Onward, Christian Lawyers

Why lawsuits filed by anti-abortion activists may be a blessing in disguise for the California stem cell institute

The institute also has a $320,000 legal services contract with the Sacramento law firm of Remcho, Johansen & Purcell. While the attorney general will make arguments in the courtroom, Remcho partner James Harrison is acting as a fill-in for a yet-to-be-hired general counsel, advising on issues such as compliance with state rule-making procedures and open-government laws.

According to Prop. 71, the institute can retain outside counsel only when the "scientific, medical, and technical nature of the issues" requires services not provided by the AG's Office. Harrison describes himself as an experienced California ballot measure litigator, having worked with Klein to help craft Proposition 71. "[Ballot measure litigation] is not a legal issue that would flummox our office," a spokesman for the attorney general says.

Institute interim President Hall says the PR and legal contracts exist only because the institute hasn't hired full-time staff. Until two months ago, when the decision to put the institute in San Francisco was made, recruiting was challenging, Hall contends. The large Edelman contract is the only way to deal with the tremendous media scrutiny of the agency, he says.

Susan Fogel, coordinator for the watchdog group Pro-Choice Alliance for Responsible Research, begs to differ: "This money should be going into research. The people of California didn't vote for us to spend $300,000 on a law firm."

At a meeting of the institute's oversight committee earlier this month in Irvine, many of the aforementioned costs and payments came as news to some oversight committee members; the committee promptly established a rule requiring that it approve all contracts over $100,000. "The message sent loud and clear at the Irvine meeting is that ICOC members take our responsibility for overseeing how tax dollars are spent very seriously," says Dr. Claire Pomeroy, dean of the UC Davis School of Medicine and a member of the committee.

That may be true, but it took eight months for the oversight committee to establish the subcommittee that will finalize a budget and an organizational structure for the stem cell institute. "Frankly, we put [the structure issue] on the back burner and kept going. We didn't stop to worry about the theoretical things; we just worked on how we were going to get our tasks done every day," says Hall, who first proposed a structure in March. Barnes and his staff are still preparing the final budget, which Barnes hopes to submit to the governance committee at the end of this month.

While it's waiting for the bond money to come through, the institute's oversight committee will have time to tackle the complex intellectual-property issues surrounding the billions of dollars in grants the agency hopes to make. Last fall, Prop. 71 advocates promised that the therapies arising from institute-sponsored research would save Californians billions in health care costs. But the research to back up that claim came from a study by the Analysis Group consulting firm, whose clients include many major pharmacological companies and biotech firms -- including Eli Lilly and Genentech -- that stand to reap huge profits by commercializing future stem cell therapies.

If California wants a piece of whatever action the institute's grants create, it will need to seek some sort of royalties in return for funding stem cell research. Prop. 71 gave the state little leverage on such intellectual-property issues, requiring the oversight committee to balance general benefits of stem cell discoveries against the threat that "essential medical research" would be hindered if grants weren't made. In other words, the state can't take such a large stake in the profits of therapies produced by stem cell research that companies are spooked away from investing in the research.

This month, the ICOC finally established a task force to negotiate with the Legislature over who will own the therapies arising from the grants. State Sen. Deborah Ortiz (D-Sacramento) has pushed for a compromise on intellectual property: Instead of guaranteeing the state royalties, she's advocating assurances of low-priced stem cell therapies, such as price controls for Medi-Cal patients, to save California money. To do that, the institute would probably still need to hold some intellectual-property interest in stem cell discoveries, and Hall believes tracking those interests would be too time-consuming for the institute's small staff, which Prop. 71 capped at 50.

So it's likely that the intellectual property, and future revenues, would go to the grant recipients themselves. A grant to UCSF that turns into a lifesaving drug could bring some revenue back to the university, indirectly cutting state costs. But a grant to a corporation -- nonprofit or profit-making -- would not.

Much of the negative publicity about the California Institute for Regenerative Medicine has centered on perceived or potential conflicts of interest involving members of the oversight committee. Several committee members have direct ties to biotech firms that could be applicants for institute funding. Committee member Dr. Ted Love is president and CEO of the biopharmaceutical company Nuvelo, and member Ed Penhoet, former CEO of Chiron, sits on the board of the neurological treatment biotech firm known as Renovis, which he co-founded.

Even though there have been several changes -- or, in ICOC lingo, "policy enhancements" -- to the institute's conflict-of-interest rules, concerns remain over potential conflicts involving the grants review working group, a body advising the oversight committee on grant selection. Appointed by an oversight committee subgroup in May, the 22-member grants working group is rife with its own conflicts of interest. For instance, as first reported by the Sacramento Bee, reviewers Drs. Andrew Feinberg and Jeffrey Rothstein are both researchers at Johns Hopkins University, which owns stock in Geron, a California biotech likely to benefit from institute grants.

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