BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 1565
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          Date of Hearing:  July 16, 2007

                                  Mark Leno, Chair

                     SB 1565 (Kuehl) - As Amended:  July 14, 2008

          Policy Committee:                              Health        
          Vote: 16-0
                        Judiciary                                 10-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

          This bill modifies several provisions of Proposition 71, which  
          created the California Institute for Regenerative Medicine  
          (CIRM) to provide funding for stem cell research. Specifically,  
          this bill: 

          1)Codifies proposed CIRM regulations to add to intellectual  
            property (IP) standards requiring grantees to submit plans to  
            provide low-income Californians access to drugs that are  
            entirely or partly a result of CIRM-supported research. 

          2)Requires grantees subject to #1, above, to provide drugs to  
            publicly funded programs in California at one of three  
            benchmark prices in the California Discount Drug Prescription  
            Program. Authorizes CIRM to waive this pricing requirement  
            under specified circumstances, including when a drug is  
            related to rare diseases recognized by the federal Food and  
            Drug Administration (FDA). 

          3)Reduces the vote threshold for funding of research proposals  
            supported by federal funding (generally non-embryonic-related  
            projects) from 2/3 to a simple majority vote. 

          4)Requests the Little Hoover Commission to evaluate the  
            governance structure of CIRM. 
          FISCAL EFFECT  

          1)No direct public fiscal impact to codify pending CIRM  

          2)No direct fiscal impact to the Little Hoover Commission, as  


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            this bill is permissive with respect to the Commission. The  
            Commission will vote on whether this request will be filled  
            within the current budget provided to the Commission. 


           1)Rationale  . This bill codifies IP regulations that have been  
            proposed with respect to making sure publicly funded programs  
            serving low-income Californians are able to access medications  
            that may be discovered through CIRM-supported research. Recent  
            amendments further clarify these pricing provisions. The  
            California Discount Drug Program was created by AB 2911  
            (Nunez), Chapter 619, Statutes of 2006. In addition, this bill  
            reduces a voting threshold from 2/3 to a simple majority for  
            proposals that qualify for federal funding. 

           2)Proposition 71  was approved by voters in November 2004 to  
            authorize the state to sell $3 billion in general obligation  
            bonds to provide funding for stem cell research in California.  
            The issue was put before the voters to address federal  
            restrictions on the use of human embryonic stem cells. CIRM,  
            which is governed by the Independent Citizen's Oversight  
            Committee (ICOC), is required to award grants and loans and to  
            adopt governance, scientific, medical and regulatory standards  
            in public meetings.  Proposition 71 requires the ICOC to  
            establish standards for IP agreements that balance public  
            benefit with the assurance that medical research and private  
            investment is not hindered by IP agreements.   

           3)Federal Funding Issues  . Current federal funding for human  
            embryonic stem cell research is restricted to research  
            involving stem cell lines created prior to 2001.  Part of the  
            genesis and voter support of Proposition 71 was for California  
            to establish a high priority for embryonic stem cell research  
            that otherwise fails to garner federal funding. 

          The current and higher CIRM voting threshold of 2/3 for  
            federally supported projects ensures that the emphasis remains  
            on embryonic-related projects, which many believe hold greater  
            immediate scientific promise. This bill changes the two-thirds  
            voting threshold to a simple majority.  The author indicates  
            the change in the voting requirement is intended to make  
            certain the most promising research is funded, regardless of  
            whether embryonic or non-embryonic stem cells are used.   
            According to CIRM, the current two-thirds threshold has not  
            prevented it from funding a research proposal to date.     


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           4)Concerns from Health Consumers and Scientific Community  . A  
            number of consumer and scientific groups have expressed  
            concerns about the IP and voting provisions of this bill. The  
            University of California indicates that codification of  
            proposed IP regulations is premature and the bill requires IP  
            strategies to be implemented that have not been tested on the  
            state or national level. Premature action in this area, as  
            well as proposed pricing changes that would result may risk  
            reducing industry participation.  The Californians for Cures,  
            a public policy group supporting cutting-edge research in this  
            area, is concerned about the change in the voting threshold.  
            The group indicates the change defies the will of the voters  
            who created Proposition 71. 

             Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081