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“Killer cells” and conflicts at California’s stem cell agency

A laboratory pipette with fluid and test tubes for cancer research. (Photo: CI Photos, via Shutterstock)

Call it “The Case of the Killer Cells.”  It is an $8 million matter involving an effort by  California’s ambitious stem cell agency to develop cures for particularly tenacious and fatal cancers.

The cash is snarled in an “embarrassing” conflict of interest, however, not to mention an irregular vote on the application for research funding from the stem cell agency. The situation has prompted an unusual, mea culpa letter to the state’s official watchdog agency that enforces conflict laws involving government spending.

Conflict-of-interest matters have dogged CIRM since its inception in 2004.

The mea culpa and the faulty vote are yet to be resolved. But the “killer-cell” case has opened a small door into the conflict-of-interest world at the California Institute for Regenerative Medicine (CIRM), as the agency is officially known.

Wrapped up in the case are the tangled complexities of conflicts of interest at the stem cell agency — ones that were built in by the very ballot initiative that created the enterprise — plus secrecy problems involved in the approval of billions of dollars in taxpayer-funded research awards. That is not to mention difficulties in dealing with the large, 35-member CIRM board, whose size is fixed in state law. The situation also makes it clear that the stem cell field is, oddly enough, both very small and very large when it comes to conflicts.

Conflict-of-interest matters have dogged CIRM since its inception in 2004. More than $2.1 billion has gone — all legally — to enterprises that have links to past or present members of its governing board, as reported by Capitol Weekly and the California Stem Cell Report. So it is not altogether surprising that this latest example popped up this spring.

Involved is Ysabel Duron, one of the 35 members of CIRM’s governing board.

Despite a conflict of interest, she voted on April 19 to approve the $8 million award to BioEclipse Therapeutics, Inc., of South San Francisco. The firm’s research uses  “killer” immune cells loaded with a cancer-killing virus to destroy cancer tissues. It was Duron who wrote the letter to California’s Fair Political Practices Commission (FPPC) confessing her mistake.

The $8 million award includes $423,500 for work being done at the Stanford Women’s Cancer Center.

Duron is a patient advocate member of the board and founder and president of the Latino Cancer Institute, a San Jose, Calif., nonprofit that receives its funding from a variety of sources, which is part of the problem connected to her vote. She receives a salary of $36,000 annually for her work at her Latino institute.

She told the FPPC that her institute is partly financed by a $212,000, four-year award received through the Stanford Cancer Institute. Duron’s organization received the award before her appointment to the CIRM board.

The $8 million award that Duron voted for includes $423,500 for work being done at the Stanford Women’s Cancer Center, which triggers a conflict of interest involving Stanford.

Before the meeting last month, the CIRM staff notified Duron that she could not vote on the killer-cell application, CLIN2-12823. CIRM directors are routinely told in advance about the applications on which they are forbidden to vote, but only with the number of the application. The names of the applicant, institution, subcontractors and the actual application are withheld from the directors as part of CIRM’s standard practices.

The directors are “blinded” to help avoid perceptions of conflicts of interest. They see only the same public summary of the grant review that the public also sees. A month or so before the directors’ meeting, the grant reviewers meet behind closed doors and make their decisions on applications. The reviewers come from out of state and are not identified beyond a listing of several hundred on the CIRM website.

“What I didn’t realize at the time of the vote was that the applications were presented…in a different order than what was on the agenda.” — Ysabel Duron

They do not have to disclose publicly their conflicts of interests either financially, personally or professionally. The CIRM staff deals with those privately, but it has stopped publishing the names of reviewers who may be disqualified in a particular round.

The reviewers make the de facto decisions on who wins an award and who loses. The reviewers’ positive recommendations have only been overturned once or twice by CIRM directors in the past 17 years.

“What I didn’t realize at the time of the vote,” Duron said in her letter, “was that the applications were presented…in a different order than what was on the agenda. And I did not think to consult my conflict list before voting on the award.

“Normally, CIRM staff doesn’t call my name for a vote on an application in which I have a conflict of interest. It turns out they were also confused due to that change in the order of presentation. As a result, they called my name for a vote on the matter, even though I had a conflict. Aside from voting in favor of the award, I did not participate in the,,, debate on the application, nor did I ask any questions about it.”

Duron described her vote as an “inadvertent error.” She said she was “embarrassed by my lack of attention.”

Duron did the right thing in reporting her errant vote to the FPPC, according to several longtime observers of CIRM affairs, who also addressed the implications of the case. They spoke with Capitol Weekly on the condition of anonymity in order to be frank and candid.  Beyond the letter, they said that the situation testifies to persistent governance issues at the agency ranging from the size of the board to the “secretiveness” of the award process.

“The secretiveness around the applicants’ identity at the board runs counter to all California government processes, is based on invalid and flimsy reasoning and should be dispensed with,” said one person who has observed CIRM since 2004.

“I think the board decision-making process should be much more transparent with full disclosure of complete applications minus proprietary information.”

This person also criticized the CIRM staff, which has grown rapidly to about 46 persons in the last 18 months. The new additions are less than familiar with the standing operations of the agency.

The size of the CIRM team had shrunk to about 30 from more than 60 four years ago as the agency faced financial extinction because of the nature of CIRM funding. Its current stream of state bond proceeds ends in about a decade or so — another feature of the ballot initiative that spawned the program.

The board size has been criticized for years for being unwieldy, leading to diffusion of responsibility and a lack of accountability.

(The initial funding that began in 2004 lasted much longer than 10 years because of a slow start-up, litigation and less expensive research.)

