BILL ANALYSIS
SB 1565
Page 1
SENATE THIRD READING
SB 1565 (Kuehl)
As Amended July 14, 2008
70% vote
SENATE VOTE :40-0
HEALTH 16-0 JUDICIARY 10-0
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|Ayes:|Dymally, Nakanishi, Berg, |Ayes:|Jones, Tran, Adams, |
| |Carter, | |Evans, Feuer, Keene, |
| |De La Torre, Caballero, | |Krekorian, Laird, Levine, |
| |Emmerson, Hancock, | |Lieber |
| |Hayashi, Hernandez, Huff, | | |
| |Jones, Lieber, Ma, Salas, | | |
| |Silva | | |
| | | | |
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APPROPRIATIONS 16-0
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|Ayes:|Leno, Walters, Caballero, |
| |Davis, DeSaulnier, |
| |Emmerson, Furutani, |
| |Karnette, Krekorian, La |
| |Malfa, |
| |Lieu, Ma, Nakanishi, |
| |Nava, |
| |Sharon Runner, Solorio |
|-----+--------------------------|
| | |
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SUMMARY : Requires the intellectual property (IP) standards of
the California Institute for Regenerative Medicine's (CIRM)
Independent Citizen's Oversight Committee (ICOC) to include a
requirement that each grantee and the licensee of the grantee
submit a plan for CIRM's approval that will afford uninsured
Californians access to any drug that is entirely or partly the
result of CIRM-funded research, as specified. Revises the vote
threshold necessary for CIRM funding of certain research
proposals. Requests the Little Hoover Commission (LHC) to study
the existing governance structure of the ICOC and CIRM, as
specified. Specifically, this bill :
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1)Requires the IP standards that the ICOC develops to include a
requirement that each grantee and licensee submit a plan to
CIRM that will afford uninsured Californians access to any
drug that is entirely or partly the result of CIRM-funded
research.
2)Directs the ICOC to require the plan to be submitted before a
drug is placed into commerce, and requires CIRM to approve the
plan after a public hearing and public comment period.
3)Requires the plan to require each CIRM grantee and licensee to
provide drugs resulting from CIRM-funded research to publicly
funded programs in California at one of the three benchmark
prices in the California Discount Prescription Drug Program
(Cal-Rx).
4)Provides that this bill does not preclude any public agency
from obtaining prices that are lower than those in Cal-Rx, as
specified.
5)Permits the CIRM to waive the requirement in 3) above under
specified circumstances relating to providing access to drugs
for rare diseases with small patient populations and expanding
access generally.
6)Changes the vote threshold necessary for CIRM funding of
certain research proposals from two-thirds to a simple
majority of a quorum of the members of CIRM's Scientific and
Medical Research Funding Working Group (Working Group) and
clarifies that the Legislature affirms that the underlying
purpose of the ICOC and CIRM is to give priority to stem cell
research that has the greatest potential for development of
therapies and cures.
7)Requests the LHC to study the governance structure of the
California Stem Cell Research and Cures Act (Act), including
the membership and relative roles of the ICOC and CIRM.
8)Requires the LHC, if it conducts the study, to report to the
Legislature by July 1, 2009, on the results of the study and
recommend ways that the governance structure of ICOC could
better ensure public accountability and reduce conflicts of
interest, consistent with the purposes of the Act.
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EXISTING LAW :
1)Establishes the Act approved by voters as Proposition 71 in
November 2004.
2)Establishes CIRM to award grants, loans or contracts for stem
cell research and research facilities. Establishes the ICOC
to oversee operations of CIRM and includes within the
functions of the ICOC the responsibility to render final
decisions on research standards and grant awards.
3)Requires the ICOC to establish standards to make all grants
and loans subject to IP agreements that balance public benefit
with the need to assure that essential medical research is not
unreasonably hindered by the agreements.
4)Prohibits certain research proposals from being funded by CIRM
except when at least two-thirds of a quorum of the Working
Group recommend to the ICOC that such a proposal is a vital
research opportunity.
5)Prohibits any amendment to Proposition 71 by the Legislature
unless 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, no direct public fiscal impact to codify pending CIRM
regulations and no direct fiscal impact to the LHC as 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.
COMMENTS : The author believes that Proposition 71 lacks the
provisions necessary to ensure that therapies emerging from the
state's stem cell research investments are available to
uninsured Californians, as well as to programs that serve
low-income Californians, at the best available prices. In order
to ensure that the neediest Californians benefit from
groundbreaking stem cell research funded by taxpayer dollars,
the author contends that statutory provisions are needed to
require grantees and licensees to submit a plan to afford
uninsured Californians access to new drugs prior to
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commercialization, and require these drugs to be sold to public
programs at the best available prices. Additionally, the author
asserts that changing the voting requirements for funding of
other stem cell-related research from two-thirds to a simple
majority of a quorum of CIRM's working group members reflects
the latest scientific breakthroughs involving non-embryonic stem
cell research and makes certain that the most promising research
is funded, regardless of the source of the stem cells. Lastly,
the author asserts that, given the ICOC/CIRM's unique formation
as a public entity, the public's investment of $3 billion in
bond funds, and the close-knit nature of the scientific
community, the ICOC and CIRM warrant a high level of scrutiny by
an independent body, such as the LHC, to ensure public trust and
confidence and protect the integrity of the ICOC and CIRM from
real or perceived conflicts of interest.
