The San Jose Mercury News

John M. Simpson ([email protected]) is Stem-cell Project Director for The Foundation for Taxpayer and Consumer Rights (FTCR), a Santa Monica-based non-profit, non-partisan consumer advocacy group. He wrote this article for the Mercury News.
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Remember the kid on the playground who threatened to pick up his marbles unless he got his way? Meet the biotech industry. Big biotech firms are telling the Proposition 71 stem-cell committee: Do it our way or we’ll pick up our petri dishes and go home.

The stem-cell committee is drawing up rules for the ownership and control of discoveries made by businesses, universities and research institutions that get some of the $3 billion in public money for stem-cell research. Already biotech executives are huffing and puffing about any requirement that fair-public-benefit provisions be linked to the grants.

Their remarks at the most recent Intellectual Property Task Force meeting were little more than a blustering attempt to cow Californians into believing that needed stem-cell research won’t happen unless the game is played by biotech’s rules. Don’t believe them.

Genentech Executive Vice President Stephen Juelsgaard said the biotech industry “simply wouldn’t engage” if the California Institute for Regenerative Medicine (CIRM) requires companies to share the rewards of Proposition 71 stem-cell research grants. Never mind that California taxpayers are putting up $3 billion to finance the research.

“I don’t think you’re sitting in a position where all these companies will come on their knees to visit you,” added Brad Margus, chief executive of Mountain View-based Perlegen Sciences. He claimed only “second-rate” firms would be interested if the money comes with public-interest requirements. “You want to encourage the best-class players to participate,” he said, “not just the most financially desperate.”

Perhaps Genentech has grown accustomed to outrageous profits such as those reaped when it charges $100,000 a year for a cancer drug like Avastin that was developed with federal assistance. Just because the federal government didn’t demand a reasonable return on its investment in developing that drug or require it to be sold at a fair price does not mean Californians can be railroaded into silent acquiescence. We should not sit by while the biotech industry makes a run at a share of $3 billion in Proposition 71 funds that are already being described as “almost like free money” in venture-capital circles.

Companies like Genentech act like committed socialists when it comes to taxpayers and the government bearing the risk of drug development. But they are greedy capitalists when it’s time to parcel out the profits.

Everyone knows that all loans and grants come with reasonable requirements and conditions. When I sign a mortgage and take the bank’s money, I agree to the bank’s terms. Venture capitalists behave the same way. They provide money to companies and require clearly spelled out conditions and expectations. There is no reason it should be any different when the taxpayers of California put $3 billion on the line. We are entitled to insist upon maximum public benefit for our investment. The rules governing ownership — intellectual-property rules — must be based on affordability, accessibility and accountability.

It’s essential that the state attorney general have the right to intervene in cases of “unreasonable” pricing of Proposition 71-funded drugs or cures. What’s unreasonable could be determined through a public process.

If a patentable discovery results from Proposition 71-funded research by a business, the state should own it through a patent pool. Rights to profitably commercialize the discovery could be licensed back to the firm.

If Proposition 71 funds the development of a treatment already covered by a patent, California should receive a fair commission. The state should be able to take cash payments or, like a venture capitalist, negotiate an equity share — stock — in the business.

Any attempt to grab “free money” without strings for biotech won’t work. “Best-class players,” as Margus calls them, understand that with the acceptance of taxpayer dollars comes the responsibility of public benefit. And with $3 billion on the table, there will be plenty of top-flight firms and researchers ready to search for cures.