BILL NUMBER: SB 1064	CHAPTERED
	BILL TEXT

	CHAPTER  637
	FILED WITH SECRETARY OF STATE  SEPTEMBER 30, 2010
	APPROVED BY GOVERNOR  SEPTEMBER 30, 2010
	PASSED THE SENATE  AUGUST 25, 2010
	PASSED THE ASSEMBLY  AUGUST 17, 2010
	AMENDED IN ASSEMBLY  JUNE 17, 2010
	AMENDED IN SENATE  MAY 20, 2010
	AMENDED IN SENATE  APRIL 27, 2010
	AMENDED IN SENATE  APRIL 12, 2010

INTRODUCED BY   Senator Alquist

                        FEBRUARY 16, 2010

   An act to amend Sections 125290.20, 125290.30, 125290.40,
125290.45, and 125290.60 of, and to add Sections 125290.71 and
125290.80 to, the Health and Safety Code, relating to stem cells.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1064, Alquist. California Stem Cell Research and Cures Act.
   The California Stem Cell Research and Cures Act, an initiative
measure approved by the voters at the November 2, 2004, statewide
general election as Proposition 71, establishes the California
Institute for Regenerative Medicine (CIRM), the purpose of which is,
among other things, to make grants and loans for stem cell research,
for research facilities, and for other vital research opportunities
to realize therapies, protocols, and medical procedures that will
result in the cure for, or substantial mitigation of, diseases and
injuries. Existing law establishes the Independent Citizen's
Oversight Committee (ICOC) composed of appointed members, that is
required to perform various functions and duties with regard to the
operation of the institute, including, but not limited to,
establishing standards applicable to research funded by the
institute. Existing law prohibits amendment of Proposition 71 by the
Legislature unless the amendment is approved by the voters, or the
amendment is accomplished by a bill introduced after the first 2 full
calendar years and approved by a vote of 70% of both houses, and
only if the amendment enhances the ability of the institute to
further the purposes of the grant and loan programs.
   Existing law specifies the appointment process for the members of
the ICOC, including the chairperson and vice chairperson who are
employees of the ICOC, and provides that the chairperson and vice
chairperson serve 6-year terms. Existing law defines the duties of
the chairperson and the president of the ICOC and limits the total
number of authorized employees of the CIRM to 50.
   This bill would require the CIRM, under the guidance of the ICOC,
to create a succession plan addressing changes in leadership in the
CIRM and ICOC, as specified. The bill would eliminate the 50-employee
maximum for the CIRM.
   The bill would also require the CIRM, under the guidance of the
ICOC, to create, by January 31, 2012, a transition plan to address
the expiration of current bond funding and to submit that plan to the
Governor, the Controller, and the Legislature.
   Existing law requires the CIRM to commission an independent
financial audit, which is provided to the Controller for review and
reported in the annual public report. Existing law establishes the
Citizen's Financial Accountability Oversight Committee, chaired by
the Controller, to review the annual audit and financial practices of
the CIRM.
   This bill would, additionally, require a performance audit to be
conducted every 3 years, as specified.
   Existing law contains provisions relating to the extent to which
requirements relating to the disclosure of public records applied to
records of the CIRM.
   This bill would require the ICOC to disclose, in all meeting
minutes, a summary of vote tallies, including each board member's
votes and recusals.
   The act provides that the ICOC shall establish standards that
require that all grants and loan awards under the act shall be
subject to intellectual property agreements that balance the
opportunity of the state to benefit from the patents, royalties, and
licenses that result from basic research, therapy development, and
clinical trials with the need to ensure that essential medical
research is not unreasonably hindered by the intellectual property
agreements.
   This bill would require that intellectual property standards that
the ICOC develops include a requirement that each grantee and the
exclusive licensees of the grantee submit to the CIRM a plan that
will afford Californians access to any drug that is, in whole or in
part, the result of research funded by the CIRM, except when the ICOC
adopts a waiver, as specified. The bill would also require specified
grant recipients to share a fraction of the revenue they receive
from licensing or self-commercialization of an invention or
technology that arises from research funded by CIRM, as specified.
   Existing law establishes the procedure by which grant and loan
applications are processed and scored by the 15 scientist members of
the Scientific and Medical Research Funding Working Group.
   This bill would remove the 15 member limit, and would instead
require that a peer review panel consist of both scientists and
patient advocates and require that there be 15 scientists on a peer
review panel.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares the following:
   (a) The California Institute for Regenerative Medicine was
established in 2004, through the passage of Proposition 71, for the
purposes of implementing and managing a $3 billion investment in stem
cell research on behalf of the state.
