BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2381
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          ASSEMBLY THIRD READING
          AB 2381 (Mullin)
          As Amended April 3, 2008
          Majority vote 

           HEALTH              13-0        APPROPRIATIONS      17-0        
           
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          |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  








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            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  








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          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 



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