Proposed Rules For $3 Billion in Taxpayer Stem Cell Grants Forfeit Public Control

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Los Angeles, CA — Consumer advocates criticized draft rules to be discussed at a public hearing today by the stem cell research oversight committee that would determine who owns discoveries paid for by $3 billion in taxpayer-funded research grants under Prop 71.

FTCR criticized a recommendation that grantees, and the private companies they license, will own publicly funded discoveries. The group raised concerns that once ownership rights are ceded there is no mechanism to assure new treatments are affordable.

“Asking the grantees to do the right thing after giving away the farm is like asking the fox to cough up the chickens after giving him the key to the hen house,” said John M. Simpson, Stem Cell Project Director for FTCR. “What leverage is there to make sure taxpayers benefit if ownership rights of publicly funded research are given away at the outset?”

The key to fulfilling the promise of Prop 71 is to “ensure that ownership rules, so-called intellectual property rights, make medical breakthroughs developed with taxpayer money available to all Californians. That means that the stem cell research institute must adopt policies that guarantee that new treatments are affordable and accessible,” according to FTCR.

The intellectual property (IP) guidelines to be discussed today says the stem cell institute, the California Institute of Regenerative Medicine (CIRM), should encourage commercialization of discoveries it funds. It says in licensing discoveries, “CIRM will require preference be given to companies with plans for access to resultant therapies for underserved patient populations.”

“That sounds good,” said Simpson, “but it’s just paying lip service to growing pressure that the public’s interest must be met and that promises made during the Prop 71 campaign are kept. The key is actually controlling the ownership of the public’s property.”

The policy discussed today is an interim IP policy meant to apply to the first training grants issued under the $3 billion bond program. However FTCR raised concerns that the current proposal failed to address key affordability issues and set a bad precedent for future ownership rules.

“Temporary policies have a way of becoming permanent when pushed by powerful private interests like the drug industry,” Simpson said.

The stem cell institute has been broadly criticized for deep conflicts of interest between the overseers of public funds, drug companies, and grant recipients. In October a Senate Health Committee public hearing was called in response to concern raised over whether taxpayers and voters will benefit from Prop 71 research, as was 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 stem cell institute has relied largely on flawed national IP guidelines, outlined in 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 licensed 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.

Before California voters overwhelming approved Prop 71, proponents claimed that California would receive up to $1 billion in royalties and $11 billion in other savings.

“Californians support stem cell research,” said Simpson. “But they expect the promises made during the Prop 71 campaign to be kept. They didn’t vote for a blank check to biotech and drug companies.”

FTCR Recommendations

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 the stem cell oversight committee 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 44% of health-related research nationally 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, shares with other researchers to guarantee “open access” to new research tools, and provides 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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