BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
1565 (Kuehl)
Hearing Date: 05/12/08 Amended: 04/16/08
Consultant: John Miller Policy Vote: Health 11 - 0
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BILL SUMMARY: SB 1565, a supermajority bill, requires each
grantee of California's stem cell program to provide access for
uninsured individuals to any drug/biologic which results from
the bond funded research. The bill also requires the Little
Hoover Commission to study the governance structure of the
initiative and its administrative authority.
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Fiscal Impact (in thousands)
Major Provisions 2008-09 2009-10 2010-11 Fund
Little Hoover Commission $ 25 $ 130 $
0General*
ICOC staff/regulation costs $ 30 $ 150 $
0Bond**
*Legislative authority to direct Commission actions is unclear,
see staff note below
**Proposition 71 bond proceeds, 2004
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STAFF COMMENTS: This bill may meet the requirements for referral
to Suspense.
In 2004, voters approved the California Stem Cell Research and
Cures Act, a popular initiative which authorized the issuance of
$3 billion in general obligation bonds over ten years to fund a
stem cell research program and dedicated research facilities in
California. The act established the California Institute for
Regenerative Medicine (institute) as a state agency with the
purpose of funding stem cell research activities. The act
directs the institute to give priority to research that has the
greatest potential for therapies and cures and for research that
cannot or is unlikely to receive timely or sufficient federal
funding. The institute is responsible for supporting all stages
of the process of developing cures and establishing appropriate
regulatory standards and oversight bodies for research and
facilities development. To oversee the institute's operations,
the Independent Citizen's Oversight Committee (committee) is
tasked with development of annual and long-term strategic
research and financial plans for the institute. The proposition
requires a supermajority (70 %) vote by the Legislature to
change provisions of the original proposal.
This bill requires the committee for the California Institute
for Regenerative Medicine to have each grant recipient file a
plan assuring access for uninsured individuals to any drug
resulting from the public grant, and would require submission of
the plan prior to marketing a product. SB 1565 further specifies
that the submitted plans require resulting drugs purchased with
public funds be sold at specified reduced prices. The Act now
requires the stem cell program to structure grants in such a way
as to balance state benefit from private patents resulting from
institute research without unduly interfering with development
of new products. The institute is now drafting regulations
requiring
SB 1565 (Kuehl)
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grantees to assure access to new therapies for uninsured/low
income individuals. On March 12, 2008, the institute issued
draft revised regulations for grants to non-profit entities to
include a requirement that all plans provide access for
uninsured Californians, that plans be submitted prior to
marketing and must be approved by the institute. However,
development of SB 1565's provisions will extend the time and
necessary costs to implement this requirement. The bill's
provisions specifying that plans sell drugs resulting from
institute funds not to exceed a specified amount will also be
implemented with new regulations. To the extent that these
pricing provisions of SB 1565 reduce the costs of new therapies
for Medi-Cal and Healthy Families beneficiaries, there will be
off-setting state and federal savings.
SB 1565 further requires a study of the governance structure of
the institute by the Little Hoover Commission. The Commission is
annually funded a fixed amount from the Budget ($1 million GF)
which is available at the discretion of the Commission. Roughly
$150,000 to $200,000 would be required for the governance study.
The Commission appropriation is appropriated for research to be
determined by the Commission. However, this bill supersedes the
authority of the Little Hoover Commission by directing this
expenditure, creating a state cost. The study related costs to
the institute were estimated based on prior costs associated
with a state audit.
Staff Notes: Staff of the Little Hoover Commission indicates
that the act which created the commission gave that body
exclusive authority to determine the subject and timing of any
commission research, and that the legislature does not have the
authority to direct the commission's work. If the portion of the
bill directing the commission to undertake the study of the
institute's governance structure cannot be enforced, the costs
associated with the Little Hoover Commission expenditures would
be eliminated. The Appropriations Committee has requested a
Counsel opinion on this matter.