CA Stem Cell Institute Must Allow Taxpayers and Patients to Have a Controlling Interest in New Medical Breakthroughs

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Consumer Group Calls on Regulators to Protect $3 Billion Investment

San Francisco, CA — Prior to a public hearing convened by the state legislature today, the Foundation for Taxpayer and Consumer Rights (FCTR) issued three principles that must be adhered to by the stem cell research institute when issuing $3 billion in bonds under voter-approved Prop 71 (see below).

The key to fulfilling the promise of Prop 71 is to “ensure that new medical breakthroughs developed with taxpayer money are available to all Californians. That means that the stem cell research institute must adopt policies that guarantee that new treatments are affordable,” according to FTCR.

“Drug and biotech companies see publicly-financed research as a gold mine. Policymakers must ensure that taxpayers and patients don’t get the shaft,” said Jerry Flanagan of FTCR. “Many Californians support stem cell research but are unwilling to provide a blank check to biotech and drug companies to develop it. Voters were told they would benefit from stem cell research, but if the drug companies own new medical treatments they will likely price them out of reach of average Californians. What is the benefit of new stem-cell technologies if we cannot afford them?”

The stem cell institute has been broadly criticized for deep conflicts of interest between the overseers of public funds, drug companies, and grant recipients. The public hearing was called in response to concern raised over whether taxpayers and voters will benefit from Prop 71 research, as they were promised by Prop 71 proponents, or whether biotech and pharmaceutical companies that control the Prop 71 research institute will profit at the state’s expense.

The Prop 71 research institute is in the process of adopting “intellectual property” guidelines that will determine who will control new medical breakthroughs and receive royalties from new products. The current recommendation is to adopt flawed national guidelines, called the Bayh-Dole Act, which has failed to keep new medications developed with taxpayer money affordable to average Americans.

For example, under federal guidelines, the rights to the blockbuster glaucoma drug Xalatan, developed with $4 million of taxpayer grants at Columbia University, were sold to Pharmacia Corp. (now Pfizer) for less than $150,000. Pharmacia made $507 million on Xalatan in 1999 alone, charging U.S. patients $50 a bottle for ingredients that cost only pennies to produce.

The stem cell institute is considering a recommendation to allow grant recipients to keep all royalties garnered from publicly-financed research, though prior to voter approval of Prop 71 proponents claimed that California would receive up to $1 billion in royalties and $11 billion in other savings.

“For most Californians, the affordability of new treatments will determine whether or not they are accessible,” said Flanagan.

The debate over ownership of intellectual property and the question of royalties must be carried out with the interests of taxpayers and patients in mind, not the private companies that have a financial stake in the outcome of policy decisions. FTCR called on policymakers to adopt the following principles before approving additional grants:

1. Affordability is the key to access. Prop 71 promised that voters and taxpayers would benefit from new medical breakthroughs. Essential to fulfilling the goal of public benefit is to ensure that new medical breakthroughs are affordable.

An example of failed intellectual property standards is the national Bayh-Dole Act which has failed to keep prescription drugs and the results of other publicly funded research affordable even though that nationally 44% of health related research is funded by taxpayers. As a result, taxpayers who have already paid for research provided by government grants are often required to pay huge prices for new prescriptions at a doctor’s office or pharmacy.

2. Public Control & Oversight of Intellectual Property. Despite huge investments of taxpayer money, the federal government has never used a provision of the federal Bayh-Dole Act allowing regulators to require affordable prices and that research tools developed with public grants are widely available. Essential to the success of Prop 71 research is a policy that provides on-going public control of how research products are priced, shared with other researchers to guarantee “open access” to new research tools, as well as provide public oversight of conflicts of interest between grantors and grant recipients.

A possible model for public control of stem cell research in California is the International AIDS Vaccine Initiative (IAVI). IAVI retains the rights to inventions developed with its funding and seeks commitments from commercial partners that will result in vaccines and treatments made available to the public at reasonable prices and in sufficient quantities. The stem cell research institute could build on this model by requiring companies developing medications with public funds to provide discounts to Californians, particularly to low and medium-income patients.

3. Diversity of research. The Prop 71 stem cell institute oversight board is dominated by biotech interests and a handful of select disease group advocates that will likely steer research grants to a narrow field of medical conditions. Intellectual property guidelines must encourage broad investment of funds to develop cures for the widest ranges of illnesses, not just those with well-heeled advocates.

Under Bayh-Dole the focus of national research has shifted to products that have immediate commercial potential for large markets — towards illnesses and/or symptoms that guarantee profit returns, not necessarily where need is greatest. For example, sickle cell anemia, which primarily effects African American communities and is not represented at the stem cell institute, has been successfully treated with the use of adult cord blood stem cells. Prop 71 stem cell research grants could provided new breakthrough treatments for sickle cell anemia only if the stem cell research institute votes to approve such grants.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization. For more information about stem research in California, go to:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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