BILL ANALYSIS                                                                                                                                                                                                    






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                        Senator Elaine K. Alquist, Chair


          BILL NO:       SB 1064                                      
          S
          AUTHOR:        Alquist                                      
          B
          AMENDED:       April 12, 2010                              
          HEARING DATE:  April 14, 2010                               
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          CONSULTANT:                                                 
          0
          Chan-Sawin                                                  
          6              4                                           
                                     SUBJECT
                                         
                  California Stem Cell Research and Cures Act
                                         
                                    SUMMARY
           
          Makes changes to the terms of the chair and vice-chair of  
          the Independent Citizens Oversight Committee (ICOC) of the  
          California Institute for Regenerative Medicine (CIRM), as  
          specified.  Clarifies the roles and responsibilities of the  
          ICOC chair and CIRM president.  Eliminates the 50-employee  
          limit for the institute and the 15-scientist limit on peer  
          review.  Requires CIRM to establish a succession plan  
          addressing changes in leadership, and a transition plan  
          addressing the expiration of current bond funding, as  
          specified.  Requires annual performance audits of CIRM and  
          ICOC, as specified.  Codifies existing CIRM regulations on  
          intellectual property (IP) agreements requiring grantees to  
          submit plans to provide low-income Californians access to  
          drugs that are entirely or partly a result of  
          CIRM-supported research.  Codifies existing IP regulations  
          requiring grantees to provide drugs to state and local  
          government-funded programs at one of the three benchmark  
          prices in the California Discount Prescription Drug  
          Program, as specified.  Requires all revenues received from  
          the IP agreements by CIRM to be deposited in the state  
          General Fund.
          
                             CHANGES TO EXISTING LAW  

                                                         Continued---



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          Existing law:
          Proposition 71:  The California Stem Cell Research and  
          Cures Act
          In November 2004, California voters passed Proposition 71,  
          which enacted the California Stem Cell Research and Cures  
          Act (the Act), establishing CIRM to make grants and loans  
          for stem cell research and research facilities.  Existing  
          law authorizes the sale of $3 billion in general obligation  
          bonds over ten years for these purposes.  Existing law  
          provides that the Legislature may amend the non-bond  
          statutory provisions of the Act, to enhance the ability of  
          CIRM to further their purposes of providing grant and loan  
          programs, with a 70 percent vote of each house and  
          compliance with specified procedural requirements.  

          CIRM has three separate scientific and medical working  
          groups focused on research funding, accountability  
          standards, and medical facilities.  The Act requires  
          members of the working groups to be subject to the same  
          conflict-of-interest standards that are applicable to  
          members of scientific review committees of the National  
          Institutes of Health (NIH).  The Act directs CIRM 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.

          Governance of the California Institute for Regenerative  
          Medicine
          The Act also creates and specifies the composition of the  
          29-member ICOC, a separate, independent governing body  
          vested with the full power, authority and jurisdiction over  
          CIRM.  Existing law specifies the appointment process for  
          ICOC, including its chair and vice chair, and provides that  
          the chair and vice chair serve six-year terms.  Existing  
          law defines the duties of the ICOC chair and the CIRM  
          president.

          Public and Financial Accountability Standards
          Among other things, existing law requires CIRM to  
          commission an annual independent financial audit.  To  
          provide additional oversight, existing law also establishes  
          the Citizen's Financial Accountability and Oversight  




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          Committee (CFAOC), chaired by the Controller, to annually  
          review the financial practices and performance of CIRM,  
          including the annually commissioned independent financial  
          audit.  Existing law requires ICOC to award all grants,  
          loans and contracts in public meetings and to adopt all  
          governance, scientific, medical, and regulatory standards  
          in public meetings.  

          Intellectual Property and Revenues Paid to the State of  
          California 
          Existing law requires ICOC to establish standards that  
          require all grants and loan awards to be subject to  
          intellectual property agreements that 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 intellectual property agreements.

          Operations of the California Institute for Regenerative  
          Medicine 
          Existing law, among other things, limits the total number  
          of authorized CIRM employees to 50.  Existing law specifies  
          that grants and loan applications are processed and scored  
          by the 15-scientist members of the Scientific and Medical  
          Research Funding Working Group.  

          This bill:
          Governance of the California Institute for Regenerative  
          Medicine
          This bill reduces the terms of the chair and vice-chair of  
          the ICOC to four-year terms, and requires the terms to be  
          staggered. This bill specifies that the chair and vice  
          chair shall be chosen from and elected by the ICOC board,  
          and removes the requirement for constitutional officers to  
          nominate candidates.  The bill clarifies the roles and  
          responsibilities of the ICOC chair and CIRM president,  
          specifying that the chair's role is to provide leadership  
          to ICOC and does not include tasks associated with the  
          day-to-day management of the institute, which fall under  
          the purview of the CIRM president.  

          This bill requires CIRM to establish, under the guidance of  
          ICOC: 1) a succession plan to address changes in leadership  
          in CIRM and ICOC as specified; and, 2) a transition plan to  
          address the expiration of current bond funding, and to  




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          submit that plan to the Governor, the Controller and the  
          Legislature by January 31, 2012.  

          Public and Financial Accountability Standards
          The bill specifies that CIRM shall annually commission an  
          independent financial and performance audit by a certified  
          independent auditing firm, as specified.  The bill also  
          requires the CFAOC to commission a performance audit of  
          ICOC's activities from a certified independent auditing  
          firm, as specified.  The bill further specifies that audits  
          will give due deference to scientific judgments, and  
          directs performance audits towards operational policies and  
          procedures related the issuance of contracts, grants and  
          loans, and the protection or treatment of IP rights.

          The bill codifies the requirement that all public meeting  
          minutes include a summary and disclosure of vote tallies  
          and recusals, and requires ICOC to amend all past minutes  
          to include this summary.
          
          Intellectual Property and Revenues Paid to the State of  
          California 
          This bill codifies existing CIRM regulations regarding IP  
          standards that require grantees to submit plans to provide  
          low-income Californians access to drugs that are entirely  
          or partly a result of CIRM-supported research.  The bill  
          would require these plans be submitted to CIRM 180 days  
          before commercialization.  This bill also codifies existing  
          IP regulations that require grantees to provide drugs to  
          state and local government-funded programs at one of the  
          three benchmark prices in the California Discount  
          Prescription Drug Program, except as specified.  The bill  
          further requires all revenues received from the  
          intellectual property agreements by CIRM to be deposited in  
          the state General Fund.

          Operations of the California Institute for Regenerative  
          Medicine 
          The bill eliminates the 50-employee cap for CIRM.  This  
          bill also eliminates the 15-scientist limit on the peer  
          review process, and requires that all grant applications  
          received shall be sent to peer review by the Scientific and  
          Medical Research Funding Working Group prior to any other  
          process, unless the process is only to determine  
          completeness of the application or to ensure that all  
          criteria for the grant program is met.  The bill also  




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          requires individuals involved in such a pre-application  
          review process to meet the same accountability standards as  
          the Scientific and Medical Research Funding Working Group,  
          as established in the Act.

          This bill also makes other clarifying and technical  
          changes.

                                  FISCAL IMPACT  

          This bill has not been analyzed by a fiscal committee.

                            BACKGROUND AND DISCUSSION  

          According to the author, SB 1064 will clarify the processes  
          by which CIRM and ICOC will ensure transparency,  
          appropriate oversight, and the way that the state and  
          Californians benefit from the money they invested.  
          The author states that, while stem cell research is an  
          important and laudable goal, concerns about transparency,  
          accountability and oversight raised by the public, the  
          independent Citizen's Financial Accountability Oversight  
          Committee, the Little Hoover Commission, and the State  
          Controller detract from CIRM's ability to provide grants  
          and loans in the most efficient way.  These concerns divert  
          resources and attention from CIRM's ability to maximize  
          voter's investment in stem cell sciences.  In 2009 alone,  
          CIRM spent $1.5 million in external contracts for legal  
          services, lobbying, public relations and communications  
          costs to improve its public image, which is a duplication  
          of existing internal resources.  Given that the debt from  
          the bonds is serviced from the General Fund, concern about  
          CIRM's lack of transparency and accountability gains  
          greater significance during these challenging fiscal times.  
           By addressing many of these public concerns, SB 1064  
          enhances CIRM's ability to make grants and loans, and the  
          removal of such barriers frees up resources that were  
          previously diverted from the grant and loan programs.

