State needs return on investment in stem-cell studies

Published on

San Jose Mercury News (California)

The California stem-cell oversight board, rife with conflicts of interest, could make matters much worse if drug companies are allowed to own new medical technologies. The Proposition 71 board is expected to decide soon who will ultimately control, and therefore benefit from, medical breakthroughs developed by the initiative’s $3 billion in taxpayer-funded research.

At the request of the California Legislature, an industry-friendly group recommended that California stem-cell research abide by the intellectual-property standards of the federal Bayh-Dole Act. Among other provisions, that law allows institutes and universities to license inventions developed with taxpayer funds to private companies. The private companies in turn are allowed to keep the majority of royalties and profits.

Anyone who has purchased prescription drugs in the past two decades knows that these “standards” have failed to give Americans access to affordable medical breakthroughs. Taxpayers who have already paid for research and development provided by government grants are often required to pay huge prices at a doctor’s office or pharmacy. For example, the rights to the blockbuster glaucoma drug Xalatan, developed with $4 million in taxpayer grants at Columbia University, were sold to Pharmacia Corp. 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.

The proposal to apply federal ownership rules to California stem-cell research raises key questions: Do taxpayers who are funding stem-cell research deserve a return on their investment? Should private industry be allowed to charge the public whatever price it chooses to access medical treatments whose discovery and development the public already paid for?

Many Californians support stem-cell research but are unwilling to give drug companies a blank taxpayer check to develop it without appropriate controls.

Sorting out who will ultimately control the research products is the key to the debate. At least 13 of the 16 applicants to receive the first round of Proposition 71 grants have already fostered deep ties with the drug and biotech industries. For example:

* One university grant recipient, the University of California-San Francisco, has staff who serve on pharmaceutical company boards and the stem-cell oversight board (which approves grant applications), receives funding from one of the world’s largest drug manufacturers (Bristol-Myers Squibb), and has a research center on campus paid for by biotech giant

*At least eight of 11 universities to receive grants have staff serving on the boards of, or are employed by, pharmaceutical and biotech companies such as Amgen, Genentech, Bristol-Myers Squibb and Johnson & Johnson.

*The private Burnham Institute has four board members with ties to biotech or pharmaceutical companies and its president is a member of the stem-cell oversight board.

According to the National Institutes of Health, taxpayer money accounts for 44 percent of all health-related research and development nationally. But the federal government has never used a provision of the law allowing regulators to require affordable prices for products developed with public funds.

Proponents of private ownership of taxpayer-funded research say such a policy is necessary to give the private market an incentive to get involved. Such involvement, they argue, benefits the public by bringing new products to market sooner. California privateers also try to deflect criticism by arguing that benefits of stem-cell research, if any, are years away.

However, allowing exclusive private control of stem-cell research would give the lion’s share of benefits to the drug industry, which would be allowed to charge monopoly prices while providing minimal returns for patients and taxpayers. If federal rules under Bayh-Dole were applied to California, another likely outcome would be limited access to powerful research tools developed by taxpayer dollars but controlled by private patents.

Californians were told they would benefit from stem-cell research under Proposition 71. But what is the benefit of new stem-cell technologies if private companies are allowed to price them out of reach?

The fact remains that at least 10 of the 29 members of the stem-cell oversight board have conflicts of interest with companies seeking to profit from public funds. But the board could go a long way to protect the public interest by adopting rules providing public control of the research. Such a move could provide a new national model for public-supported research.

Voters deserve what they voted for and taxpayers deserve what they are paying for. That means that California must have a controlling share of all future stem-cell research.

JERRY FLANAGAN is the health care policy director for the Foundation for Taxpayer and Consumer Rights (

DEBORAH BURGER is the president of the California Nurses Association ( They wrote this article for the Mercury News.

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.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases