Senate approves stem cell measure

The Senate approved a bill Wednesday calling for the state of
California to receive guaranteed benefits from its $3 billion stem
cell investment. SB 771 passed on a 38-0 vote and now heads for the

The bill follows several unsuccessful attempts to mandate financial
benefits from Proposition 71, which voters passed by a wide margin in
2004. It also comes as watchdog groups are charging that supporters of
Prop. 71 have backed off of initial rosy promises of financial
royalties to the state.

The bill had an uncommon set of co-authors, Senators Sheila Kuehl,
D-Santa Monica, and George Runner, R-Antelope Valley. While there has
been sharp disagreement across the political aisle about whether the
state should be funding stem cell research in the first place, there
parties appear to be united by the idea that the legislature should
have more oversight on the state’s investment.

Indeed, Runner opposed Prop. 71 for religious and moral reasons. But
he said that he supports Kuehl’s effort, despite their differing
opinions on stem cell research itself, because he wants the state’s
voters to get what they were promised. Runner added that he perfectly
understands the argument that insisting the state get royalties could
have a dampening effect on companies seeking Prop. 71 grants.

“The only problem is, that was the agreement,” Runner said. “You can’t
change the rules.”

Specifically, SB 771 adds a “requirement that every award recipient
provide the state with 25% of the associated net licensing revenues
and would authorize the institute to commission an audit of
expenditures to ensure appropriate accounting.”

SB 771 is similar to a legislation carried last year by termed out
Senator Debra Ortiz, said John Simpson, a consumer advocated at the
watchdog group the Foundation for Taxpayer and Consumer Rights. Ortiz
carried both SCA 13 and SB 401, which sought to exert greater
legislative control of the state’s stem call agency, the California
Institute of Regenerative Medicine.

“Proposition 71 does it’s utmost to cut the legislature out of the
process,” Simpson said.

Runner coauthored both pieces of Ortiz’s legislation last year. While
the current bill is similar, he said, there is one key difference this
time–they set up the bill with a veto-proof 70 percent threshold. If
it does nearly as well in the Assembly, it will become law, no matter
what Governor Arnold Schwarznegger does. He said it is his hope that
the CIRM board sees the wisdom in writing in some of these protections
into the regulations they are currently evaluation.

Stem cell experts have repeatedly warned that actual treatments are
years away, and that any royalties to the state would likely be
dwarfed by other benefits–such as lives saved and medical procedures

However, Simpson said that he wants to avoid a repeat of Avastin.
Biotech giant Genentech developed the cancer drug with the help of
significant public investment, he said, including $44.6 million in
federal dollars from the National Cancer Institute. When released, the
drug costs $47,000 for a 10-month round of treatment–a number that
could have been more than twice as high if Genentech hadn’t bowed to
pressure to lower the price, Simpson said. Genentech reported a $2.1
billion profit last year.

“There is nothing in the current regulations that would preclude that
type of outrageous profiteering,” Simpson said.

During the campaign for Prop. 71, supporters pointed to a report from
Stanford professor Laurence Baker and consultant Bruce Deal from the
Analysis Group which said the state could get direct royalties of
between $537 and $1.1 billion on its stem cell investment.

Baker was also one of three authors or a paper in the journal Nature
Biotechnology last month titled “Proposition 71 and the CIRM–assessing
return on investment.” The paper appears to back away from claims of
direct royalty payouts to the state.

“In theory, royalties from IP developed with CIRM funding could
provide a direct financial return to the California budget,” the paper
states. It then goes on to emphasize high levels of “uncertainty” and
warns of “the long run trade-off between assessing royalties and
speeding development of treatment.” While benefits to the state could
eventually amount to tens of billions of dollars, the report states
these will come mostly in offset medical costs and longer, healthier
lives for many citizens.

CIRM spokesman Dale Carlson said the agency wished to decline comment
on either SB 771 or the report from Baker and a pair of other Stanford
researchers, Michael Longaker and Henry Greely.

Speaking the Capitol Weekly last year, Deal said the royalty numbers
were only possibilities and would pay out over multiple decades–and
that they were widely taken out of context during the campaign. More
recently, Deal wrote a report claiming that Missouri could see $3.8
billion in offset medical cost by approving stem cell research. But
Missouri is not directly funding research, and that report did not
tout royalties.

“Unfortunately, the idea that public funding for stem cell research
can pay for itself many times over has found its way into similar
proposals in other states,” said Jesse Reynolds project director for
biotechnology accountability at the Center for Genetics and Society, a
leading CIRM critic. He pointed to New York, where Governor Eliot
Spitzer has been pushing a $1 billion stem cell initiative largely on
these grounds.

Runner said he also found the article troubling: “Those kind of
responses are precisely what brought us to the point of needing

In the meantime, some Republican critics of stem cell research could
not help but gloat over what they see as Democratic buyers remorse of
Prop. 71.

“Does Senator Kuehl possibly suggest that the proponents of
Proposition 71 may have in some way exaggerated the benefits of
Proposition 71 to the people,” scoffed Senator Tom McClintock,
R-Thousand Oaks, during Wednesday floor debate over SB 771. McClintock
then voted for the bill.

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