   (b) Stem cell research is a promising area of research aimed at
finding breakthrough cures for currently incurable diseases and
injuries affecting millions of people. This investment, as stated in
the proposition, would protect and benefit the California budget by
funding scientific and medical research that will significantly
reduce state health care costs in the future.
   (c) Furthermore, the Legislative Analyst, in its official ballot
information, stated that the state would "receive payments from
patents, royalties, and licenses resulting from the research funded
by the institute" through institute-established standards "requiring
that all grants and loans be subject to agreements allowing the state
to financially benefit from patents, royalties, and licenses
resulting from the research activities funded under the measure."
   (d) Since its inception, questions and concerns have been raised
about the institute's practices, its governing board, and how the
state directly and financially benefits through this sizeable
investment. These criticisms divert the attention and focus of the
institute to drive transformational scientific research and find
cures.
   (e) It is the intent of the Legislature to further enhance the
ability of the institute to manage this investment made with public
funds by addressing public concerns regarding oversight and
transparency.
   (f) It is further the intent of this act to ensure that California
maximizes its receipt of revenues generated through grants or loans
made through the institute and with state funds.
   (g) It is in the best interests of the state that therapies that
are created in whole or in part by funding from the institute be made
available to Californians who have no other means of purchasing
those therapies for reasons that include, but are not limited to, low
income or the lack of available health insurance coverage.
   (h) It is in the best interests of the state that the leadership
of the institute, including the ICOC and the officers of the
institute, possess the qualities necessary to serve the needs of the
institute, and that the chairperson of the ICOC and the president of
the institute have well defined and complementary duties.
  SEC. 2.  Section 125290.20 of the Health and Safety Code is amended
to read:
   125290.20.  ICOC Membership; Appointments; Terms of Office
   (a) ICOC Membership
   The ICOC shall have 29 members, appointed as follows:
   (1) The Chancellors of the University of California at San
Francisco, Davis, San Diego, Los Angeles, and Irvine shall each
appoint an executive officer from his or her campus.
   (2) The Governor, the Lieutenant Governor, the Treasurer, and the
Controller shall each appoint an executive officer from the following
three categories:
   (A) A California university, excluding the five campuses of the
University of California described in paragraph (1), that has
demonstrated success and leadership in stem cell research, and that
has:
   (i) A nationally ranked research hospital and medical school; this
criteria will apply to only two of the four appointments.
   (ii) A recent proven history of administering scientific and/or
medical research grants and contracts in an average annual range
exceeding one hundred million dollars ($100,000,000).
   (iii) A ranking, within the past five years, in the top 10 United
States universities with the highest number of life science patents
or that has research or clinical faculty who are members of the
National Academy of Sciences.
   (B) A California nonprofit academic and research institution that
is not a part of the University of California, that has demonstrated
success and leadership in stem cell research, and that has:
   (i) A nationally ranked research hospital or that has research or
clinical faculty who are members of the National Academy of Sciences.

   (ii) A proven history in the last five years of managing a
research budget in the life sciences exceeding twenty million dollars
($20,000,000).
   (C) A California life science commercial entity that is not
actively engaged in researching or developing therapies with
pluripotent or progenitor stem cells, that has a background in
implementing successful experimental medical therapies, and that has
not been awarded, or applied for, funding by the institute at the
time of appointment. A board member of that entity with a successful
history of developing innovative medical therapies may be appointed
in lieu of an executive officer.
   (D) Only one member shall be appointed from a single university,
institution, or entity. The executive officer of a California
university, a nonprofit research institution or life science
commercial entity who is appointed as a member, may from time to time
delegate those duties to an executive officer of the entity or to
the dean of the medical school, if applicable.
   (3) The Governor, the Lieutenant Governor, the Treasurer, and the
Controller shall appoint members from among California
representatives of California regional, state, or national disease
advocacy groups, as follows:
   (A) The Governor shall appoint two members, one from each of the
following disease advocacy groups: spinal cord injury and Alzheimer's
disease.
   (B) The Lieutenant Governor shall appoint two members, one from
each of the following disease advocacy groups: type II diabetes and
multiple sclerosis or amyotrophic lateral sclerosis.
   (C) The Treasurer shall appoint two members, one from each of the
following disease groups: type I diabetes and heart disease.
