Taxpayer Money Will Finance Industry Profits Unless Public ‘Owns’ New Medical Breakthroughs

Santa Monica, CA — 13 of 16 recipients of stem cell research grants to be financed by California taxpayers under Proposition 71 have links to private industry which will likely result in over-priced medical treatments unless new provisions for public control are adopted, according to the Foundation for Taxpayer and Consumer Rights (FTCR). FTCR said the conflicts-of-interest would be made worse if the board overseeing the stem cell funds agrees to a proposed policy allowing grant recipients to control the medical treatments invented and developed with publicly funded research.

The research grants were awarded both to private research institutes and universities that have links to pharmaceutical companies. Federal policies in place under the Bayh-Dole Act allow universities and institutions to license inventions developed with taxpayer funds to private companies who are allowed to keep the majority of royalties and profits. The Bayh-Dole Act has been proposed as a model for California stem cell research.

Under Bayh-Dole, taxpayer money accounts for 44% of all health-related research and development. Despite this huge investment of taxpayer money, the federal government has never used a provision of the federal Bayh-Dole Act allowing regulators to require “affordable” prices for prescription drugs and other products developed with public funds (see Arno-Davis study below). As a result, taxpayers who have already paid for research provided by government grants are often required to pay huge prices for new prescriptions that fail to account for taxpayer subsidies. FTCR said that unless new protections are created for stem cell research in California, average and low-income Californians would likely not have access to any new stem cell treatments because private companies would be allowed to charge exorbitant prices for, and profit from, the new medical technologies.

“Allowing private companies to own and control new medical treatments developed with taxpayer money is a violation of the public trust. Voters were told they would benefit from stem cell research, but if the drug companies own the treatments, it will be the top executives and shareholders that will profit,” said Jerry Flanagan FTCR. “Without proper controls put in place now, many Californians will not be able to afford access to the research products they paid for.”

The grant recipient conflicts-of-interest include:

* The Burnham Institute which has four board members with ties to biotech or pharmaceutical companies and Burnham’s President is a member of the stem cell research institutes oversight board (ICOC);
* 8 of 11 universities receiving grants have ties to pharmaceutical and biotech companies such as Amgen, Genentech, Bristol-Myers Squibb and Johnson & Johnson;
* One university grant recipient, UCSF, has staff that serve on pharmaceutical companies boards, receives funding from one of the worlds largest pharmaceutical companies (Bristol Myers Squibb), has two ICOC members on staff, and has a research center on campus paid for by biotech giant, Genentech.

Click here to read an analysis of the 13 grant recipients.

The Prop 71 board that oversees the stem cell grants is expected to vote on a policy in November that will determine who will ultimately have control of medical breakthroughs created by $3 billion in taxpayer funded research. At the direction of California legislature, The California Council on Science and Technology, an industry group with an interest in maintaining the status quo on research policy, recently recommended that the stem cell institute adopt the federal Bayh-Dole standards.

Payment of the grants has been blocked by lawsuits alleging Prop 71 violates the California Constitution by awarding taxpayer company to a research institute that is not subject to state good-government, political reform and open meetings laws.

For more information regarding the Bayh-Dole Act’s failure to keep publicly funded prescription drug breakthroughs affordable read the Tulane Law Reivew article by Professors Peter Arno and Michael Davis.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization.