Summary1

ABSTRACT

The California Institute for Regenerative Medicine (CIRM) was created in 2005 by The California Stem Cell Research and Cures Act (Proposition 71) to distribute $3 billion in state funds for stem cell research. The passage of Proposition 71 by the voters of California occurred at a time when federal funding for research involving human embryonic stem cells was uncertain, given the ethical questions raised by such research. During its initial period of operations, CIRM has successfully and thoughtfully provided more than $1.3 billion in awards to 59 California institutions, consistent with its stated mission. As it transitions to a broadened portfolio of grants to stimulate progress toward its translational goals, the Institute should obtain cohesive, longitudinal, and integrated advice; restructure its grant application review process; and enhance industry representation in aspects of its operations. CIRM’s unique governance structure, while useful in its initial stages, might diminish its effectiveness moving forward. The committee recommends specific steps to enhance CIRM’s organization and management, as well as its scientific policies and processes, as it transitions to the critical next stages of its research and development program.

__________________

1This summary does not include references. Citations for the findings presented in the summary appear in the subsequent report chapters.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 1
Summary1 ABSTRACT The California Institute for Regenerative Medicine (CIRM) was created in 2005 by The California Stem Cell Research and Cures Act (Proposition 71) to distribute $3 billion in state funds for stem cell research. The passage of Proposition 71 by the voters of California occurred at a time when federal funding for research involving human embryonic stem cells was uncertain, given the ethical questions raised by such research. During its initial period of operations, CIRM has successfully and thoughtfully provided more than $1.3 billion in awards to 59 California institutions, consistent with its stated mission. As it transitions to a broad- ened portfolio of grants to stimulate progress toward its transla- tional goals, the Institute should obtain cohesive, longitudinal, and integrated advice; restructure its grant application review process; and enhance industry representation in aspects of its operations. CIRM’s unique governance structure, while useful in its initial stages, might diminish its effectiveness moving forward. The com- mittee recommends specific steps to enhance CIRM’s organization and management, as well as its scientific policies and processes, as it transitions to the critical next stages of its research and develop- ment program. 1  Thissummary does not include references. Citations for the findings presented in the sum- mary appear in the subsequent report chapters. 1

OCR for page 1
2 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE P roposition 71 (The California Stem Cell Research and Cures Act) was adopted by the voters of California on November 2, 2004, to provide substantial state support for a comprehensive in-state stem cell research program. The California Institute for Regenerative Medicine (CIRM) was created in 2005 to carry out this program. The act established a distinctive model of both finance and governance for CIRM. The Institute itself was to be governed by an Independent Citizens Oversight Committee (ICOC) and was to be financed through the issuance of long-term general obligation bonds of the State of California. CIRM was charged by Proposi- tion 71 with determining the most effective means of distributing $3 billion in state funds for stem cell research and research on regenerative medicine more broadly over at least 10 years. Its principal aims are to accelerate cer- tain critical aspects of the science of regenerative medicine and its transla- tion into treatments for a spectrum of currently intractable human diseases. Research on stem cells is an important area of biomedical research because of the promise it holds for developing new and more effective treatments for a wide variety of diseases. However, the past 15 years has seen continuing uncertainty regarding the federal government’s willingness to fund research using human embryonic stem (hES) cells. Given that the federal government has traditionally been the largest source of funding for biomedical research outside of industry and the largest funder of basic research, some believed that the United States was forgoing an important opportunity to be a pioneer in developing the basic research necessary to produce critical new clinical applications. It was in this context that a broad group of California-based scientists, leaders in higher education in the state, disease advocates, and others mounted the Proposition 71 initiative. The aim of this initiative was to fill the gap created by fluctuating and uncertain federal policies, thereby helping both to develop new clinical modalities and to create a leadership position for California in this critical area of biomedicine. It is worth remembering that in 2004, there had been little demonstration of the potential for reprogramming somatic cells to bring them to a pluripotent state. CHARGE TO THE COMMITTEE AND STUDY APPROACH At the request of CIRM, the Institute of Medicine (IOM) convened the Committee on a Review of the California Institute for Regenerative Medicine in 2011 to critically review the Institute and produce a report including recommendations for how CIRM could improve its performance. The committee’s statement of task is presented in Box S-1. The committee was not asked to assess the wisdom of the California voters in passing Proposition 71. However, many of the detailed provisions of Proposition 71 directly impact aspects of CIRM’s operations that the

OCR for page 1
SUMMARY 3 BOX S-1 Statement of Task The California Institute for Regenerative Medicine (CIRM) asked the Institute of Medicine (IOM) to convene a committee to produce a report providing an independent assessment of CIRM’s programs, operations, strategies, and performance since 2005. Specifically, the committee was charged with addressing the following questions: •  IRM’s initial processes—What can be learned from the history C and process of building consensus in the public and scientific communities to support the inception and work of CIRM? • CIRM’s programmatic and scientific scope—Does CIRM have the portfolio of projects and grant opportunities necessary to meet its scientific goals? How can CIRM improve upon its existing array of programs? What additional programs and initiatives are recommended to meet its goals? What impacts have been seen from international agreements? Does CIRM’s scientific strategic plan address the range of relevant issues in regenerative medi- cine within CIRM’s mandated scope of work? • CIRM’s organizational and management systems—Are the internal organizational and management systems (in particular the board and working group structures and operations, the peer review system, the conflict of interest guidelines, and the grants management system) effective in working toward the Institute’s scientific goals? Are the systems that are in place scientifically and ethically valid and rigorous? Do they achieve the level of transparency and the level of stakeholder and scientific commu- nity involvement needed to meet the Institute’s public responsibili- ties and scientific goals? • CIRM’s funding model—Has the funding model for CIRM had an impact on the work of the Institute? What are the advan- tages of CIRM’s model for covering long-term costs of medical research? Could aspects of this funding model serve as a para- digm for other states or countries? What has been the economic impact of CIRM’s research and facilities awards and grants? • CIRM’s intellectual property policies—What are the strengths and weaknesses of CIRM’s policy for sharing revenue generated by intellectual property? How does this model compare to the model governing federally supported research? The principal objective of this review was to ensure that all aspects of CIRM’s operations are functioning at peak performance. The committee was asked to provide recommendations regarding short-, medium-, and long-term actions that could improve the performance of CIRM.

OCR for page 1
4 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE committee was asked to evaluate in its charge. The committee was also not asked to rigorously evaluate the details of CIRM’s scientific contributions, specific grant awards, or impact on the field of regenerative medicine. This report evaluates some of the unique aspects of CIRM’s origins, governance structure, and scientific and intellectual property policies. The report is intended to help CIRM consider the best path forward for achieving its mission. CIRM’S ORIGINS AND TRANSITION CIRM is in many ways a bold social innovation. CIRM’s existence is the result of the work, initiative, commitment, and imagination of a broad, diverse, and evolving group of dedicated citizens, scientists, univer- sity leadership, disease advocacy organizations, and some members of the California Legislature. CIRM differs from many other competitive scientific research programs in its innovative funding model, which provides for a stable source of funding for research in regenerative medicine over 10 years, financed by the issuance of general obligation bonds of the State of California. This approach transfers the financing burden of current research funding from current to future tax revenues. In these respects CIRM is both a creative supplement to the more traditional sources of biomedical research funding in the United States and an innovative initiative designed to further strengthen California’s biotechnology efforts. Estimating the long-term economic impact of investments in a particu- lar set of biomedical research activities is a complex task that requires at the very least considerable time and experience with various treatments and/or cures that result from those investments. In the short term, CIRM’s expenditures are supporting approximately 3,400 jobs, and its innovative efforts have also attracted substantial additional private and institutional resources to this research arena in California. CIRM’s long-term impact on such critical aspects of the California economy as state tax revenues and health care costs beyond the shorter-term and temporary impact of its direct expenditures cannot be reliably estimated at this point in CIRM’s history. Because the funding provided by Proposition 71 is limited to the $3 bil- lion initially authorized, it is now critical for CIRM to continue to develop its plans for taking fullest advantage of its achievements in order to help support a sustainable future in which its funding circumstances could be quite different. The committee believes that in this process, it will be important for CIRM to increase industry inputs and share with the public any plans to obtain private-sector support for its ongoing activities and how any such arrangements might affect its continuing public obligations, including those related to CIRM-funded intellectual property, as well as its obligations as laid out in its access plans.

OCR for page 1
SUMMARY 5 Recommendation 2-1.2 Develop a Sustainability Platform. CIRM should work with its current and future partners and those who have been substantial recipients of CIRM support to develop and present to the public its plans for sustaining the momentum of its achievements as it moves beyond its first decade of operations. Any such plan should address such key strategic areas as how CIRM intends to obtain funding after bond proceeds have been spent, how the venture philanthropy fund proposed in the 2012 Strategic Plan will interface with CIRM, and impacts of any new funding models on the role and structure of the ICOC.3 GOVERNANCE OF CIRM Assembling the broad coalition of citizens and institutions that were united in their enthusiasm for stem cell research, but had somewhat differ- ent perspectives, had implications not only for the design of Proposition 71 but also for CIRM’s ongoing programs and operations. While CIRM’s restrictions on amending the administrative structure established in Propo- sition 71 had the advantage of protecting the Institute’s ongoing operations from outside interference in an ethically controversial arena, they also made it difficult to modify the organization’s structure in response to experience and/or changing circumstances. Moreover, these protections, whatever their benefits, appear to some to shield CIRM from the normal accountability mechanisms in place for state agencies. In assessing the governance of CIRM, the committee considered issues of operations versus oversight, the ICOC and working group structure, and conflict of interest definitions and policies. Operations Versus Oversight Proposition 71 established the 29-member ICOC as the governing board of CIRM and created three large working groups—a 19-member Sci- entific and Medical Accountability Standards Working Group, a 23-member Scientific and Medical Research Funding Working Group (Grants Work- ing Group), and an 11-member Scientific and Medical Facilities Working Group—to provide guidance to the ICOC. The CIRM president serves as the Institute’s chief executive officer, but the ICOC board chair has signifi- cant operational responsibilities in addition to managing the ICOC itself. 2  The committee’s recommendations are numbered according to the chapter of the main text in which they appear. 3  See main body of the report for the full text of this recommendation.

OCR for page 1
6 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE In some cases, the allocation of responsibility for important management functions is split between the president and the board chair. The committee recognizes that CIRM’s current governance structure, as designed under Proposition 71, may have been appropriate at the start of the endeavor and contributed to its early success. Now that CIRM is a more mature organization, however, it would benefit from a clear and appropriate separation of duties, with the board being responsible primarily for independent oversight and strategy and staff for the implementation of the board’s policies. The current structure of the ICOC impedes indepen- dent oversight because it relies on the ICOC to function as both overseer and executer. The committee believes good governance requires that the board del- egate more authority and responsibility for day-to-day affairs to the presi- dent and senior management. The Little Hoover Commission recommended that CIRM and the legislature eliminate overlapping authority between the chair and president and improve the clarity and accountability of each. This recommendation was echoed by the External Advisory Panel, which called for clarity in the division of roles and responsibilities between these two positions, particularly with respect to strategic direction, policies, international partnerships, funding decisions, public communications, and oversight. Recommendation 3-1. Separate Operations from Oversight. The board should focus on strategic planning, oversee financial perfor- mance and legal compliance, assess the performance of the president and the board, and develop a plan for transitioning CIRM to sustain- ability. The board should oversee senior management but should not be involved in day-to-day management. The chair and the board should delegate day-to-day management responsibilities to the president. Each of the three working groups should report to management rather than to the ICOC. Board and Working Group Structure The predominance of direct stakeholders—defined as individuals with a direct stake in the process and outcomes of CIRM’s activities that arises outside of their service to the Institute—in the composition of the ICOC compromises its independence beyond the entanglement of operations and oversight. Board members who have personal and professional interests in the activities of CIRM that go beyond the interests of the general public undoubtedly bring considerable energy and commitment to the tasks before them, but they may also introduce bias into the board’s decisions that com- promises its stewardship over CIRM as a public institution. The board’s