   (D) The Controller shall appoint two members, one from each of the
following disease groups: cancer and Parkinson's disease.
   (4) The Speaker of the Assembly shall appoint a member from among
California representatives of a California regional, state, or
national mental health disease advocacy group.
   (5) The President pro Tempore of the Senate shall appoint a member
from among California representatives of a California regional,
state, or national HIV/AIDS disease advocacy group.
   (6) A chairperson and vice chairperson who shall be elected by the
ICOC members. Each constitutional officer shall nominate a candidate
for chairperson and another candidate for vice chairperson. The
chairperson and vice chairperson shall each be elected for a term of
six years. The chairperson and vice chairperson of ICOC shall be
full- or part-time employees of the institute and shall meet the
following criteria:
   (A) Mandatory Chairperson Criteria
   (i) Documented history in successful stem cell research advocacy.
   (ii) Experience with state and federal legislative processes that
must include some experience with medical legislative approvals of
standards and/or funding.
   (iii) Qualified for appointment pursuant to paragraph (3), (4), or
(5) of subdivision (a).
   (iv) Cannot be concurrently employed by or on leave from any
prospective grant or loan recipient institutions in California.
   (B) Additional Criteria for Consideration:
   (i) Experience with governmental agencies or institutions (either
executive or board position).
   (ii) Experience with the process of establishing government
standards and procedures.
   (iii) Legal experience with the legal review of proper
governmental authority for the exercise of government agency or
government institutional powers.
   (iv) Direct knowledge and experience in bond financing.
   The vice chairperson shall satisfy clauses (i), (iii), and (iv) of
subparagraph (A). The vice chairperson shall be selected from among
individuals who have attributes and experience complementary to those
of the chairperson, preferably covering the criteria not represented
by the chairperson's credentials and experience.
   (b) Appointment of ICOC Members
   (1) All appointments shall be made within 40 days of the effective
date of this act. In the event that any of the appointments are not
completed within the permitted timeframe, the ICOC shall proceed to
operate with the appointments that are in place, provided that at
least 60 percent of the appointments have been made.
   (2) Forty-five days after the effective date of the measure adding
this chapter, the Controller and the Treasurer, or if only one is
available within 45 days, the other shall convene a meeting of the
appointed members of the ICOC to elect a chairperson and vice
chairperson from among the individuals nominated by the
constitutional officers pursuant to paragraph (6) of subdivision (a).

   (c) ICOC Member Terms of Office
   (1) The members appointed pursuant to paragraphs (1), (3), (4),
and (5) of subdivision (a) shall serve eight-year terms, and all
other members shall serve six-year terms. Members shall serve a
maximum of two terms.
   (2) If a vacancy occurs within a term, the appointing authority
shall appoint a replacement member within 30 days to serve the
remainder of the term.
   (3) When a term expires, the appointing authority shall appoint a
member within 30 days. ICOC members shall continue to serve until
their replacements are appointed.
  SEC. 3.  Section 125290.30 of the Health and Safety Code is amended
to read:
   125290.30.  Public and Financial Accountability Standards
   (a) Annual Public Report
   The institute shall issue an annual report to the public which
sets forth its activities, grants awarded, grants in progress,
research accomplishments, and future program directions. Each annual
report shall include, but not be limited to, the following: the
number and dollar amounts of research and facilities grants; the
grantees for the prior year; the institute's administrative expenses;
an assessment of the availability of funding for stem cell research
from sources other than the institute; a summary of research
findings, including promising new research areas; an assessment of
the relationship between the institute's grants and the overall
strategy of its research program; and a report of the institute's
strategic research and financial plans.
   (b) Independent Financial Audit for Review by Controller
   The institute shall annually commission an independent financial
audit of its activities from a certified public accounting firm,
which shall be provided to the Controller, who shall review the audit
and annually issue a public report of that review.
   (c) A performance audit shall be commissioned by the institute
every three years beginning with the audit for the 2010-11 fiscal
year. The performance audit, which may be performed by the Bureau of
State Audits, shall examine the functions, operations, management
systems, and policies and procedures of the institute to assess
whether the institute is achieving economy, efficiency, and
effectiveness in the employment of available resources. The
performance audit shall be conducted in accordance with government
auditing standards, and shall include a review of whether the
institute is complying with ICOC policies and procedures. The
performance audit shall not be required to include a review of
scientific performance. The first performance audit shall include,
but not be limited to, all of the following:
   (1) Policies and procedures for the issuance of contracts and
grants and a review of a representative sample of contracts, grants,
and loans executed by the institute.