To date, CIRM has adopted regulations pertaining to IP
requirements for nonprofit organizations, such as universities
and research institutions, and for for-profit organizations,
such as biotechnology companies. At the March 12, 2008, meeting
of the ICOC, revised IP draft regulations were issued for grants
to for-profit organizations to include language similar to this
bill by requiring grantees to submit plans to afford uninsured
Californians access to a drug resulting from CIRM-funded
research, prior to the time the drug is brought to market, and
requiring the plans to be subject to CIRM approval after a
public hearing and opportunity for public comment is held. The
proposed revisions also indicate that if Cal-Rx is repealed,
benchmark prices must be based on the Cal-Rx benchmark prices on
the last day the program is in effect.
Cal-Rx was created pursuant to AB 2911 (Nunez), Chapter 619,
Statutes of 2006, to require the Department of Health Care
Services (DHCS) to use manufacturer rebates and pharmacy
discounts in order to reduce prescription drug prices and
improve the quality of health care for eligible Californians.
DHCS is required to consider three different benchmarks in
negotiations with drug manufacturers: the lowest price offered
to private payers; the Medicaid best price; or, the average
manufacturers' price minus 15%.
Current federal funding for human embryonic stem cell research
is restricted to research involving stem cell lines created
prior to 2001. Current state law, pursuant to Proposition 71,
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establishes a high priority for CIRM funding for embryonic stem
cell research that cannot or is unlikely to receive timely or
sufficient federal funding and permits CIRM to fund other stem
cell-related research proposals if two-thirds of a quorum of the
members of its Working Group recommend to the ICOC that the
proposal is vital to advancing medical science. This bill
changes the two-thirds voting threshold to a simple majority.
The author indicates that the change in the voting requirement
is intended to make certain that 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.
The University of California (UC) is concerned that any effort
to codify in statute IP provisions related to Proposition 71 is
premature at this time. As a major research university engaged
in stem cell research and a recipient of Proposition 71 funding,
UC points out that CIRM's IP policy was the result of broad
consultation with the public and various stakeholders, and
carefully balanced the need to foster university-industry
partnerships with the important goal of ensuring that scientific
advances in stem cell diagnostics and therapies benefit the
public. UC states that CIRM's approach to IP includes novel
treatments of IP that have not yet been tested on the state or
national level and, therefore, the policy should be given the
chance to be tested and the flexibility to be modified if it
turns out that it is not adequately serving the public interest
before it is codified in statute or significant changes are
made. UC asserts that CIRM should be permitted to establish a
track record to assure prospective industry partners that CIRM's
policies support commercialization of products and encourage
success in these risky research endeavors.
CIRM states that this bill is premature and unnecessary and is
opposed to this bill unless it is amended to remove the
provision that changes the two-thirds vote requirement to a
majority vote and to give CIRM greater flexibility to establish
a waiver mechanism through the Administrative Procedure Act
(APA), which would provide for adoption of regulations to
implement the waiver after notifying the Legislature and
conducting a public hearing. CIRM contends that eliminating the
current two-thirds vote requirement for funding of
non-embryonic-related research eliminates the priority that
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Proposition 71 places on human embryonic stem cell research and
thwarts the will of Californians who approved Proposition 71 in
order to address the federal funding gap that exists for this
type of research. With respect to the public pricing
requirement in this bill, CIRM asserts that providing for a
waiver process pursuant to the APA would permit CIRM to assess
changes in medical technology and in the health care sector
prior to defining the scope and contours of the waiver and would
provide an opportunity for the Legislature and the public to
comment on the proposed waiver mechanism before it is adopted.
Lastly, CIRM remains concerned that by attempting to specify the
precise conditions under which CIRM could waive pricing
provision, this bill will fail to address other situations in
which a waiver would be equally justified.
Supporters, including Consumer Watchdog (formerly the Foundation
for Taxpayer and Consumer Rights), California Common Cause,
Health Access, California Nurses Association and California
Alliance for Retired Americans, state that this bill will help
ensure that the taxpayers of California will have affordable
access to the fruits of the research they are funding and will
help make CIRM and the ICOC more responsive and accountable to
the public. They note that Californians saw great promise when
Proposition 71 was adopted, that they would have access to drugs
and products that could cure or slow the progression of numerous
diseases and conditions and, therefore, they should have access
to this promise whether they are insured or uninsured.
Furthermore, supporters point out that too often public funds
are used to develop medical treatments that are then
unaffordable to the most vulnerable people in our society and
this bill ensures that every taxpayer in California paying for
research funding by CIRM has access to any medical care that is
developed.
Groups representing the life sciences community, including the
California Healthcare Institute and BayBio, contend that this
bill discourages commercial collaboration and industry
participation in research opportunities by codifying proposed IP
regulations prematurely and increasing investors' financial risk
by imposing state price regulation on products resulting from
CIRM-funded research. Consumer advocacy groups that support
cutting-edge medical research in this area, including
Californians for Cures, oppose the provision modifying the vote
requirement for funding proposals that involve non-embryonic
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stem cell lines, arguing that it is a poison pill that removes
the existing priority established for embryonic stem cell
research and inappropriately assumes that alternative therapies
are viable and timely. Opponents contend that while recent
advances in alternative therapies are exciting, they are still
unproven and the vast majority of the scientific community
agrees that embryonic stem cell research remains the gold
standard.
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097 FN: 0006182