Lawmakers eye state share of stem cell revenue
BYLINE: Daniel S. Levine
California's voter-created stem cell institute so far has only spent borrowed money, but some legislators are worried that the state won't get its fair share of revenues generated by the research it funds.
The California Senate Health Committee was scheduled to hold a hearing April 11 on SB 771, which would, among other things, require that the intellectual property standards for the institute provide the state with 25 percent of the associated net licensing revenues. The legislation was drafted by the committee's chair, Sen. Sheila Kuehl, D-Santa Monica, and Sen. George Runner, R-Antelope Valley.
A day before the hearing, the board of the stem cell institute voted unanimously to oppose the legislation, calling it "premature" and noting that the institute is still creating the regulations that will guide it. Members of the board spread out through the capitol to meet with legislators to discuss their opposition to the bill.
"We are trying to strike a balance. We want the state to receive a fair return from the investments we are making," said Dale Carlson, spokesman for the institute. "We want any therapies that come out of the research we fund to be available at reasonable prices, but we've got to have life science companies involved in this project.Academic centers don't develop therapies. They don't bring therapies to market and the life science companies have access to capital in the significant amounts that are required to bring something through clinical trials."
The proposed legislation would also require for-profit grantees to pay 2 to 5 percent royalties on revenues from products that result from institute-funded research for the life of the product. In addition, grantees would have to agree to provide patients therapies, drugs and diagnostics at the federal Medicaid price and would have to demonstrate they have plans to provide "significant access" to resulting therapies for uninsured Californians.
The California Alliance For Consumer Protection, California Nurses Association, CALPIRG and Senior Action Network are among the organizations supporting the legislation. They argue the legislation is necessary to ensure the institute delivers on the promises made during the campaign to establish $3 billion in stem cell research funding under Proposition 71 and provide an appropriate financial return to the state, ensure affordable therapies and fair access to treatments.
Opponents say without the legislation Prop. 71 will fail to live up to its promise to voters to cut health-care costs and generate significant royalties to the state and instead turn into a $3 billion giveaway to large biotechnology and pharmaceutical companies.
Opponents, which include the San Diego-based biotechnology association BIOCOM and the industry advocacy group the California Healthcare Institute, fear that the state's concern over capturing a financial return and ensuring affordability will result in barriers to for-profit companies in raising large amounts of capital to translate early-stage research into a commercial product.
"Because commercialization is essential for the development and production of new medicines that can be used by Californians and others, CHI believes that the basic goal of intellectual property policies should be to minimize barriers to transfer technologies from basic research laboratories to the private sector for commercialization into products," said David Gollaher, president and CEO of the California Healthcare Institute, in a letter to senators Kuehl and Runner. "Moreover, while we strongly support policies to improve patients' access to advanced medicine, we maintain that IP policies and regulations are not the way to improve accesses and cost."
Bruce Cohen, CEO of San Carlos-based Cellerant Therapeutics, said Prop. 71 will provide companies with only a small fraction of the money needed to develop cures and that the threat of California setting pricing will scare investors away. Instead, he thinks the state should seek to emulate federal models and not use the grant process as a means of managing the cost of the health-care system, but use it as a way to make sure the best science gets funded.
"For CIRM to be successful you want the best science to come there. And if you want the best science to come there, you have to be reasonable," said Cohen. "If you put so many restrictions on it in an attempt to recoup short-term money for the state, what you essentially do is bias it toward not so good science -- the science that can't get investor dollars. That's a bad outcome."