   (2) Policies and procedures relating to the protection or
treatment of intellectual property rights associated with research
funded or commissioned by the institute.
   (d) All administrative costs of the audits required by
subdivisions (b) and (c) shall be paid by the institute.
   (e) Citizen's Financial Accountability Oversight Committee
   There shall be a Citizen's Financial Accountability Oversight
Committee chaired by the Controller. This committee shall review the
annual financial audit, the Controller's report and evaluation of
that audit, and the financial practices of the institute. The
Controller, the Treasurer, the President pro Tempore of the Senate,
the Speaker of the Assembly, and the Chairperson of the ICOC shall
each appoint a public member of the committee. Committee members
shall have medical backgrounds and knowledge of relevant financial
matters. The committee shall provide recommendations on the institute'
s financial practices and performance. The Controller shall provide
staff support. The committee shall hold a public meeting, with
appropriate notice, and with a formal public comment period. The
committee shall evaluate public comments and include appropriate
summaries in its annual report. The ICOC shall provide funds for all
costs associated with the per diem expenses of the committee members
and for publication of the annual report.
   (f) Public Meeting Laws
   (1) The ICOC shall hold at least two public meetings per year, one
of which will be designated as the institute's annual meeting. The
ICOC may hold additional meetings as it determines are necessary or
appropriate.
   (2) The Bagley-Keene Open Meeting Act, Article 9 (commencing with
Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the
Government Code, shall apply to all meetings of the ICOC, except as
otherwise provided in this section. The ICOC shall award all grants,
loans, and contracts in public meetings and shall adopt all
governance, scientific, medical, and regulatory standards in public
meetings.
   (3) The ICOC may conduct closed sessions as permitted by the
Bagley-Keene Open Meeting Act, under Section 11126 of the Government
Code. In addition, the ICOC may conduct closed sessions when it meets
to consider or discuss:
   (A) Matters involving information relating to patients or medical
subjects, the disclosure of which would constitute an unwarranted
invasion of personal privacy.
   (B) Matters involving confidential intellectual property or work
product, whether patentable or not, including, but not limited to,
any formula, plan, pattern, process, tool, mechanism, compound,
procedure, production data, or compilation of information, which is
not patented, which is known only to certain individuals who are
using it to fabricate, produce, or compound an article of trade or a
service having commercial value and which gives its user an
opportunity to obtain a business advantage over competitors who do
not know it or use it.
   (C) Matters involving prepublication, confidential scientific
research or data.
   (D) Matters concerning the appointment, employment, performance,
compensation, or dismissal of institute officers and employees.
Action on compensation of the institute's officers and employees
shall only be taken in open session.
   (4) The meeting required by paragraph (2) of subdivision (b) of
Section 125290.20 shall be deemed to be a special meeting for the
purposes of Section 11125.4 of the Government Code.
   (g) Public Records
   (1) The California Public Records Act, Article 1 (commencing with
Section 6250) of Chapter 3.5 of Division 7 of Title 1 of the
Government Code, shall apply to all records of the institute, except
as otherwise provided in this section.
   (2) Nothing in this section shall be construed to require
disclosure of any records that are any of the following:
   (A) Personnel, medical, or similar files, the disclosure of which
would constitute an unwarranted invasion of personal privacy.
   (B) Records containing or reflecting confidential intellectual
property or work product, whether patentable or not, including, but
not limited to, any formula, plan, pattern, process, tool, mechanism,
compound, procedure, production data, or compilation of information,
which is not patented, which is known only to certain individuals
who are using it to fabricate, produce, or compound an article of
trade or a service having commercial value and which gives its user
an opportunity to obtain a business advantage over competitors who do
not know it or use it.
   (C) Prepublication scientific working papers or research data.
   (3) The institute shall include, in all meeting minutes, a summary
of vote tallies and disclosure of each board member's votes and
recusals on all action items.
   (h) Competitive Bidding
   (1) The institute shall, except as otherwise provided in this
section, be governed by the competitive bidding requirements
applicable to the University of California, as set forth in Article 1
(commencing with Section 10500) of Chapter 2.1 of Part 2 of Division
2 of the Public Contract Code.
   (2) For all institute contracts, the ICOC shall follow the
procedures required of the Regents by Article 1 (commencing with
Section 10500) of Chapter 2.1 of Part 2 of Division 2 of the Public
Contract Code with respect to contracts let by the University of
California.
   (3) The requirements of this section shall not be applicable to
grants or loans approved by the ICOC.
