can find them directly by using this URL: http://www.cirm.ca.gov/publicsummaries/RFA_06-02/PublicList.html.

The grant recipients will formally be approved next Friday at the meeting of the CIRM Oversight Committee in Los Angeles.

Leon Thal: 'Meticulous, Unflappable, Creative'

Hundreds of persons memorialized scientist Leon Thal, a member of CIRM's Oversight Committee and an internationally acclaimed expert on Alzheimer's disease, at UC San Diego on Monday.

Reporter Cheryl Clark of the San Diego Union-Tribune wrote:

"As a scientist, Thal was a meticulous, humble, creative, diplomatic and unflappable mensch who helped design and conduct clinical trials to determine whether certain substances might stop progression of the disease, the speakers said during a memorial service at UCSD."

Clark continued:

"'I really believe he was the world's leading investigator in the testing of new therapies,' said Neil Buckholtz, who leads the dementias of aging branch for the National Institute on Aging in Bethesda, Md. "He gave hope for millions of people . . . because of his ability to forge consensus and his commitment to the principles of science.'"

Speakers also addressed other aspects of Thal's life: gardening, travel and flying cross-country in his small plane. They spoke of how he continued to drive his 1985 Toyota to work because "it still ran."

"Donna Thal fought back tears as she described some of her husband's idiosyncrasies. For example, he picked up trash while jogging and 'mended his socks even with holes as big as a half dollar,' she said."

CIRM has named the first-ever research grants awarded by the institute after Thal. UC San Diego has announced creation of a training fund for promising neuroscientists. The university said:

"Donations to this fund can be made online at http://neurosciences.ucsd.edu/neurocentral/memorial.htm, or checks may be made payable to UC San Diego Foundation, referencing Fund #4467, Thal Educational Scholarship (on memo line of check) and sent to: UCSD Neurosciences Development, c/o Leon J. Thal Educational Scholarship Fund; 9500 Gilman Drive, Mail Code 0853; La Jolla, CA 92093-0853."

Thal, 62, died last month in the crash of his plane in the Southern California desert.

CIRM CEO Search: The Pace and Talk of Candidates from Business and the Oversight Committee

How quickly will the California stem cell agency move to fill the spot of departing President Zach Hall?

Based on the track record of the 2005 presidential search, the CIRM Oversight Committee may not move with stunning dispatch. The search that year took about nine months. They had hoped to complete it in six.

But some pressure exists for relatively quick action. We found that sentiment in the first meeting of the CIRM Presidential Search Subcommittee along with a desire for more candidates from business and a disclosure that some members of the CIRM Oversight Committee themselves are interested in the position.

At least two members of the search subcommittee are on the record supporting quicker action, speed that we noted previously is certainly warranted.

During the subcommittee's meeting, Michael Goldberg, a member of the committee and a venture capitalist who directs life science investments for Mohr Davidow Ventures of Menlo Park, Ca., also warned against complacency. He said,

"There's a whole organization there that's been charged with an enormous responsibility of administering the research apparatus of the CIRM, and it's leaderless. I don't like working for an organization that's leaderless. I say leaderless, I don't mean that in the sense it doesn't have a chair engaged and vice chair engaged and Zach's engagement, but it's not the same as an organization that's moving forward.

"There's entropy in my experience at this stage of an organization's life with a leader who's announced his departure....That should give us actually an increased sense of urgency, if anything. so I'd like to do everything we can to fast track the process without sacrificing any of the transparency and engagement with stakeholders that i think we're all committed to."

Joan Samuelson, a patient advocate member of the search committee, said she concurred with Goldberg.

Earlier in the meeting, some members indicated displeasure with the 2005 selection process. However, the context of the search then was much different. CIRM had just been created but not within any existing state department. At first, the institute did not have an office, phones or even a way to make payroll. Those were relatively easy obstacles to overcome compared to the more complex tasks the organization faced later that year without a permanent president.

Brian Henderson, dean of the USC Keck School of Medicine and a member of the committee, said,

"I don't want to see a search go like the last time where getting to the end was more important than the process."

Philip Pizzo, dean of the Stanford medical school, agreed. He came back to the subject later in the meeting.

"I think last time we were under such a rush, that perhaps we didn't have the time to do that kind of due diligence, but we should be able to do it this time."

It was a sentiment echoed by Jeff Sheehy, a patient advocate member, said,

"I think we can be more deliberate this time, and we don't quite have the same sort of pressure upon us."

Sheehy additionally expressed hope that the committee would see more candidates from the business community. A business candidate presumably would be more oriented towards pushing stem cell products out the door as opposed to the sometimes more cautious views expressed by those more oriented towards science.

Also briefly mentioned during the meeting was the fact that some members of the Oversight Committee themselves have expressed an interest in the president's position, pointing up the importance of using a search firm to assist in filling the spot.

Obviously the Oversight Committee includes many capable people, but picking a president from the Oversight Committee would smack of an inside deal, although such practices occur in the business world. Perhaps such candidates should consider resigning from the Oversight Committee immediately if they want to be seriously considered.

Of course that might telegraph that they are candidates. The search committee is already distressed by the publicity surrounding an approach made to James Battey, the NIH's top stem cell executive. Perhaps candidates from the Oversight Committee have already been quietly discouraged by the search committee if it has a consensus on the matter. This is one of those situations where people mention "horns" and "dilemmas."

The full transcript of the Jan. 31 search committee meeting can be found at cirm.ca.gov.

Storing Stem Cells and Cash

Sometimes you could say that the California stem cell agency is in the business of hope.

That's a core engine behind the drive for embryonic stem cell research. Another is profit.

But hope propels other research and business as well.