Another issue coming into play, said the person, is that the agency’s governing board, which is nearly the size of the 40-member State Senate, is “too damn big.”

The board size has been criticized for years for being unwieldy, leading to diffusion of responsibility and a lack of accountability. In 2012, a $700,000, blue-ribbon study commissioned by CIRM itself recommended downsizing the board. Nonetheless, Proposition 14 of 2020, which was endorsed by the CIRM board, expanded the panel from 29 to the current 35. Many members of that board are no longer serving.

The sponsor of the 2020 measure was Robert Klein, a Palo Alto real estate developer. He founded and heads the stem cell advocacy group Americans for Cures. Klein was also responsible for drafting the 2004 ballot initiative that created the agency. In preparing the measure, Klein gave most of the institutions that would benefit from CIRM’s largesse a seat at the table where the money is handed out. Klein became the first chairman of the organization and served until 2011.

“I do agree that there are issues with the structure of the CIRM board.” — Francisco Prieto

From the very start in 2004, “having a big board (meant it) was going to be horrific,” said another person long familiar with CIRM. “Some innocent mishap could be blown up” well beyond the “killer cell” situation. “It could be very unpleasant.”

Duron’s vote and CIRM’s procedures, said the person, deserve a full, public post-mortem on exactly what happened, who discovered the problem and what steps are being taken to prevent it from happening again.

One former board member, Sacramento physician Francisco Prieto, who served from 2004 until recently, said in an email, ”I do think that Ysabel is, as she says, ‘a strong advocate for government transparency and ethics,’ and a very ethical person. The fact that she reported this rather than waiting to see if it would later be revealed (I suspect it might never have been) reflects this, in my opinion.

“I do agree that there are issues with the structure of the CIRM board,” Prieto said, adding that the creation in 2013 of a special board committee (the Application Review Subcommittee)  to approve awards instead of the full board “pretty effectively addressed most of these.”

The conflict rules require that directors not speak on applications on which they have a conflict.

Prieto said that the creation of the committee “made many of the institutional representatives on the board unhappy, feeling that they had been reduced to something like spectators. I thought at the time and still think it was the right decision.”

The Application Review Subcommittee consists of 19 members of the full board, including Duron. It was created to ratify reviewer decisions on awards as a surrogate for the full board and to help avoid conflicts of interest that sometimes resulted in only a handful of directors being able to vote. In 2014, however, only seven members of the subcommittee voted on the largest single research award in CIRM history, $40 million.

In the case of the subcommittee’s meeting in April when Duron voted, 12 of the 19 members had conflicts that prevented them from voting on at least one of the six applications. Six members had conflicts on two or more. Art Torres, a UC regent and vice chair of the full CIRM board, had conflicts on four of the applications.

The conflict rules require that directors not speak on applications on which they have a conflict. Nonetheless, on April 19 Torres suggested a parliamentary maneuver aimed at helping to approve an application (not involving BioEclipse) on which he had a conflict. He received no admonition at the time from CIRM’s lawyers.

CIRM has given awards to less than 800 scientists. Plus the large majority of funding has gone to only eight institutions in California.

CIRM’s process of voting as laid out in Duron’s letter was described by one observer as “ridiculous.”

“They are spending too much time on the wrong things because of the built-in conflicts,” said the person.

Then there is the small world of stem cell research in California, although the state is a leader in the field. This is not an area which has tens of thousands of researchers at the top level, even nationally. CIRM has given awards to less than 800 scientists. Plus the large majority of funding has gone to only eight institutions in California. At the same time, stem cell and gene therapy research is a global endeavor that brings together in one form or another collaborators and rivals, sometimes uncomfortably, as they all seek to be the first with a new, blockbuster treatment.

Asked for comment about her letter, Duron said in an email, “I felt it important that I report myself for total transparency!

“You are correct about the complexity of keeping our voting clear of conflict or even frankly remembering. The staff works its darndest to keep us on the straight and narrow. And I believe all of the board is well-intentioned and committed to what is right and fair. If you can find or recommend a best or better practice to improve on these practices I welcome it.”

The CIRM board itself could ask the legislature to modify the initiative, but that would be a prodigious task.

Because of the nature of the stem cell and gene therapy fields, it is almost impossible to avoid conflicts unless the CIRM directors are chosen from persons who have little or no connection with any research institutions or stem cell businesses. A few CIRM board members may fill that bill, but the CIRM ballot initiatives say to do otherwise.

The underlying issues are nearly impossible to fix short of a third ballot initiative. That is unlikely to happen anytime soon and perhaps never. The CIRM board itself could ask the legislature to modify the initiative, but that would be a prodigious task. It would require a super, super-majority vote of both houses and the governor’s signature — yet another feature of the ballot initiatives.

Duron’s vote last month was not critical to the approval of the $8 million application. CIRM directors are expected this Thursday to vote again on the proposal just to be sure everything is legal. The FPCC is not likely to take up Duron’s letter any time soon. This is a big election year and the usual flood of complaints will fill the FPPC’s agenda. Plus, given the voluntary letter and the explanation, the watchdog’s bite is likely to be more of a muffled warning bark.

“This situation highlights an issue that has plagued the agency and its governing board since inception,” said an observer who has tracked CIRM for years.

“Just how independent are members of the Independent Citizens Oversight Committee (the official name of the CIRM board)? Even for the patient advocates, the answer, unfortunately, is, ‘not very.’

“Governance remains CIRM’s Achilles heel.”

Editor’s Note: David Jensen is a retired newsman who has been writing about the California stem cell agency for 17 years on his newsletter, The California Stem Cell Report. He is also the author of the book, “California’s Great Stem Cell Experiment.”

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