   (4) Except as provided in this section, the Public Contract Code
shall not apply to contracts let by the institute.
   (i) Conflicts of Interest
   (1) The Political Reform Act, Title 9 (commencing with Section
81000) of the Government Code, shall apply to the institute and to
the ICOC, except as provided in this section and in subdivision (e)
of Section 125290.50.
   (A) No member of the ICOC shall make, participate in making, or in
any way attempt to use his or her official position to influence a
decision to approve or award a grant, loan, or contract to his or her
employer, but a member may participate in a decision to approve or
award a grant, loan, or contract to a nonprofit entity in the same
field as his or her employer.
   (B) A member of the ICOC may participate in a decision to approve
or award a grant, loan, or contract to an entity for the purpose of
research involving a disease from which a member or his or her
immediate family suffers or in which the member has an interest as a
representative of a disease advocacy organization.
   (C) The adoption of standards is not a decision subject to this
section.
   (2) Service as a member of the ICOC by a member of the faculty or
administration of any system of the University of California shall
not, by itself, be deemed to be inconsistent, incompatible, in
conflict with, or inimical to the duties of the ICOC member as a
member of the faculty or administration of any system of the
University of California and shall not result in the automatic
vacation of either such office. Service as a member of the ICOC by a
representative or employee of a disease advocacy organization, a
nonprofit academic and research institution, or a life science
commercial entity shall not be deemed to be inconsistent,
incompatible, in conflict with, or inimical to the duties of the ICOC
member as a representative or employee of that organization,
institution, or entity.
   (3) Section 1090 of the Government Code shall not apply to any
grant, loan, or contract made by the ICOC except where both of the
following conditions are met:
   (A) The grant, loan, or contract directly relates to services to
be provided by any member of the ICOC or the entity the member
represents or financially benefits the member or the entity he or she
represents.
   (B) The member fails to recuse himself or herself from making,
participating in making, or in any way attempting to use his or her
official position to influence a decision on the grant loan or
contract.
   (j) Patent Royalties and License Revenues Paid to the State of
California
   (1) The ICOC shall establish standards that require that all
grants and loan awards be subject to intellectual property agreements
that balance the opportunity of the State of California to benefit
from the patents, royalties, and licenses that result from basic
research, therapy development, and clinical trials with the need to
ensure that essential medical research is not unreasonably hindered
by the intellectual property agreements. All revenues received
through the intellectual property agreements established pursuant to
this subdivision shall be deposited into the General Fund.
   (2) These standards shall include, at a minimum, a requirement
that CIRM grantees, other than loan recipients and facilities grant
recipients, share a fraction of the revenue they receive from
licensing or self-commercializing an invention or technology that
arises from research funded by CIRM, as set forth below. All revenues
received pursuant to this paragraph or regulations adopted to
implement this paragraph shall be deposited in the General Fund for
use consistent with Section 202(c)(7) of Title 35 of the United
States Code, if applicable.
   (A) (i) A grantee that licenses an invention or technology that
arises from research funded by CIRM shall pay 25 percent of the
revenues it receives in excess of five hundred thousand dollars
($500,000), in the aggregate, to the General Fund. The threshold
amount of five hundred thousand dollars ($500,000) shall be adjusted
annually by a multiple of a fraction, the denominator of which is the
Consumer Price Index, All Urban Consumers, All Items (San
Francisco-Oakland-San Jose; 1982-84=100) as prepared by the Bureau of
Labor Statistics of the United States Department of Labor and
published for the month of October 2009, and the numerator of which
is that index published for the month in which the grantee accepts
the grant.
   (ii) If funding sources other than CIRM directly contributed to
the development of the invention or technology, then the return to
the General Fund shall be calculated as follows: The amount of CIRM
funding for the invention or technology shall be divided by the total
of funding provided by all sources, and that fraction shall be
multiplied by 25. That numeral is the percentage due to the General
Fund.
   (B) (i) A grantee that self-commercializes a product that results
from an invention or technology that arises from research funded by
CIRM shall pay an amount to the General Fund equal to three times the
total amount of the CIRM grant or grants received by the grantee in
support of the research that contributed to the creation of the
product. The rate of payback of the royalty shall be at a rate of 3
percent of the annual net revenue received by the grantee from the
product.
   (ii) In addition to the payment required by clause (i), the first
time that net commercial revenues earned by the grantee from the
product exceed two hundred fifty million dollars ($250,000,000) in a
calendar year, the grantee shall make a one-time payment to the
General Fund equal to three times the total amount of the grant or
grants awarded by CIRM to the grantee in support of the research that
contributed to the creation of the product.
   (iii) In addition to the payments required by clauses (i) and
(ii), the first time that net commercial revenues earned by the
grantee from the product exceed five hundred million dollars
($500,000,000) in a calendar year, the grantee shall make an
additional one-time payment to the General Fund equal to three times
the total amount of the grant or grants awarded by CIRM to the
grantee in support of the research that contributed to the creation
of the product.
   (iv) In addition to the payments required by clauses (i), (ii),
and (iii), the first time that net commercial revenues earned by the
grantee from the product equal or exceed five hundred million dollars
($500,000,000) in a calendar year, the grantee shall pay the General
Fund 1 percent annually of net commercial revenue in excess of five
hundred million dollars ($500,000,000) for the life of any patent
covering the invention or technology, if the grantee patented its
invention or technology and received a CIRM grant or grants amounting
to more than five million dollars ($5,000,000) in support of the
research that contributed to the creation of the product.
   (3) The ICOC shall have the authority to adopt regulations to
implement this subdivision. The ICOC shall also have the authority to
modify the formulas specified in subparagraphs (A) and (B) of
paragraph (2) through regulations if the ICOC determines pursuant to
paragraph (1) that a modification is required either in order to
ensure that essential medical research, including, but not limited
to, therapy development and the broad delivery of therapies to
patients, is not unreasonably hindered, or to ensure that the State
of California has an opportunity to benefit from the patents,
royalties, and licenses that result from basic research, therapy
development, and clinical trials. The ICOC shall notify the
appropriate fiscal and policy committees of the Legislature 10
calendar days before exercising its authority to vote on the
modification of the formulas specified in subparagraphs (A) and (B)
of paragraph (2).
   (k) Preference for California Suppliers
   The ICOC shall 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 percent of such purchases from California suppliers.
  SEC. 4.  Section 125290.40 of the Health and Safety Code is amended
to read:
   125290.40.  ICOC Functions
   The ICOC shall perform the following functions:
   (a) Oversee the operations of the institute.
   (b) Develop annual and long-term strategic research and financial
plans for the institute.
   (c) Make final decisions on research standards and grant awards in
California.
   (d) Ensure the completion of an annual financial audit of the
institute's operations.
   (e) Issue public reports on the activities of the institute.
   (f) Establish policies regarding intellectual property rights
arising from research funded by the institute.
   (g) Establish rules and guidelines for the operation of the ICOC
and its working groups.
   (h) Perform all other acts necessary or appropriate in the
exercise of its power, authority, and jurisdiction over the
institute.
   (i) Select members of the working groups.
   (j) Adopt, amend, and rescind rules and regulations to carry out
the purposes and provisions of this chapter, and to govern the
procedures of the ICOC. Except as provided in subdivision (k), these
rules and regulations shall be adopted in accordance with the
Administrative Procedure Act (Government Code, Title 2, Division 3,
Part 1, Chapter 4.5, Sections 11371 et seq.).
   (k) Notwithstanding the Administrative Procedure Act (APA), and in
order to facilitate the immediate commencement of research covered
by this chapter, the ICOC may adopt interim regulations without
compliance with the procedures set forth in the APA. The interim
regulations shall remain                                           in
effect for 270 days unless earlier superseded by regulations adopted
pursuant to the APA.
   (l) Request the issuance of bonds from the California Stem Cell
Research and Cures Finance Committee and loans from the Pooled Money
Investment Board.
   (m) May annually modify its funding and finance programs to
optimize the institute's ability to achieve the objective that its
activities be revenue-positive for the State of California during its
first five years of operation without jeopardizing the progress of
its core medical and scientific research program.
   (n) Notwithstanding Section 11005 of the Government Code, accept
additional revenue and real and personal property, including, but not
limited to, gifts, royalties, interest, and appropriations that may
be used to supplement annual research grant funding and the
operations of the institute.
   (o) Under the guidance of the ICOC, the institute shall create a
succession plan addressing changes in leadership of both the
institute and the ICOC designed to minimize disruption and adverse
impacts to the activities of the institute. A copy of the succession
plan shall be transmitted to the Governor, Controller, and the
Legislature within 30 days of its completion. The succession plan
should include, but is not limited to:
    (1) An assessment of leadership needs before beginning a search.
   (2) An outline of succession procedures.