Reporter Melissa Healy of the Los Angeles Times wrote today about private tissue banks, including the case of one man who expects to pay $6,000 to harvest his own stem cells and pay a Southern California firm $400 a year to store them. She wrote,

"NeoStem, the company that he has chosen to store his stem cells, has launched a $2.5-million plan to expand its services across the country in the next year. It joins a private tissue-banking industry that already includes more than two dozen companies storing the stem cell-rich blood of the umbilical cord harvested at the time of a baby's birth, one other bank storing stem cells from circulating blood, and an 8-month-old bank that draws and stores stem cells from the soft pulp of children's baby teeth."

Ebert Comments: Scientists Shy From Criticism, Controversy

Patent attorney and blogger Larry Ebert has posted a comment on the scientists and "humiliation" item below in "Stem Cell Snippets." Among other things, he says, "Most scientists avoid controversy like the plague. In a world where a competitor is apt to be the next reviewer of your grant or referee of your paper, you can't go around humiliating those in your field." Even public criticism, something different than humiliation, is not the norm, says Ebert.

A cozy world, indeed, if what Ebert says is 100 percent correct. Undoubtedly even cozier in the relatively tiny world of stem cell research. All more the reason for more public disclosure regarding the interests of those who review the applications for stem cell research grants.

Which brings up a sentiment from Lord Acton, the British historian. He said, "Everything secret degenerates...nothing is safe that does not show how it can bear discussion and publicity."

Regarding the quote, our thanks to Peter Singer, a bioethicist at Princeton University, who used it in an essay in New Scientist in October 2006, where we found it.

New Structure for a New CIRM President

The California stem cell agency is cleaning up its troublesome, dual executive issues and shifting power to the presidency of the $3 billion institute and away from the chairman's office.

The move is linked to the search for a new president for the California Institute for Regenerative Medicine. The current CEO, Zach Hall, plans to leave around June. Overlapping responsibilities and the resulting differences between Hall and CIRM Chairman Robert Klein have surfaced publicly in the past. (See "Dualing Execs: Touchy Issues.") Clearer lines of authority and creation of a non-executive chairman's office should enhance recruitment of top-flight candidates for the job, so the reasoning goes.

One patient advocate, who has watched CIRM closely since its inception, worried, however, that the new structure would turn the chairman and the Oversight Committee into "powerless figureheads."

In his Feb. 26 posting on stemcellbattles.com, Don Reed wrote:

"Bob Klein is the one man who understands the whole thing. Removing him from power is like taking Walt Disney away from Walt Disney enterprises."

Reed was commenting on restructuring of CIRM management that was approved, with an aye vote from Klein, Feb. 21 by the CIRM Governance Subcommittee. The changes now must be approved by the Oversight Committee at its meeting later this month. Months ago, Klein indicated he would step down from his position in 2008.

Among other things, the changes would:

-- Limit to four instead of 10 the number of employees in the office of the chair, including one for the vice chair. (CIRM has only 22 employees.)

-- Place the "Policy Office" under the president instead of the chair. That office implements Oversight Committee directives "through outreach" to the state legislature, Congress and other constituents. The president also would implement legislative policies of the Oversight Committee.

-- Require the concurrence of the chair in only the hiring of the chief legal officer, instead both the legal officer and the chief communications officer.

-- Clarify that all CIRM employees, except for the chair and vice chair, report to the president and remove language that stipulated the president and the chair "work out" office assignments.

-- Restructure CIRM's executive committee, giving the president more explicit control of its composition.

John M. Simpson, stem cell project director for the Foundation for Taxpaper and Consumers Rights, said the changes were a "step in the right direction." He said that the new policy was drawn up by CIRM Vice Chair "Ed Penhoet with consultation from Tina Nova, Richard Murphy and Phil Pizzo (all Oversight Committee members) after interviews with all CIRM employees."

As we have reported, CIRM's management structure, dictated in many ways by Prop. 71, has led to unnecessary difficulties. The changes would seem to create cleaner lines of authority and help to avoid ambiguities that generate confusion and conflict. But organizational charts are still only so much paper. They require persons of great skill, good will and energy to make them work.

The old and new "internal governance" policies can be found at www.cirm.ca.gov in links on the agenda for the Feb. 21 governance subcommittee meeting. We are told that only minor word changes were made then in the proposed new policy.

Stem Cell Snippets: Dirty Laundry and Openness

Humiliation and Secrecy – Scientists are accustomed to publicly humiliating each other, comments Wired blogger Kristen Philipkoski on CIRM Chairman Robert Klein's defense of CIRM's secrecy policy on the economic interests of grant reviewers. Dale Carlson, chief communications officer for CIRM, also defends the public secrecy in an op-ed piece in The Sacramento Bee. The San Jose Mercury News editorializes against it: "The public has a right to know who is applying, what research they want to do and who failed to receive grants. It also should know when scientists reviewing those grants have a conflict of interest. Opening up those two crucial aspects of the state's stem-cell program will help build confidence that taxpayers' $3 billion investment is in good hands."

Audits, Editorials and Dirty Laundry – Patient advocate Don Reed says in a March 1 item that the State Auditor did not find any real "dirty laundry" in her report on CIRM. The San Jose Mercury News editorialized that the institute should revisit its "ongoing transparency issues." The newspaper also said, "If questions over the use of chauffeured rental vehicles are going to receive this much attention across the state, imagine how the focus will sharpen when the institute starts spending $300 million a year and choosing which areas of research deserve priority." The San Francisco Chronicle editorialized that the audit has "the power to keep the institute on track to meet strategic goals and avoid conflicts of interest."

One Million – For the latest on the doings of the advocacy group headed by CIRM Chairman Robert Klein, check out its Web site. Americans for Stem Cell Therapies and Cures is pushing a nationwide email campaign on Congressional stem cell legislation. The goal is to generate one million personal stories, print them out and deliver to Washington, D.C.