BILL ANALYSIS
SB 1064
Page 1
SENATE THIRD READING
SB 1064 (Alquist)
As Amended June 17, 2010
70% vote requirement
SENATE VOTE :33-0
HEALTH 19-0 APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Monning, Fletcher, |Ayes:|Fuentes, Conway, |
| |Ammiano, Carter, Conway, | |Bradford, |
| |De La Torre, De Leon, | |Huffman, Coto, Davis, De |
| |Eng, Gaines, Hayashi, | |Leon, Gatto, Hall, |
| |Hernandez, Jones, Bonnie | |Harkey, Miller, Nielsen, |
| |Lowenthal, Nava, | |Norby, Skinner, Solorio, |
| |V. Manuel Perez, Salas, | |Torlakson, Torrico |
| |Smyth, Audra Strickland, | | |
| |Silva | | |
| | | | |
-----------------------------------------------------------------
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
SB 1064
Page 2
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
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
SB 1064
Page 3
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, 2012, 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.
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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, audit costs of $200,000 to $400,000 every three years
to be paid by the bond funding that supports CIRM, additional
unknown bond-fund supported increases in salaries and overhead
to the extent CIRM increases staffing above current levels, and
unknown future General Fund (GF) revenues to the extent the
requirement for GF deposits related to IP agreements established
by this bill increases state revenues.
COMMENTS : 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
SB 1064
Page 4
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 CIRM.
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. 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; and, requiring CIRM and ICOC to begin formal planning
for leadership transition, and to develop a transition plan for
expiration of bond funds.
Stem cell research projects funded with Proposition 71 monies
are expected to generate many types of 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.
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
SB 1064
Page 5
would make practical changes to the operation of CIRM, including
succession planning for the end of its bond funding, 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.
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097
FN: 0005986