   (3) Strategies to ensure successful knowledge transfer.
  SEC. 5.  Section 125290.45 of the Health and Safety Code is amended
to read:
   125290.45.  ICOC Operations
   (a) Legal Actions and Liability
   (1) The institute may sue and be sued.
   (2) Based upon ICOC standards, institute grantees shall indemnify
or insure and hold the institute harmless against any and all losses,
claims, damages, expenses, or liabilities, including attorneys'
fees, arising from research conducted by the grantee pursuant to the
grant, and/or, in the alternative, grantees shall name the institute
as an additional insured and submit proof of such insurance.
   (3) Given the scientific, medical, and technical nature of the
issues facing the ICOC, and notwithstanding Section 11042 of the
Government Code, the institute is authorized to retain outside
counsel when the ICOC determines that the institute requires
specialized services not provided by the Attorney General's office.
   (4) The institute may enter into any contracts or obligations
which are authorized or permitted by law.
   (b) Personnel
   (1) The ICOC shall from time to time determine the total number of
authorized employees for the institute, excluding members of the
working groups who shall not be considered institute employees. The
ICOC shall select a chairperson, vice chairperson, and president who
shall exercise all of the powers delegated to them by the ICOC. The
following functions apply to the chairperson, vice chairperson, and
president:
   (A) The chairperson's primary responsibilities are to manage the
ICOC agenda and workflow including all evaluations and approvals of
scientific and medical working group grants, loans, facilities, and
standards evaluations, and to supervise all annual reports and public
accountability requirements; to manage and optimize the institute's
bond financing plans and funding cashflow plan; to interface with the
California Legislature, the United States Congress, the California
health care system, and the California public; to optimize all
financial leverage opportunities for the institute; and to lead
negotiations for intellectual property agreements, policies, and
contract terms. The chairperson shall also serve as a member of the
Scientific and Medical Accountability Standards Working Group and the
Scientific and Medical Research Facilities Working Group and as an
ex officio member of the Scientific and Medical Research Funding
Working Group. The vice chairperson's primary responsibilities are to
support the chairperson in all duties and to carry out those duties
in the chairperson's absence.
   (B) The president's primary responsibilities are to serve as the
chief executive of the institute; to recruit the highest scientific
and medical talent in the United States to serve the institute on its
working groups; to serve the institute on its working groups; to
direct ICOC staff and participate in the process of supporting all
working group requirements to develop recommendations on grants,
loans, facilities, and standards as well as to direct and support the
ICOC process of evaluating and acting on those recommendations, the
implementation of all decisions on these and general matters of the
ICOC; to hire, direct, and manage the staff of the institute; to
develop the budgets and cost control programs of the institute; to
manage compliance with all rules and regulations of the ICOC,
including the performance of all grant recipients; and to manage and
execute all intellectual property agreements and any other contracts
pertaining to the institute or research it funds.
   (2) Each member of the ICOC except, the chairperson, vice
chairperson, and president, shall receive a per diem of one hundred
dollars ($100) per day (adjusted annually for cost of living) for
each day actually spent in the discharge of the member's duties, plus
reasonable and necessary travel and other expenses incurred in the
performance of the member's duties.
   (3) The ICOC shall establish daily consulting rates and expense
reimbursement standards for the members of all of its working groups.

   (4) Notwithstanding Section 19825 of the Government Code, the ICOC
shall set compensation for the chairperson, vice chairperson, and
president and other officers, and for the scientific, medical,
technical, and administrative staff of the institute within the range
of compensation levels for executive officers and scientific,
medical, technical, and administrative staff of medical schools
within the University of California system and the nonprofit academic
and research institutions described in paragraph (2) of subdivision
(a) of Section 125290.20.
  SEC. 6.  Section 125290.60 of the Health and Safety Code is amended
to read:
   125290.60.  Scientific and Medical Research Funding Working Group
   (a) Membership
   The Scientific and Medical Research Funding Working Group shall
have at least 23 members as follows:
   (1) Seven ICOC members from the 10 disease advocacy group members
described in paragraphs (3), (4), and (5) of subdivision (a) of
Section 125290.20.
   (2) At least 15 scientists nationally recognized in the field of
stem cell research.
   (3) The Chairperson of the ICOC.
   (b) Functions
   The Scientific and Medical Research Funding Working Group shall
perform the following functions:
   (1) Recommend to the ICOC interim and final criteria, standards,
and requirements for considering funding applications and for
awarding research grants and loans.
