Senate Health Committee, Senate Subcommittee on Stem Cell Research Oversight, Assembly Health Committee, Assembly Judiciary Committee

San Francisco, California

My name is Jesse Reynolds. I am the director of the Project on Biotechnology Accountability at the Center for Genetics and Society, a public interest organization advocating responsible societal governance of the new human biotechnologies. We support human embryonic stem cell research and its public funding, but have raised many concerns about Proposition 71 and the activities of the California Institute for Regenerative Medicine.

Thank you for giving me the opportunity to speak.

As we have heard today, intellectual property is perhaps the most pressing issue facing the CIRM. An IP policy must be in place before any grants, including training grants, are issued.

The Center for Genetics and Society believes that provisions regarding returns to the state and accessible pricing must be made explicit before individual grant agreements are negotiated. This will make it much easier to secure terms that benefit the citizens of California.

IP policy has a major influence on all aspects of stem cell research and applications. I'll note just three. First, it determines the level of financial returns to the state. Second, it can determine whether any applications are likely to be affordable by the majority of Californians. And third, it can, if poorly crafted, undermine public support for the work of the CIRM. If CIRM-funded research leads to a valuable product that a pharmaceutical firm is selling at high prices with little return to the state, public support for the work of the CIRM is very likely to decline.

As we've heard, there are many different approaches to crafting policy regarding intellectual property. Like all policies, policies on intellectual property are grounded in sets of values and criteria. I'd like to focus on an important set of values and criteria that haven't been emphasized, namely, those outcomes promised to the voters of California during the Proposition 71 campaign.

During the course of the campaign, voters were repeatedly told, "Trust us with your taxpayer dollars, we'll do the research and deliver the therapies, and the state will financially benefit in the process." They were told that the initiative would provide an opportunity for the state to receive a share of royalties. These claims were made in printed materials, television and radio ads, public statements and all other communications, throughout the campaign.

Although these pledges do not carry the weight of law, they were clearly a foundational element of voter support. At the March hearing of this committee, bioethicist Arthur Caplan repeatedly called the language used in the campaign an "implicit moral promise."

We can make allowances for typical campaign rhetoric and still understand that these pledges have created an obligation. Ask yourselves: if the voters of California had been asked last November to approve $3 billion in taxpayer dollars for stem cell research without pledges that this money would be returned to the state, what effect would this have had on the final vote?

The presentation used by the campaign, available on its website, cites the state's "opportunity to share in royalties resulting from the research, which could generate millions in additional state revenues for decades to come."

The economic analysis commissioned and promoted by the Proposition 71 campaign estimated that the state could expect to receive up to 1.1 billion dollars in direct returns.

And, as a typical example, an op ed by Edward Holmes, John Reed and Joe Panetta - two of whom are now on the ICOC - that ran just before the election in the San Diego Union Tribune, said "Proposition 71 … has the potential to bring the state of California billions of dollars through new tax revenues, patent royalties and by reducing California's skyrocketing health care costs."

Earlier this year, the public became aware that such returns to the state may conflict with the federal government's provision for tax exempt bonds. We were disturbed - to put it mildly - to have learned last week from a story in the San Francisco Chronicle that Robert Klein, as chairman of the Proposition 71 campaign, knew of this likely conflict but did not inform the voters. Yet the campaign continued to project financial returns that relied on tax exempt bonds and returns to the state. Mr. Klein himself said on national television, in no uncertain terms, that "The state of California will gain jobs, new tax revenues and intellectual property revenues to pay back the taxpayers."

If this report is true, then Mr. Klein knowingly misled the voters of California and the supporters of Proposition 71.

I am sure you are aware of the crisis of health care disparities in America. Millions of Californians lack health care, and even those who have it often find their share of the costs difficult to cover. And the largest source of rising health costs is the price of pharmaceuticals.

One of our original concerns about Proposition 71 was that it could greatly exacerbate health inequities. Stem cell therapies are expected to be extraordinarily expensive. We've heard a leading CIRM scientist say that some stem cell therapies could cost one hundred thousand dollars per patient., and paraphrasing, "I don't like that, but it's not my job to worry about it. Our job is just to do the science."

The CIRM's policies, and its IP policies in particular, can greatly influence the degree to which Prop 71 contributes to, health care disparities.

The ICOC is obliged to enact policies, to the best of its ability, which fulfill the promises made to voters. Unfortunately, the work so far is not encouraging. The leadership of the new institute has been surrounded with an echo chamber of enthusiasm for the status quo, that is, the Bayh-Dole act. As we've seen today, there are numerous critics of Bayh-Dole who have constructive ideas about alternative approaches, yet these perspectives have not been included among the CIRM's advisors.

A notable example of the biased sources on which the CIRM has been soliciting for advice is the committee of the California Council on Science and Technology. The committee's membership is dominated by private industry and university representatives, particularly from technology transfer offices. These are the very institutions that are likely to oppose provisions to ensure returns to the state and affordable pricing.

Meanwhile, key constituencies have been notably absent in the discussion over IP policies. These include representatives of state government and of public interest groups, particularly those who advocate for affordable health care.

As many of you heard at the March hearing of this committee, some scientists believe that the "culture of science" warrants downplaying or even disregarding the general public interest as a criterion for determining public policies. We believe this contention is incompatible with a commitment to democratic governance. We don't believe that the CIRM leadership is entitled to use public funds without continuing and effective oversight by the general public through its elected officials.

The Center for Genetics and Society is looking to this committee to provide leadership ensuring that the promises of the Proposition 71 campaign and the promise of stem cell research in California are fulfilled. The results of this generous public investment must benefit all Californians - not just the wealthy and not just the pharmaceutical corporations. To do otherwise is to renege on pledges made to the voters of California last November.