December 7, 2004

New Agency Begins Stem Cell Project

IRVINE, Calif. (AP) -- Californians voted by a wide margin last month to pass a landmark $3 billion initiative to fund stem-cell research. That may have been the easy part.

Now, a state agency must be created from scratch to decide who gets the money from Proposition 71 and who will benefit financially from any scientific breakthroughs produced from the huge, taxpayer-funded gift.

Scientists and bureaucrats gathered Tuesday for a second day to begin hashing out the issues at a forum sponsored by the National Academy of Sciences at the University of California, Irvine. But political wrangling has already begun, over matters such as who will lead the state agency and how best to ensure that the state gets its fair share of any financial windfall.

Meanwhile, in Sacramento, state Sen. Deborah Ortiz, D-Sacramento, introduced legislation Monday "reform" the proposition.

Her proposed law would require drugs developed with state money be made affordable for the poor and would guarantee that California share in any profits realized by companies that benefit from the publicly supported research.

"As funders of this research, the people of California not only deserve, but are entitled to, appropriate royalties from their investment," Ortiz wrote in a letter to the organizer of the Irvine meeting.

Proposition 71 decrees that the state "shall establish standards" but doesn't detail how it would accomplish the profit sharing - a key campaign promise made to taxpayers by the well-heeled supporters of the initiative, who contributed more than $20 million to help pass it.

The University of Wisconsin - where human embryonic stem cells were first discovered - and its corporate partner, Geron Corp. (GERN) of Menlo Park, already claim broad patent rights to any commercial products developed with stem cells.

Proposition 71 campaign chairman Robert Klein II said such intellectual property issues will be worked out once a 29-member board to govern the new agency is established later this month.

Klein said many of the board members are from the University of California and Stanford University, which he said are adept at hammering out deals with corporations that want to exploit academia's discoveries.

He said once research reaches a critical mass in California, the University of Wisconsin and Geron will be compelled to deal "reasonably" with California interests.

Furthermore, Klein said, legislative remedies such as Ortiz's are not necessary and will serve only to confuse stem cell researchers, many of whom are already frustrated by red tape and funding restrictions from federal funding sources.

"I would hope that the Legislature showed respect and constraint," said Klein, who added that Proposition 71 also includes provisions barring the Legislature from amending the initiative for three years.

It's not clear what affect that prohibition has on the bill proposed by Ortiz, who also included provisions to prevent exploitation of poor women, such as prohibiting payment for anything more than expenses for donating eggs to research.

Researchers extract most of their experimental stem cells from fertilized human eggs, most of which are now donated by fertility clinics. But scientists say they need to find or create other supply sources to broaden their research, including using cloning techniques to create stem cell sources.

Stem cells are formed in the first days after fertilization and they are the building blocks of the human body. Researchers hope to harness that biological power to create "cells in a bottle" to cure and treat a wide range of ailments from diabetes to spinal cord injuries.

But conservative Christians and others oppose the research as immoral because days-old embryos are destroyed in the lab. President Bush has severely limited the amount of federal funding allowed for the work.

That prompted Klein, a millionaire housing developer, to organize a coterie of venture capitalists, technology tycoons such as Microsoft Corp. (MSFT)'s Bill Gates and wealthy parents of sick children to pass the proposition.

Klein has emerged as a leading candidate to serve as the new state agency's first chairman - a position that is widely expected to be the most influential voice of the $3 billion California Institute for Regenerative Medicine.

Gov. Arnold Schwarzenegger, Lt. Gov. Cruz Bustamante, Treasurer Phil Angelides and Controller Steve Westly may each propose a candidate to chair the 29-member board. Board members themselves will vote on the appointment.

Klein, a major Democratic campaign donor whose son suffers from diabetes, said he met with Schwarzenegger, a Republican, for an hour last month to discuss the chairmanship.

Schwarzenegger broke ranks with the state Republican Party and endorsed the measure, which will cost $6 billion to pay back the principal and interest of the bonds California will use to fund the research.