   (2) Recommend to the ICOC standards for the scientific and medical
oversight of awards.
   (3) Recommend to the ICOC any modifications of the criteria,
standards, and requirements described in paragraphs (1) and (2) above
as needed.
   (4) Review grant and loan applications based on the criteria,
requirements, and standards adopted by the ICOC and make
recommendations to the ICOC for the award of research, therapy
development, and clinical trial grants and loans.
   (5) Conduct peer group progress oversight reviews of grantees to
ensure compliance with the terms of the award, and report to the ICOC
any recommendations for subsequent action.
   (6) Recommend to the ICOC standards for the evaluation of grantees
to ensure that they comply with all applicable requirements. Such
standards shall mandate periodic reporting by grantees and shall
authorize the Scientific and Medical Research Funding Working Group
to audit a grantee and forward any recommendations for action to the
ICOC.
   (7) Recommend its first grant awards within 60 days of the
issuance of the interim standards.
   (c) Recommendations for Awards
   Award recommendations shall be based upon a competitive evaluation
as follows:
   A peer review panel shall consist of both scientists and patient
advocates. There shall be 15 scientists on a peer review panel. Only
the scientist members of the Scientific and Medical Research Funding
Working Group shall score grant and loan award applications for
scientific merit. Such scoring shall be based on scientific merit in
three separate classifications--research, therapy development, and
clinical trials, on criteria including the following:
   (1) A demonstrated record of achievement in the areas of
pluripotent stem cell and progenitor cell biology and medicine,
unless the research is determined to be a vital research opportunity.

   (2) The quality of the research proposal, the potential for
achieving significant research, or clinical results, the timetable
for realizing such significant results, the importance of the
research objectives, and the innovativeness of the proposed research.

   (3) In order to ensure that institute funding does not duplicate
or supplant existing funding, a high priority shall be placed on
funding pluripotent stem cell and progenitor cell research that
cannot, or is unlikely to, receive timely or sufficient federal
funding, unencumbered by limitations that would impede the research.
In this regard, other research categories funded by the National
Institutes of Health shall not be funded by the institute.
   (4) Notwithstanding paragraph (3), other scientific and medical
research and technologies and/or any stem cell research proposal not
actually funded by the institute under paragraph (3) may be funded by
the institute if at least two-thirds of a quorum of the members of
the Scientific and Medical Research Funding Working Group recommend
to the ICOC that such a research proposal is a vital research
opportunity.
  SEC. 7.  Section 125290.71 is added to the Health and Safety Code,
to read:
   125290.71.  Under the guidance of the ICOC, the institute shall,
by January 31, 2012, create a transition plan addressing the
expiration of current bond funding. A copy of the transition plan
shall be transmitted to the Governor, the Controller, and the
Legislature within 30 days of its completion.
  SEC. 8.  Section 125290.80 is added to the Health and Safety Code,
to read:
   125290.80.  The intellectual property standards that the ICOC
develops shall include:
   (a) A requirement that each grantee or the exclusive licensee of
the grantee submit a plan to CIRM to afford access to any drug that
is, in whole or in part, the result of research funded by CIRM to
Californians who have no other means to purchase the drug. The access
plan must be consistent with industry standards at the time of
commercialization in California, accounting for the size of the
market for the drug, and the resources of the grantee or exclusive
licensee.
   (b) A requirement that the grantee or exclusive licensee either
submit the plan required by subdivision (a), seek an extension from
CIRM, or notify CIRM of its intention to seek a waiver, within 10
business days following final approval of the drug by the federal
Food and Drug Administration. If the grantee seeks an extension, the
plan must be submitted within 30 business days following final
approval of the drug by the federal Food and Drug Administration. The
plan shall be subject to the approval of CIRM, after a public
hearing and opportunity for public comment.
   (c) A process by which the ICOC may waive the requirement in
subdivision (a) if the ICOC determines, after a public hearing, that
in the absence of the waiver, development and broad delivery of the
drug will be unreasonably hindered or that the waiver will provide
significant benefits that equal or exceed the benefits that would
otherwise flow to the state pursuant to subdivision (a). The process
shall include the requirement that a request for a waiver shall be
posted on CIRM's Internet Web site for a minimum of 10 business days
in advance of the public hearing and that CIRM shall notify the
Legislature if the ICOC grants a waiver request, including the
reasons that justified the waiver request.
   (d) Procedures to protect from public disclosure proprietary
information submitted by grantees and exclusive licensees to CIRM
pursuant to this section.