BILL ANALYSIS
SB 1064
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Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 1064 (Alquist) - As Amended: June 17, 2010
SENATE VOTE : 33-0
SUBJECT : California Stem Cell Research and Cures Act.
SUMMARY : Imposes additional oversight and transparency
requirements on the California Institute for Regenerative
Medicine (CIRM), revises CIRM's intellectual property (IP)
standards with regard to licensing revenue and drug discount
access plans for low income and uninsured Californians, and
requires revenues from CIRM's IP agreements to be deposited in
the state General Fund, as specified. Specifically, this bill :
1)Requires CIRM to commission a performance audit every three
years, as specified. Requires the initial audit to include:
a) policies and procedures for the issuance of contracts and
grants and a review of a representative sample of contracts,
grants, and loans executed by CIRM; and, b) policies and
procedures relating to the protection or treatment of IP
rights associated with CIRM-funded or commissioned research.
2)Specifies that all administrative costs associated with the
triennial audits must be paid by CIRM.
3)Requires all meeting minutes of CIRM's Independent Citizen's
Oversight Committee (ICOC) to include a summary of vote
tallies and disclosure of each board member's votes and
recusals on all action items.
4)Requires the existing IP agreements developed by the ICOC to
at least include 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 CIRM-funded research, according to specific formulas
prescribed in this bill.
5)Confers authority upon the ICOC to adopt regulations to
implement and modify the formulas specified in 4) above and
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requires the ICOC to notify the Legislature as specified
before exercising its authority to vote on the modification of
these formulas.
6)Requires all revenues received through the IP agreements to be
deposited into the General Fund.
7)Requires the ICOC's existing IP standards to include a
requirement that each grantee or exclusive licensee submit a
plan to CIRM to afford uninsured Californians access to any
drug that is entirely or partly the result of CIRM-funded
research, as specified.
8)Requires the grantee or exclusive licensee, with regard to the
drug discount access plan required by 7) above, to either
submit the plan to CIRM, 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 (FDA). Specifies that,
if the grantee seeks an extension, the plan must be submitted
within 30 business days following the drug's final FDA
approval.
9)Requires the plan in 7) above to be subject to the approval of
CIRM but permits the ICOC to waive the requirement in 7)
above, under specified conditions, after a public hearing and
opportunity for public comment.
10)Requires a request for a waiver to be posted on CIRM's
Internet Web site for at least 10 business days in advance of
the public hearing and directs CIRM to notify the Legislature
if the ICOC grants a waiver request, including the reasons
justifying the request.
11)Requires the ICOC to develop procedures to protect
proprietary information submitted by grantees and exclusive
licensees pursuant to 7) above from public disclosure.
12)Directs CIRM, under the guidance of the ICOC, to establish a
succession plan with regard to changes in leadership of both
CIRM and the ICOC that includes specified information, and, by
January 31, 2010, a transition plan addressing the expiration
of current bond funding. Requires a copy of both of these
plans to be transmitted to the Governor, Controller, and the
Legislature within 30 days of completion.
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13)Deletes the existing cap of 50 authorized CIRM employees and
eliminates the existing cap of 15 scientist members of CIRM's
Scientific and Medical Research Funding Group that is
responsible for processing grant and local applications.
14)Requires the competitive evaluation process used in the
awarding of grants and loans to include a peer review panel of
both scientists and patient advocates. Limits the number of
scientists on a peer review panel to 15. Clarifies that only
the scientist members of the Scientific and Medical Research
Funding Group must score grant and loan award applications for
scientific merit.
EXISTING LAW :
1)Establishes the California Stem Cell Research and Cures 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 CIRM to provide a public annual report disclosing
specified information that includes, among other things,
grants awarded, grants in progress, research accomplishments,
the number and dollar amounts of research and facilities
grants; the grantees from the prior year; its administrative
expenses; and, its strategic financial plans.
4)Establishes the Citizen's Financial Accountability and
Oversight Committee (CFAOC), chaired by the State Controller,
to annually review the financial practices and performance of
CIRM.
5)Requires the ICOC to establish standards to make all grants
and loans subject to IP agreements. Requires the IP
agreements to balance the opportunity for the state to benefit
from the patents, royalties, and licenses that result from
research and therapy development and clinical trials, with the
need to ensure that essential medical research is not
unreasonably hindered by the agreements.
6)Establishes within CIRM three separate scientific and medical
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working groups: Research Funding; Accountability Standards;
and, Medical Facilities.
7)Restricts the total number of authorized CIRM employees to 50.
Specifies that grants and loan applications are processed and
scored by the 15 scientist members of the Scientific and
Medical Research Funding Group.
8)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 Senate Appropriations
Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Triennial audit at least $400$0
$0 Bond*
Additional employee salaries likely in the hundreds of
thousands Bond*
to low millions of dollars annually
General Fund Revenues potentially in the millions of General
dollars, likely not until at least 2020
* California Stem Cell Research and Cures Fund
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, when
California voters approved Proposition 71 in 2004 to create
CIRM, they opted to invest $3 billion of general obligation
bond funds in stem cell research. The author argues that in
the six years since Proposition 71 passed, it has become clear
that additional oversight and transparency is needed to ensure
that Proposition 71 is operating as intended. The author
maintains that this bill will clarify the processes by which
CIRM and the ICOC will ensure transparency, provide
appropriate oversight, and guarantee a return on the public's
investment by providing a payback to the General Fund and
equal access to any of the stem cell treatments developed by
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CIRM.
2)LITTLE HOOVER COMMISSION REPORT . In June 2009, the Little
Hoover Commission (LHC) issued a report identifying several
recommendations to more adequately guide the state's unique
investment in stem cell science and improve CIRM's efficiency
in meeting the goals of Proposition 71. According to the
report, the LHC noted that CIRM's governance structure is
insufficient to protect taxpayers' interests or further its
own ambitious goals, and urged the Legislature to reform
CIRM's governance 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. To enhance CIRM's ability to
fulfill its mission, LHC made a number of recommendations,
many of which are incorporated in this bill, including
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 the CFAOC to conduct
performance reviews; and, requiring CIRM and ICOC to begin
formal planning for leadership transition, and to develop a
transition plan for expiration of bond funds.
3)PRIOR AUDITS AND EVALUATIONS . In January 2009, the Bureau of
State Audits released a report that made several findings with
regard to CIRM including that it had not fully implemented its
plans to develop a process to track management information
reported annually by grantees to ensure accountability and to
enable it to assess annual progress in meeting its strategic
goals and initiatives; 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; and, had not fully implemented
its grants monitoring process. However, CIRM reports that, as
of January 2010, remedies to correct these three deficiencies
have since been implemented. Additionally, in 2008, the State
Controller conducted a review of CIRM's conflict-of-interest
policies, grants administration, administrative expenses and
expenditures, and concluded that these policies were adequate
and properly followed.
4)CURRENT IP STANDARDS . Stem cell research projects funded with
Proposition 71 monies are expected to generate many types of
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IP, such as new research tools, new stem cell lines, and,
ultimately, stem cell treatments and drugs. In many cases,
grantees will be able to use the rights to these inventions or
license them to other entities in order to develop other stem
cell products and research tools. To date, the ICOC has
adopted IP and revenue-sharing regulations for for-profit and
non-profit grantees. These regulations incorporate
requirements that would be codified in this bill, including: a
requirement for grantees that commercialize a drug to submit a
plan to CIRM that affords uninsured Californians' access to
the drug in accordance with industry standards; a requirement
for grantees that commercialize a drug to sell the drug at
specified benchmark prices; revenue sharing requirements that
require grantees to share a portion of revenues with the State
of California without specifying how or where those funds will
be deposited; and, a requirement to pay royalties to the State
of California to be deposited in the General Fund.
5)PRIOR LEGISLATION .
a) SB 343 (Alquist) of 2009 would have, among other things,
required IP standards developed by the ICOC to include a
requirement providing for drug discount access plans to
afford uninsured Californians access to any drug that is,
in whole or in part, the result of research funded by CIRM.
SB 343 failed passage in the Senate Health Committee.
b) SB 1565 (Kuehl and Runner) of 2008 would have imposed
requirements providing for drug discount access plans
similar to the provisions of this bill and would have
requested, among other things, the LHC to study the
existing governance structure of the ICOC and CIRM. SB
1565 was vetoed by Governor Schwarzenegger who stated in
his veto message that it did nothing to advance the will of
the voters.
c) SB 401 (Ortiz) of 2006 would have modified the public
hearing and conflict-of-interest procedures of members of
the ICOC, the Citizen's Financial Accountability Oversight
Committee and the advisory and working group established to
assist these bodies and would have prescribed minimum
intellectual property licensing conditions applicable to
ICOC standards for research and facilities grants and
loans. SB 401 was held in the Assembly Appropriations
Committee.
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d) 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. SB 340 was scheduled for a
hearing in the Assembly Health Committee but the hearing
was cancelled at the request of the author.
e) SB 18 (Ortiz) of 2005 would have required the State
Auditor to conduct a performance audit of the ICOC and
CIRM. SB 18 was vetoed by Governor Schwarzenegger who
indicated in his veto message that it was in direct
conflict with the text of Proposition 71 as approved by the
voters.
f) SCA 13 (Ortiz) of 2005 would have modified provisions of
Proposition 71 relating to reporting of economic interests,
conflict-of-interest standards, open meetings and public
record laws. SCA 13 was placed on the Senate inactive file
at the request of the author.
6)SUPPORT . CIRM writes in support of this bill, stating that it
would ensure that the State of California has the opportunity
to benefit from voters' investment in stem cell research while
providing CIRM with the operational flexibility it needs to
carry out its mission of providing therapies to California
patients. The State Controller supports this bill because it
would make practical changes to the operation of CIRM,
including succession planning for its 2014 dismantling date
and flexibility in staffing, and ensure optimal performance by
requiring recurring performance audits. The LHC notes in
support that CIRM is a frequently studied agency that has been
responsive to many suggestions for improvement from outside
entities. Consumer Watchdog adds that this bill is a
thoughtful measure that makes necessary adjustments to help
ensure that the promises of Proposition 71 are kept.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Controller John Chiang
California Institute for Regenerative Medicine
Consumer Watchdog
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Little Hoover Commission
Opposition
None on file.
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097