OCR for page 1
SUMMARY 7 composition should be modified to include a majority of members who are independent in the sense of having no direct personal or professional interest that might compete or conflict with the interests of CIRM and the people of California in ways that might bias their decisions (see also the discussion of conflict of interest below). The working groups currently report to the chair. The committee believes they should report to CIRM senior management, with the ICOC being reserved to perform its responsibilities for high-level and indepen- dent strategic oversight. Thus, it is important that the chair and other ICOC members not serve on the working groups. As board members on the working groups are replaced, the working groups should not lose the fundamental and critical perspective of disease advocates; instead, any board members of the working groups who are disease advocates should be replaced by an equal number of other disease advocates who are not board members. The committee’s recommendation is intended to both redefine and expand the role of disease advocates. Recommendation 3-2. Change the Composition and Structure of the Board and Working Groups. CIRM should put systems in place to restructure the board to have a majority of independent members, with- out increasing the size of the board. It should include representatives of the diverse constituencies with interests in stem cell research, but no institution or organization should be guaranteed a seat on the board. Consideration should be given to adding members from the business community. The terms of board members should be staggered to bal- ance fresh perspectives with continuity. The chair and other ICOC members should be prohibited from serv- ing on the working groups. During the reconstitution of the working groups, the current level of representation of disease advocates should be maintained, such board members being replaced with other disease advocates who are not board members. Conflict of Interest Definitions and Policies The built-in allocation of ICOC board seats to university leadership, patient advocates, and members of the biotechnology industry, for example, ensured that a high percentage of those seats would be permanently occu- pied by persons with almost unavoidable, conflicts of interest, whether actual or perceived, between their roles as ICOC board members and their other, non-CIRM responsibilities. At the very least the perceived conflicts are one factor that has led some observers, perhaps unfairly, to continue to question the integrity and independence of some of CIRM’s decisions. Such

OCR for page 1
8 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE conflicts, real or perceived, are inevitable given the provisions of Proposi- tion 71 and were not addressed by Senate Bill 1064.4 Conflict of interest is not misconduct, but bias that potentially skews the judgment of a board member in favor of interests that may be different from or narrower than the broader interests of the institution. Inherent conflicts arise from the interests of board members as employees of grantees and as representatives of disease advocacy organizations. The committee did not uncover or search for evidence of any inappropriate behavior by any ICOC board members. The point is that the board suffers from a wide range of perceived conflicts generated directly by the particular and unique governance requirements of Proposition 71. This threatens to undermine respect for ICOC decisions. California law focuses primarily on financial conflicts of interest, but the committee believes that personal conflicts of interest arising from one’s own or a family member’s affliction with a particular disease or advocacy on behalf of a particular disease also can create bias for board members. Studies in psychology and behavioral economics show that conflict of interest leads to unconscious and unintentional “self-serving bias” and to a “bias blind spot” that prevents recognition of one’s own bias. Bias distorts evaluation of evidence and assessment of what is fair. The presence of conflicts of interest for individual board members would be less cause for concern if the board had more non-conflicted mem- bers. CIRM should address real and apparent conflicts of interest, including and beyond financial interests, built into its governance structure regard- less of whether these conflicts have in theory been waived by the voters or excused under California law. Recommendation 3-3. Revise Conflict of Interest Definitions and Poli- cies. CIRM should revise its definitions of conflict of interest to recog- nize conflicts arising from nonfinancial interests, such as the potential for conflict arising from an individual’s interest in a specific disease, and should reassess its policies for managing conflict of interest in light of this broader definition. An important theme of the committee’s governance recommendations is for CIRM to transition from the governance structure initially outlined in Proposition 71 to one the committee believes would better serve the interests of the citizens of California and the field of regenerative medicine. In assessing CIRM’s current governance structure and proposals for reform, the committee did not limit considerations and recommendations to the boundaries imposed by Proposition 71. Instead, the committee worked to 4  California Legislature (Sen. Bill No. 1064), approved by Governor September 30, 2010. Filed with Secretary of State on September 30, 2010.

OCR for page 1
SUMMARY 9 develop recommendations that would best serve CIRM and the California taxpayers from this point forward. The committee fully appreciates the fact that even in the best of circumstances, such a transition, if carried out thoughtfully, must take place over time. THE SCIENTIFIC PROGRAM The ICOC adopted its first scientific strategic plan in December 2006. The goals during this initial phase were to develop appropriate laboratory facilities for stem cell research, to fund basic research in stem cell biology, to invest in programs focused directly on research on a broad range of diseases, and to establish a long-term foundation for California’s leader- ship in stem cell research and development. In this first crucial period of operations, CIRM provided—in a remarkably expeditious and thoughtful manner—more than $1.3 billion in awards to 59 institutions. The focus of these awards was fully consistent with CIRM’s stated mission and was important for building the infrastructure for stem cell research in Cali- fornia. Collaborations with funding partners and stem cell researchers in the United States and around the world have attracted tens of millions of dollars in matching funds for CIRM projects, and resulted in new levels of cooperation and funding in the field. It is clear that in this initial period, CIRM substantially enhanced California’s position as one of the key inter- national hubs of activity in regenerative medicine. Two years after developing its initial strategic plan, CIRM moved to broaden its portfolio of grants to stimulate progress toward its translational goals. Over time, 14 disease team awards totaling $210 million were made. A subsequent evaluation of the progress of these teams in 2011 led to the termination of one of these grants. It is not possible to say at this stage whether the net cast by CIRM’s disease teams is too wide or too narrow. What is clear is that the resources ultimately required to bring any one of these initiatives to the bedside far exceed those available from CIRM. Evolution Past the Initial Phase In 2012, CIRM developed a new strategic plan outlining 10 goals that build on and extend those efforts articulated in the 2006 plan. The new plan increases the priority of projects clearly focused on moving toward clinical trials for evidence of therapeutic benefit and the development of partnerships with both industry and other centers for research in regenera- tive medicine. These are the key objectives that, in part, reflect CIRM’s response to the 2010 External Advisory Panel review. This shift is illus- trated further by the July 26, 2012, announcement of an additional eight disease team awards totaling approximately $151 million. These teams are

OCR for page 1
10 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE expected either to have filed a request to begin clinical trials or to have completed a Phase 1/2 clinical trial within 4 years. The latest round of awards brings the number of disease teams to 22 and the total funding for this program to approximately $360 million. CIRM-supported late-stage research projects now address 37 different disease areas. Given the pressure for CIRM to show progress in therapeutic appli- cations within its limited time frame, the rapid transition to the disease teams and the stated goals of the 2012 strategic plan are understandable. Nonetheless, based on the consensus of both academic and industrial stem cell experts who provided comments to the committee, and given both the lengthy time frame generally required for development of new therapies and the high failure rate of clinical trials at Phase 1 or 2, the committee believes the translational goals enumerated in the 2012 strategic plan are unrealistic. Instead of focusing purely on quantitative measures, such as numbers of trials and disease areas, CIRM should also focus on fundamental biological mechanisms that ultimately determine the success or failure of a specific disease intervention and on the careful design of translational studies to make them maximally informative even in the absence of any demonstrable clinical benefit. To guide its ongoing implementation of the 2012 strategic plan, CIRM proposes to create a Clinical Advisory Panel and Industry Advisory Board. Although the committee supports CIRM’s intent to establish advisory boards, it recommends that one Scientific Advisory Board be established. Striking the proper balance in research across the portfolio of basic, trans- lational, and clinical studies will require that CIRM solicit broad input in executing its strategic plan. The committee believes the proposed Scientific Advisory Board could serve an invaluable role in this process. Recommendation 4-1. Establish a Scientific Advisory Board. CIRM should establish a single Scientific Advisory Board comprising indi- viduals with expertise in the scientific, clinical, ethical, industry, and regulatory aspects of stem cell biology and cell-based therapies. A single Scientific Advisory Board, as opposed to multiple advisory boards as proposed in the 2012 strategic plan, would provide cohesive, longitu- dinal, and integrated advice to the president regarding strategic pri- orities, which is lacking in the current CIRM organizational structure. The majority of the members of the Scientific Advisory Board should be external to California, appointed by and reporting to the CIRM president. Such an external board would be invaluable in vetting ideas for new Request for Applications (RFAs), suggesting RFAs that oth- erwise would not have been considered, and helping CIRM maintain an appropriate balance in its research portfolio. Input from this board would help CIRM make fundamental decisions about dealing with

OCR for page 1
SUMMARY 11 challenges that cut across particular diseases, decide which discoveries should progress toward the clinic, and determine how best to engage industry partners in developing new therapies. The board’s reports and the president’s response to those reports should be delivered to the ICOC and discussed in sessions open to the public. Omitted Areas of Emphasis CIRM made strategic decisions that resulted in the omission of some important areas of emphasis during its initial phase, areas that fall squarely within the CIRM mandate. For example, there is a lack of RFAs addressing the novel ethical and regulatory aspects of clinical applications of potential stem cell therapies. Most of CIRM’s ethics and public policy spending has focused on intramural funding for public outreach and education and the internal development of technical, instrumental, and procedural policy frameworks for basic stem cell research. Also lacking are proposals that would prepare academic institutions in California for collaboration with the private biotechnology or large pharmaceutical sectors. CIRM has engaged industry in a number of ways. However, CIRM’s relatively small investment in industry projects (roughly 6 percent of its total budget) and the notable absence of industry repre- sentatives on most disease teams demonstrate the inadequate emphasis of CIRM’s translational/development RFAs on what is needed to enable regulatory approval for cell-based therapies. Recommendation 4-3. Fund Research and Training on Ethical and Regulatory Issues. CIRM should sponsor training programs and workshops and offer new grant opportunities aimed specifically at identifying and addressing ethical and regulatory issues surrounding stem cell–based clinical trials research. CIRM should use the informa- tion resulting from these initiatives, together with current knowledge, to strengthen its ethical standards for CIRM-funded human subjects research based on sound empirical and theoretical grounds. Recommendation 4-4. Enhance Industry Representation in Key Aspects of CIRM Organization. Industry representation on the ICOC, the Scientific Advisory Board, the Standards Working Group, and the Grants Working Group should be enhanced to leverage industry’s expertise and resources in product development, manufacturing, and regulatory approval in support of the ultimate goal of bringing thera- pies to patients.

OCR for page 1
12 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE Grant Review and Funding Process The committee recognizes the magnitude of CIRM’s successful effort to develop a grant management infrastructure within a remarkably short period of time following passage of Proposition 71. Given the complexity of this endeavor and the legislated limitation on staff size (initially no greater than 50 full-time equivalents), the overall success of this grant management infrastructure is impressive. At the same time, CIRM’s credibility requires that the grant review process be expert, transparent, and fair. The committee has considerable concern about the role of the ICOC with regard to management versus oversight of CIRM activities, particularly for the grant-making process. The ICOC may move applications from one tier to another before taking a final vote. Examination of ICOC records indicates that the shifting of applications from one tier to another does occur, including some for major programs with large budgets. As of October 22, 2012, 62 extraordinary petitions were heard by the ICOC, of which 20 (32 percent) were suc- cessfully funded. The committee is troubled by the extraordinary petition mechanism and suggests that this practice be eliminated. Given that membership of the ICOC includes individuals who have vested interests in which diseases are supported by grants and who repre- sent institutions that stand to benefit greatly from grant-making decisions, it is not surprising that, even if no actions have been taken as a result of these interests, many in the community feel that irreconcilable conflicts exist. The committee believes these inherent and perceived conflicts diminish the credibility of the ICOC and therefore decrease its potential to be effective as a transparent, impartial body. Recommendation 4-2. Restructure the Grant Review and Funding Process. CIRM should restructure the grant review and funding process to separate oversight and strategic planning from day-to-day opera- tions. The ICOC should remain responsible for oversight and articula- tion of an overall strategic plan. However, grant management, funding recommendations, and grant administration should be the responsibil- ity of the CIRM scientific staff, reporting to the president. This restruc- turing would help mitigate concerns related to conflicts of interest and would also put the review and funding process in the hands of those best equipped to make those decisions. The committee recommends several changes pertaining to the devel- opment and approval of RFAs, composition of the Grants Working