          The author also states that, given CIRM and ICOC's unique  
          formation as a public entity, the level of public  
          investment--$3 billion in bond funds that will amount to a  
          General Fund expenditure of $6 billion (including  
          interest)--and the close-knit nature between the scientific  
          community, CIRM, and ICOC, it should be thoroughly  
          scrutinized by an independent body to ensure the highest  




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          level of public trust and confidence. 

          In addition, the author states that Proposition 71 was  
          intended to both directly and indirectly benefit  
          Californians and the state.  Without clarification, it is  
          unclear how that will be achieved permanently.  Currently,  
          there is no mechanism that would allow revenues generated  
          to go back to the state permanently.  Nor is there a  
          guarantee that a treatment developed with Prop 71 funds  
          will be affordable to low-income or uninsured Californians.  
           Existing law simply directs CIRM to develop intellectual  
          property standards to address this need.  The author  
          believes that codifying the requirement for IP agreements  
          to contain such provisions in statute ensures that the  
          neediest Californians benefit from groundbreaking stem cell  
          research funded by taxpayer dollars.

          Little Hoover Commission Report
          In 2008, Senators Sheila Kuehl and George Runner asked the  
          commission to study CIRM and recommend ways to strengthen  
          its governance structure, improve accountability, and  
          reduce conflict of interest.  In response, the Little  
          Hoover Commission (LHC) issued a report in June 2009.   
          Unlike fiscal or performance audits, the LHC reports look  
          beyond whether programs comply with existing requirements,  
          and instead explore how programs could and should function  
          more efficiently.  The LHC report highlighted management  
          shortcomings and legislatives obstacles to CIRM's success.
          
          In the 2009 report, the LHC found that CIRM's governance  
          structure is not adequate to protect taxpayers' interests  
          or serve its own ambitious goals, and urged the Legislature  
          to reform CIRM's governance structure to ensure that it can  
          deliver on its mission of developing cures for the benefit  
          of all, as well as provide transparency and accountability  
          for California's taxpayers who will be paying off the  
          bonds.  The report also found that ICOC includes  
          representatives from institutions that have benefited from  
          grants the committee approved.  This structure, along with  
          overly long terms and the inability to nominate its own  
          leaders or hold them accountable, fuels concerns that the  
          committee never can be entirely free of  
          conflict-of-interest or self-dealing, notwithstanding a  
          court ruling that establishes the legality of such a  
          structure. Furthermore, the report states that as long as  
          the ICOC board remains in its present form, its structure  




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          will draw scrutiny, diverting CIRM resources.

          To enhance CIRM's ability to fulfill its mission, the  
          report made a number of recommendations, many which are in  
          SB 1064, including:  
                 Reducing ICOC terms to four years for the chair and  
               vice-chair.
                 Realigning the roles of the chair and the president  
               to eliminate overlapping authority, improve clarity  
               and bolster accountability.
                 Allowing ICOC to nominate and elect its own chair  
               and vice-chair from within its membership.
                 Eliminating the 50-person cap on CIRM staffing and  
               the 15-person limit on outside scientific peer  
               reviewers.
                 Requiring all past and future meeting minutes to  
               specify votes and recusals.
                 Extending the authority of CFAOC to conduct  
               performance reviews.
                 Requiring CIRM and ICOC to begin formal planning  
               for leadership transition, and to develop a transition  
               plan for expiration of bond funds.

          CIRM regulations on intellectual property and ensuring  
          access for all Californians
          According to its 2009 annual report, since 2006, CIRM has  
          awarded 328 research and facility grants worth over $1  
          billion, including funding for 12 world class research  
          institutes and centers of excellence, and $106 million in  
          training grants.  Stem cell research projects that receive  
          Proposition 71 funding are expected to generate many kinds  
          of intellectual property, including new research tools, new  
          stem cell lines, new methods for isolating stem cells, and,  
          ultimately, stem cell therapies and drugs.  In many cases,  
          grantees will be able to license the rights to those  
          inventions to other entities or else to use those rights  
          themselves, to develop stem cell products and research  
          tools. 

