NOW THAT California taxpayers know that the $3 billion ($6 billion with debt service) that they voted in 2004 to spend on stem-cell research may possibly be an outright grant of money for research rather than an investment, does it make a difference?
Does it matter that Robert Klein, the author and chief promoter of Proposition 71, knew while he was promising the voters a return on their investment that the state might be forbidden to collect royalties from the biomedical research it invests in because of an arcane federal tax law?
What was voters' intent in approving a plan to invest in a promising but financially risky new technology that may someday cure disease and save lives? Were they counting on a financial return, a new industry or promises of cures? And did they assume that they would be affordable to the majority of Californians?
It's important to know the answers to these, and other questions, before the California Institute of Regenerative Medicine, the agency created by the 2004 stem-cell initiative, begins awarding grants of taxpayer funds. Why? Because the answers ultimately will determine who holds the intellectual property rights to the work funded by the institute, which will determine who benefits financially, which will help maintain continued public support for the institute's work.
In November 2004, the state's voters entered into an unprecedented partnership of science and democracy when they approved an initiative placed on the ballot by Klein and bankrolled by venture capitalists. The measure clearly appealed to the entrepreneurial spirit and sense of compassion that defines Californians and, in the wake of the dot-com bust, tapped into the state's desire to be on the cutting-edge of the next big technological boom. The measure, which The Chronicle endorsed, passed with approval of 59 percent of voters.
The debate since then has, in part, focused on how much the state could reasonably expect to earn in licensing fees and royalties and how much it will cost the state to issue the bonds -- issues the voters were led to believe were established by the initiative. Not so.
And now a panel advising the institute, created by the California Council on Science and Technology, made up of business and academic interests that would benefit from these investments, has suggested that any requirement to pay royalties or fees might impede the development of the medicine. Klein said in a telephone interview Friday that royalties might discourage research for diseases such as multiple sclerosis or Lou Gehrig's disease that require subsidies because so few individuals are affected by them. He also said that the state would gain more benefit from new tax revenues, savings from shorter hospital stays and the reduced cost of therapies than it might earn in royalties. He suggests that the state's share of royalties or fees be dedicated to nonprofit funds that would pay for low-income, uninsured Californians to have access to these new therapies.
State Treasurer Phil Angelides is to be commended for urging the institute in a letter to its president, Zach W. Hall, to ensure that the "State of California and its taxpayers share in the financial benefits." But the treasurer, who endorsed the initiative, didn't warn voters that the state would have to sell both tax-exempt and more costly taxable bonds to raise the funds. Who is looking out for the interests of the taxpayer? And whose job is it to make sure the intellectual property is managed so that the state is guaranteed the other promised returns -- those of reduced health-care costs and broad accessibility for all Californians to these new techniques and treatments?
Sen. Deborah Ortiz, D-Sacramento, introduced legislation last session to address the issues of royalties and intellectual property rights as well as standards of public accountability and transparency but was stymied by the board of the new institute, now chaired by Klein. Her legislation will return this session for another attempt at becoming law. Such a message would be in keeping with the spirit -- indeed the promises -- of Prop. 71.
Decisions regarding how this unique experiment in democracy is conducted will set precedent for what follows. It is far too important to leave to the scientists only.
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