OCR for page 1
SUMMARY 13 Group, reordering of rankings by CIRM staff, notification of appli- cants, and process for making final decisions.5 INTELLECTUAL PROPERTY POLICIES Intellectual property is a policy tool for motivating investments in innovation. CIRM has devoted considerable attention to the development of its intellectual property policies, repeatedly drafting and revising them in response to wide-ranging feedback from various stakeholders. The argument for intellectual property rights differs for inventions developed with public funds and those funded privately. When the public bears the cost and risk of the research and development that yields an inven- tion, it is arguable whether the public should not have to pay again for the same invention through higher prices as a result of the exclusionary rights conferred by patents. Often, however, substantial further private investment is necessary after government funding ceases, especially when the recipient of the latter funding is a research institution that is not in the business of translating new scientific discoveries into commercial products. The Bayh-Dole Act of 1980 has been particularly influential in setting the ground rules for patenting of inventions by universities. While the intel- lectual property policies of CIRM follow the broad contours of the Bayh- Dole regime, there are some differences. Consistent with the approach of the Bayh-Dole Act,6 Proposition 71 appears to assign a significant role to contracts as a mechanism for imple- menting CIRM’s intellectual property policies by binding grantees to its terms.7 In practice, however, CIRM has instead used regulations to govern intellectual property for CIRM-funded research results. By their terms, these regulations bind not only CIRM grantees and loan recipients but also their collaborators and licensees, and even third parties who subsequently acquire rights from them.8 Some flexibility is built into the regulations, but this flexibility also creates uncertainty as to how the regulations will be applied in the future. In addition, CIRM’s intellectual property poli- 5  See main body of the report for full text of this recommendation. 6  35 U.S.C. § 202(c). 7  Proposition 71 divides responsibility for CIRM’s intellectual property policies among the ICOC, which is assigned to “establish policies regarding intellectual property rights arising from research funded by the institute”; the chairperson, whose responsibilities include “to lead negotiations for intellectual property agreements, policies, and contract terms”; and the president, whose responsibilities include “to manage and execute all intellectual property agreements and any other contracts pertaining to the institute or research it funds.” Codified at California Health and Safety Code § 125290.40. 8  California Health and Safety Code § 125290.40(j); interview with Scott Tocher and Elona Baum, January 24, 2012.