          ICOC has adopted intellectual property and revenue-sharing  
          regulations for for-profit and non-profit grantees.  These  
          regulations include:
                 An access requirement for grantees that  
               commercializes a drug to submit an access plan to CIRM  
               that affords uninsured Californians' access to the  
               drug that is consistent with "industry standards" (an  




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               undefined term).
                 An access requirement for grantees that  
               commercializes a drug to sell the drug at any  
               benchmark price described in the California Discount  
               Prescription Drug Program, or a successor statewide  
               prescription drug discount program.  
                 Revenue sharing requirements that require grantees  
               to share a portion of revenues, as specified, with the  
               State of California without specifying a mechanism or  
               where those funds shall be deposited.
                 A requirement to pay royalties to the State of  
               California to be deposited in the General Fund.  

          SB 1064 proposes to codify these requirements without  
          limiting CIRM's authority to make changes in how these  
          requirements are carried out.
          
          Past audit and evaluations
          Besides the annually commissioned financial audit and the  
          Controller's evaluation of that audit, the California State  
          Auditor conducted a review of CIRM's implementation of the  
          Act in 2007, making, among other things, the following  
          findings:
                 CIRM had moved forward in identified long-term  
               research priorities and considered the industry's best  
               practices to create its strategic plan, but had yet to  
               implement a process to assess annual progress toward  
               attaining its strategic goals.  
                 The ICOC approved IP policies that provided benefit  
               to the state from patents, royalties, and licenses  
               resulting from institute-funded activities without  
               reasonably hindering essential research, but those  
               policies lack adequate guidance to grantees to ensure  
               access to therapies for uninsured Californians.
                 Although ICOC has identified standards for discount  
               prices for drugs in its IP policies, it has yet to  
               identify the appropriate benchmarks to use as a  
               standard for establishing discount prices for non-drug  
               therapies. 
                 CIRM awarded multiple contracts without a  
               competitive-bidding process and did not maintain  
               documents that demonstrated it received reasonable  
               prices on the goods and services it purchased. 
                 CIRM's travel reimbursement policy did not provide  
               sufficient control over travel expenses. Policy  
               revisions were made in December 2006 to address  




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               concerns regarding contracting and travel  
               reimbursements. 
                 CIRM's salary survey and compilation of the data  
               contained enough errors, omissions, and  
               inconsistencies that the committee and the institute  
               cannot ensure the salaries for certain positions  
               comply with the requirements of the Act.

          The 2007 report made 12 recommendations, and in January  
          2009, the State Auditor released a follow-up report that  
          evaluated how many of the recommendations were undertaken  
          by CIRM.  Out of twelve recommendations, three had not been  
          implemented: 
                 CIRM had not fully implemented its plans to develop  
               a process to track management information reported  
               annually by grantees to ensure accountability and to  
               enable CIRM to be able to assess annual progress in  
               meeting its strategic goals and initiatives.
                 CIRM had not fully followed through with its plans  
               to identify appropriate standards to provide uninsured  
               Californians' access to therapies developed with CIRM  
               funding or identified practical benchmarks to use as a  
               standard for discount prices for therapies.
                 CIRM had not fully implemented its grants  
               monitoring process.

          In January 2010, the State Auditor released another  
          follow-up report and found that these three recommendations  
          were implemented.

          In 2008, the State Controller conducted a review of  
          conflict-of-interest policies, grant administration,  
          administrative expenses and expenditures, and found that,  
          except for an issue concerning specialists' failure to sign  
          post-review conflict-of-interest certification forms, that  
          CIRM's conflict-of-interest policies were adequate and  
          properly followed.

          Other concerns 
          In 2007-2008, public concerns were raised because ICOC  
          board members from various research institutions wrote  
          letters of recommendation in support of the grants, in  
          violation of conflict-of-interest rules that apply to  
          governing board members.  Currently, 18 of 29 members of  
          ICOC come from universities, research institutions, and  
          life science companies that have direct or indirect  




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          interests in stem cell research.  

          Since then, two major newspapers (Los Angeles Times and  
          Sacramento Bee) have editorialized on the incidents and  
          have urged the Legislature to address these problems by  
          reconfiguring ICOC, and reducing the number of appointees  
          who come from organizations that have direct interests in  
          stem cell research grants.  CIRM resolved these conflicts  
          in 2008, and no grants affected by the conflicts were  
          funded. 
           
           Other public concerns and criticisms continue to be raised,  
          including overstating CIRM's role in funding key research,  
          inordinately high salaries compared to other research  
          grant-making institutions, such as the NIH and the Centers  
          of Disease Control and Prevention, which manage  
          significantly larger grant programs, which are out of touch  
          with the realities of a state mired in a financial crisis,  
          and spending over $1 million in public relations, with  
          plans to spend even more.

