BILL ANALYSIS AB 2381 Page 1 ASSEMBLY THIRD READING AB 2381 (Mullin) As Amended April 3, 2008 Majority vote HEALTH 13-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Dymally, Nakanishi, Berg, |Ayes:|Leno, Walters, Caballero, | | |De Leon, Emmerson, | |Davis, DeSaulnier, | | |Hancock, Hayashi, | |Emmerson, Furutani, | | |Hernandez, Huff, Jones, | |Huffman, Karnette, | | |Ma, Salas, Strickland | |Krekorian, | | | | |La Malfa, Lieu, Ma, | | | | |Nakanishi, Nava, Sharon | | | | |Runner, Solorio | | | | | | ----------------------------------------------------------------- SUMMARY : Defines "California supplier" for purposes of the California Stem Cell Research and Cures Act (Act), as any sole proprietorship, partnership, joint venture, corporation, or other business entity, the owners or policymaking officers of which are domiciled in California and whose permanent, principal office or place of business from which the supplier's trade is directed or managed is located in California. EXISTING LAW : 1)Establishes the Act approved by voters as Proposition 71 in November 2004. 2)Establishes the California Institute for Regenerative Medicine (CIRM) to award grants, loans or contracts for stem cell research and research facilities. Establishes the Independent Citizen's Oversight Committee (ICOC) to oversee operations of the CIRM and includes within the functions of the ICOC the responsibility to render final decisions on research standards and grant awards. 3)Requires CIRM to provide a public annual report disclosing specified information relating to its activities, grants awarded, grants in progress, research accomplishments, and future program directions, including the number and dollar amounts of research and facilities grants; the grantees from AB 2381 Page 2 the prior year; CIRM's administrative expenses; an assessment of the funding for stem cell research from non-CIRM sources; a summary of research findings; an evaluation of the relationship between CIRM grants; and, the overall strategy of its research program and a report on CIRM's strategic research and financial plans. 4)Requires the ICOC to establish standards to require all grants and loans be subject to intellectual property agreements (agreements). Requires the agreements to balance the opportunity of the state to benefit from the patents, royalties, and licenses that result from research and therapy development and clinical trials, with the need to assure that essential medical research is not unreasonably hindered by the agreements. 5)Requires the ICOC to establish standards to ensure that grantees purchase goods and services from California suppliers to the extent reasonably possible, in a good faith effort to achieve a goal of more than 50% of such purchases from California suppliers. 6)Prohibits any amendment to Proposition 71 by the Legislature unless the amendment is approved by the voters or accomplished by a bill introduced after the first two full calendar years and approved by a vote of 70% of both houses. FISCAL EFFECT : According to the Assembly Appropriations Committee analysis this bill has no direct fiscal impact. COMMENTS : According to the sponsor, Invitrogen, a biotechnology company with headquarters in California, CIRM has initiated significant grant-making activities but guidance is needed to assist grantees in meeting the preference for California suppliers specified in current law. This bill seeks to provide grantees clarification of this preference by defining a California supplier as an entity that must have its commercial domicile in California and maintain and staff a permanent place of business in California from which its trade or business is directly managed. The sponsor asserts that this bill fills a vital missing link in the matrix of terms within which CIRM grantees must work when applying for CIRM funding and helps to ensure that public funding of stem cell research generates critically important business transaction revenues for the AB 2381 Page 3 state's struggling economy. In January 2008, the sponsor submitted a petition to CIRM to adopt by regulation a definition of a "California supplier." In the petition, the sponsor contended that the ICOC is mandated to establish a definition in order to achieve the goals of Proposition 71. According to the sponsor, defining a California supplier to mean those companies that are headquartered in the state, whose principal owners or officers are residents of the state, and whose operations are directed from within the state, ensures that a variety of California companies are well-positioned to provide the goods and services needed to conduct CIRM-funded research. At the March 12, 2008, meeting of the ICOC, CIRM staff initially recommended denying the petition for several reasons, including that the ICOC has already carried out its statutory requirement to establish a standard for a preference for California suppliers; that new revenue and employment opportunities can also be achieved in California by including any supplier that pays income or sales tax in the state, employs residents of the state or has a brick and mortar location in the state; and, finally, that the sponsor's proposed definition may violate federal interstate commerce law. However, CIRM indicates that during the meeting, the sponsor clarified that the petition was intended to initiate a rulemaking process rather than to demand the adoption of a definition. As a result, the ICOC decided to adopt the sponsor's definition as an initial draft for the purpose of initiating a regulatory review process to finalize a formal definition. BIOCOM states in support of this bill that it benefits California's economy by creating additional jobs within the supply industry and increasing the number of specialty supplier businesses to serve CIRM grantees. Analysis Prepared by : Cassie Rafanan / HEALTH / (916) 319-2097 FN: 0004334