OCR for page 1
14 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE cies apply to a broader range of research outcomes than is covered by the Bayh-Dole Act. Moreover, CIRM’s intellectual property regulations, unlike Bayh-Dole, call for revenue sharing, with provisions designed to generate direct finan- cial returns to the state treasury. Perhaps the most controversial aspect of CIRM’s intellectual property provisions is the requirement that grantees and their exclusive licensees submit to CIRM “access plans” that will afford access to any drug resulting from CIRM-funded research to “Cali- fornians who have no other means to purchase the drug.”9 Federal law and other state-funded stem cell programs have no comparable provisions. Uncertainty about how the system will work could make industry cautious about licensing and investing in CIRM-funded inventions, especially if they have the option of turning to other sponsors that do not impose similar requirements. CIRM holds “march-in rights” that allow it to enter into license agree- ments on behalf of a grantee or its exclusive licensee with respect to a CIRM-funded invention under three circumstances: (1) the grantee, col- laborator, or exclusive licensee is failing to exercise reasonable efforts to achieve practical application of the invention; (2) the grantee, collaborator, or exclusive licensee has failed to submit or comply with an access plan; or (3) the grantee, collaborator, or exclusive licensee has unreasonably failed to use a CIRM-funded invention to alleviate a public health emergency declared by the governor.10 Overall, CIRM’s intellectual property policies reflect a reasonable effort to balance conflicting interests of different constituencies, each with a legiti- mate stake in these policies. The actual impact of the policies may not be clear for many years, but the concerns of stakeholders are already apparent. Some of the more contested provisions attempt to address competing views by giving CIRM discretion over implementation, but this flexibility cuts two ways: it allows for adaptation to particular circumstances, but it also cre- ates uncertainty and risk for potential developers of commercial products. CIRM might reduce some of the uncertainty arising from the unfamiliar- ity of its policies by modifying those policies to conform more closely to the more familiar Bayh-Dole approach. Departures from the Bayh-Dole approach may put CIRM-funded invention at a growing disadvantage in the future as funding from other states and the federal government yield competing candidates for commercial development that are available for licensing on more favorable terms. 9  California Health and Safety Code § 125290.80; 17 California Code of Regulations § 100607. 10 17 California Code of Regulations § 100610(b).

OCR for page 1
SUMMARY 15 Recommendation 5-1. Incorporate Future Enforcement of Intellectual Property Policies in the Sustainability Platform. As part of the plan maximizing the continued impact of CIRM’s many achievements (see Recommendation 2-1), CIRM should propose regulations that specify who will have the power and authority to assert and enforce in the future rights retained by the state in CIRM-funded intellectual property. CIRM should seek to clarify which state agencies and actors will be responsible for the exercise of discretion currently allocated to CIRM and the ICOC over future determinations on issues regarding march-in rights, access plans, and revenue-sharing rights that might arise years after CIRM’s initial funding period has passed. As it has done in the past, CIRM should provide ample opportunity for public comment on proposed changes to its intellectual property policies that pertain to transition planning. Recommendation 5-2. Consider Harmonizing Intellectual Property Policies with Policies of Bayh-Dole Act. As other sources of funding for stem cell research become available and as the field of regenerative medicine advances from the laboratory to the clinic, the ICOC should reconsider whether its goal of developing cures would be better served by harmonizing CIRM’s intellectual property policies wherever possible with the more familiar policies of the Bayh-Dole Act. CONCLUSION The creation of CIRM resulted from the initiative, imagination, and hard work of a broad group of stakeholders in California. In its initial years, CIRM has been highly effective in building an impressive research portfolio. The Institute’s governance structure is, however, unusual in important respects that the committee believes could diminish its effective- ness going forward. While the profile of the ICOC was understandably designed to include representatives from a broad range of those most concerned and most knowledgeable regarding the future of regenerative medicine, its members were also the constituencies expected to benefit most directly and immediately from CIRM’s grants. The committee believes that CIRM and the taxpayers of California would be better served going forward by a structure and processes whereby the role of the ICOC would remain focused on broad oversight and strategic planning rather than involvement in day-to-day management issues. The committee has offered several recommendations for CIRM and the transition to its next stage of operations. As discussed above, the committee did not limit its recommendations to the boundaries imposed by Proposi- tion 71. In the committee’s view, some recommendations (2-1, 4-1, 4-3,

OCR for page 1
16 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE and 5-1) can be carried out by CIRM without legislative action. For others (3-1, 3-2, 3-3, 4-2, 4-4, and 5-2), CIRM may be able to make modest moves in line with the recommendations, but it may need to work with the state legislature in order to fully implement them. The committee is aware that its recommendations come at a time when CIRM may well be faced with pressing challenges resulting from the expiration of Proposition 71 funding and/or dynamic changes in the field of regenerative medicine. The commit- tee hopes its recommendations will be considered not only now, but also in the future as decisions are made.