          As recent as this February, Pulitzer Prize-winning  
          columnist, Michael Hiltzik, wrote in an Los Angeles Times  
          article that CIRM, which has "self-righteously" opposed  
          better public oversight of its activities, should be  
          altered to create a research program that "exemplifies not  
          only good science, but good government."  The article was  
          posted in response to the latest CFAOC meeting, during  
          which CFAOC endorsed many of the findings of the LHC  
          report, and unanimously called for more openness and  
          transparency of CIRM.  In the article, Hiltzik states that  
          there's no question that CIRM has funded important work and  
          bolstered the state's research profile, nor is there reason  
          to doubt that CIRM needs more staff scientists to make sure  
          grant recipients are spending our money properly,  
          especially since the program is about to start doling out  
                                    loans to commercial companies, not just grants to  
          academics.  
          
          Related legislation
          SB 343 (Alquist) of 2009 would have required intellectual  
          property standards developed by ICOC to include a  
          requirement that each grantee, and the licensees of the  
          grantee, submit to CIRM for approval, a plan that will  
          afford uninsured Californians access to any drug that is,  
          in whole or in part, the result of research funded by the  




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          institute.  This bill would have specified that the plan  
          must require grantees and licensees to provide drugs to  
          California state and local government-funded programs at  
          one of the three benchmark prices in the California  
          Discount Prescription Drug Program, except when the  
          institute adopts a waiver.  Failed passage in Senate Health  
          Committee.

          SB 471 (Romero and Steinberg), Chapter 185, Statutes of  
          2009, creates the California Stem Cell and Biotechnology  
          Education and Workforce Development Act of 2009 to  
          establish stem cell and biotechnology education and  
          workforce development as a state priority and to promote  
          stronger links among industry sectors, the California  
          Institute for Regenerative Medicine, and California public  
          schools, as specified.  

          Prior legislation
          SB 1565 (Kuehl and Runner) of 2008 would have requested,  
          among other things, the LHC to conduct a study of the  
          governance structure of Proposition 71 and provide  
          recommendations on ways the governance structure of ICOC  
          could better ensure public accountability and reduce  
          conflicts-of-interest, consistent with the purposes of  
          Proposition 71. Vetoed by the Governor.  
          
          SB 771 (Kuehl and Runner) of 2007 would have required stem  
          cell research grant or loan recipients to grant exclusive  
          licenses only to organizations that have presented plans  
          that CIRM determines will provide substantial access to  
          resulting therapies, drugs, and diagnostics for uninsured  
          Californians, and provide the therapies, drugs, and  
          diagnostics to publicly funded programs in California at  
          the federal Medicaid price.  The bill would have also  
          required recipients of research grants or loans to agree to  
          make royalty payments to the state, as specified.  These  
          provisions were amended out of the bill. 

          SB 340 (Battin) of 2005 would have required all revenues  
          derived from patents, royalties, and licenses paid to the  
          state as a result of intellectual property agreements  
          entered into pursuant to Proposition 71, to be deposited  
          into the state General Fund. Held in the Assembly Health  
          Committee. 

          SB 401 (Ortiz and Runner) of 2005 would have made changes  




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          to the public meeting, public record, grant and loan  
          licensing conditions, and conflict-of-interest provisions  
          of Proposition 71.  The bill would have required ICOC to  
          establish and apply minimum licensing conditions to its  
          grants and loans for research, including that grantees  
          provide to the state a portion of net licensing revenue or  
          royalties and sell any product, drug, or therapy that they  
          develop using grant or loan funds to state and county  
          health programs at a cost not to exceed the federal  
          Medicaid price.  Held on Assembly Appropriations Committee  
          suspense file.

          SCA 13 (Ortiz and Runner) of 2005 would have modified  
          provisions of Proposition 71 dealing with reporting of  
          economic interests and conflicts-of-interest, and applied  
          open meeting and public records laws to meetings and  
          records of ICOC, CIRM, and its working groups with  
          exceptions.  The bill would have required ICOC to ensure  
          that treatments, therapies, products, and services  
          resulting from technologies and inventions derived from  
          grants awarded are accessible and affordable to low-income  
          residents, including those residents eligible for state and  
          county-funded health care programs.  Died on the Senate  
          Floor.

