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PART #2, California's Stem Cell Program Is Hobbled but Staying the Course

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Published: December 10, 2005
(Page 2 of 2)



The cells can turn into any type of cell in the body. That means stem cells might one day be used to generate replacement tissue for damaged organs and treat numerous diseases. But the science is ethically controversial because the creation of stem cells involves the destruction of human embryos.

Proposition 71 set up the California Institute for Regenerative Medicine, governed by a 29-member board. Members, appointed by state officials, are largely patient advocates and the deans or presidents of California universities and research institutes.

The initiative was written to shield the institute from interference by the Legislature, in hopes of speeding its work. But that approach has not totally worked and, in fact, might have left the stem cell program vulnerable to legal challenges.

Two lawsuits, although filed by lawyers opposed to embryonic stem cell research on ethical grounds, challenge the legality of Proposition 71, contending that it allows state money to be spent by people not adequately under state control.

A trial, in a state court, is set to begin Feb. 27. Until the litigation is resolved, which could take many months, the state will not issue any of the $3 billion in bonds to pay for research.

So far the institute has been subsisting on a $3 million loan from the state and a $5 million gift from the audio entrepreneur Ray Dolby. But that money will run out in May and the institute, which has 19 employees, has frozen hiring.

Robert N. Klein, the chairman of the institute's board and chief author of Proposition 71, denied that the institute's structure left it vulnerable. "They would have challenged us regardless of how we would have written it," he said.

Mr. Klein, a real estate developer whose son has diabetes, said he hoped to raise as much as $50 million in bridge financing early next year from charities and wealthy individuals. The money would allow for grants, first to train scientists in stem cell techniques and then perhaps for actual medical research.

Some California legislators and public interest groups that favor stem cell research have also criticized the institute, saying it has built-in potential for conflict of interest because some board members are from universities that could receive grants.

Critics also say the institute's activities have not been adequately open to public scrutiny. The board and various board committees have held more than 50 public meetings so far, and many have been sparsely attended.

At the meeting held this past Tuesday at the City of Hope medical center in Duarte, east of Los Angeles, the board members outnumbered members of the public.

The meeting's major topic - one of the final issues to be ironed out before grants can be awarded - was how to handle patents arising from research paid for by the state. A study commissioned by backers of Proposition 71 during the campaign had projected the state could earn royalties of $537 million to $1.1 billion in the next 35 years.

But a commission that the legislature asked to examine patent issues reported in August that such projections were "based on unrealistic assumptions about the potential economic impact" of the stem cell program.

Also dashing some prospects for royalties is a concern that if the state received too much in royalties it might be required under federal rules to issue taxable bonds instead of tax-exempt ones. That could raise the state's interest costs by several hundred million dollars during the next 30 years.

Mr. Klein said royalties were never expected to be a major part of the economic return from stem cell research. That return, he said, would instead come from the growth of the California biotechnology industry and from lower medical costs resulting from stem cell therapies.

At Tuesday's meeting board members agreed on an interim policy: let universities and other grant recipients own the patents developed from their research financed by the stem cell program and license them to companies. That would be in accord with federal policy under the Bayh-Dole Act.

But some board members, as well as state legislators, have said there was a promise to voters that the state would get a direct financial return and that treatments developed with taxpayer money would be made affordable to Californians. Others countered that requirements for royalties to the state or restrictions on pricing of therapies could discourage companies from developing treatments.

The interim policy calls for universities to share the proceeds from highly lucrative patents with the state in some still unspecified way.

Another item on Tuesday's agenda was a proposal to appoint a 14-member committee to develop a strategic plan for the institute.

Some of the academic members of the panel revolted, saying the plan should be developed by the institute's president, in consultation with individual board members. A board's job, they said, is just to approve or amend what the staff does.

This stance seems to reflect a sense on the part of some of the university presidents and deans that the monthly all-day board meetings, plus extra meetings if they are on committees, are more time-consuming than they had imagined.

But some patient advocates on the board said they wanted to be directly involved in developing the strategic plan. And Mr. Klein said a formal committee was probably necessary because it might violate the state's open-meeting law for the president to consult privately with too many board members.

The board decided the president, Zach W. Hall, should come up with a plan for developing the strategic plan, including how he would involve the board. Mr. Berg of Stanford objected, saying that if every plan first needed a plan on how to develop the plan "you guys are going to be just strangled."

The question of whether there will be a strategic planning committee was left for a future meeting.