          AB 2911 (Nunez), Chapter 619, Statutes of 2006, establishes  
          the California Discount Prescription Drug Program (CalRx)  
          within the Department of Health Care Services, and requires  
          DHCS to attempt to negotiate, with each drug manufacturer,  
          discounts to offer single-source prescription drugs under  
          the program at a volume weighted average discount that is  
          equal to or below any one of the following benchmark  
          prices: (1) 85 percent of the average manufacturer price  
          for a drug, as published by the Centers for Medicare and  
          Medicaid Services; (2) the lowest price provided to any  
          nonpublic entity in the state by a manufacturer; or, (3)  
          the Medicaid best price, to the extent that this price  
          exists under federal law. 

          ACR 24 (Mullin), Resolution Chapter 111, Statutes of 2005,  
          requests that the California Council on Science and  
          Technology expand its study group on how the state should  
          treat intellectual property made under state contracts,  
          grants, and agreements to include contracts, grants, and  
          agreements under Proposition 71 and that it expand the  
          membership of the study group to include representatives  




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          from ICOC. 
          
          ACR 1 (Negrete McLeod), Resolution Chapter 128, Statutes of  
          2005, urges the ICOC to 1) adopt robust  
          conflict-of-interest standards, 2) adopt policies requiring  
          CIRM to comply with existing state open meeting and public  
          records laws, and 3) to commit itself to seeking to ensure  
          therapies are available to low-income residents.  It also  
          urges CIRM to report to the Legislature by January 1, 2006.

          Arguments in support
          The State Controller writes in strong support of the bill,  
          stating that SB 1064 implements the most relevant findings  
          of the Little Hoover Commission report that would make  
          practical changes to the operation of the institute to  
          ensure optimal performance by CIRM and ICOC, by requiring  
          recurring performance audits, and ensuring that  
          Californians will have access to drugs created by  
          CIRM-funded research.  The Controller further states that,  
          in January 2010, CFAOC unanimously endorsed the LHC  
          recommendations for greater transparency and accountability  
          included in this bill.

          The Little Hoover Commission writes in support of the bill,  
          stating that SB 1064 would improve transparency and  
          accountability of CIRM by addressing structural  
          deficiencies, such as the long terms served by ICOC board  
          members, which limit turnover and fresh perspectives, or  
          the inherent conflict-of-interest by board members who are  
          tasked by the Act to play an oversight role while  
          simultaneously carrying out day-to-day administrative  
          duties.  LHC states that these structural deficiencies  
          continue to invite criticism and distract CIRM's leaders  
          from their critical task of finding cures.
          
          Arguments in opposition
          The California Heathcare Institute (CHI), an advocacy  
          organization of biotechnology companies and academic  
          research institutions, writes in opposition to the bill,  
          stating that provisions requiring grantees to submit a plan  
          to afford uninsured Californians access to any drug  
          developed as a result of CIRM-funded research, and to  
          provide drugs to state and local government-funded programs  
          at one of the three benchmark prices in the California  
          Discount Prescription Drug Program would create a  
          disincentive for firms to commercialize drugs whose  




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          research was funded with CIRM funding.  CHI further states  
          that the basic goal of IP policies should be to minimize  
          barriers to transferring technologies from basic research  
          laboratories to the private sector, and that CIRM needs  
          flexibility to change its IP policies.
          
                                     COMMENTS
           
          1.  Annual performance audits may be overly burdensome.   
          Although finances are tied to performance, audit findings  
          and recommendations take time to implement, and the results  
          may not be immediately apparent year to year.  Extending  
          the time interval between audits to once every three years  
          would give ICOC and CIRM opportunity to review and  
          implement audit findings, and for the results to be  
          reflected in the next performance audit.  Staggering the  
          separate audits of CIRM and ICOC would also be appropriate,  
          given that the ICOC has governance authority over the CIRM.  
            

          2.  Suggested technical amendments:

               -      Page 8, lines 8-9, change "certified  
                 independent auditing firm" to "public accounting  
                 firm"

               -      Page 8, line 29, change "certified independent  
                 auditing firm" to "public accounting firm"


                                    POSITIONS  


          Support:  State Controller's Office
                    Little Hoover Commission
          
          Oppose:   California Health Institute


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