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Opinion: Taxpayers must benefit from stem-cell research

by John SimpsonSan Francisco Chronicle
March 27th, 2006

If you pay somebody to build a house, you expect to benefit when it is finished. Probably you will live in it. Perhaps you will rent it or sell it for a profit.

Similarly, when you pay a biotech company to develop drugs and cures through stem-cell research, you expect a direct benefit. At a minimum, you deserve affordable access to the resultant drugs and therapies. Proposition 71, passed by voters in November 2004, takes $6 billion of California taxpayers' money -- yours and mine -- to fund bonds providing $3 billion for stem-cell research. Prop. 71 promises public benefit, but whether that actually comes about will depend on the details of who controls the discoveries and how technologies and treatments developed from those discoveries are priced.

Those details, known as intellectual property policies, are not spelled out in Proposition 71. On Wednesday, an institute committee will begin developing the IP rules for how Prop. 71 money is granted to biotech corporations. Your eyes probably glaze over at "intellectual property," but it's time to wake up and pay attention.

The policies will determine whether new life-saving drugs will be affordable to the taxpayers who are financing their development. About half of California's families are estimated to have a member who could potentially benefit from stem-cell therapies. Most of the media fuss surrounding stem-cell research has been over political and social issues surrounding the use of fertilized human eggs. But it's the boring, really technical IP regulations that could mean whether or not you will get treatment someday.

The biotech industry is lining up to take Prop. 71 money and wants as few strings as possible attached. Speaking to biotech executives at a conference his firm organized in San Francisco, Steve Burrill, chairman of the venture capital and merchant banking firm Burrill & Co., described the capital funding being provided by taxpayers in California and a few other states as "almost like free money" compared to commercial venture capital. That phrase is a tipoff to the lack of any sense of obligation. Clearly defined IP rules, governing such things as price and accessibility by underserved populations, will ensure that businesses meet fair obligations to the public when they take the public's "free money."

The state's Independent Citizen's Oversight Committee, appointed by various constitutional officers to oversee Prop. 71, has already proposed intellectual property rules for universities and nonprofits -- they're a good first step, though needing improvement. They require a modest financial return to the state on profitable discoveries. They do not do enough, however, to ensure that all Californians will have affordable access to the fruits of taxpayer-funded research. They do provide a minimum starting point for developing rules for private biotech companies.

The university and nonprofit regulations demonstrate laudable concern for the needs of the poor and uninsured. But all Californians are paying for Proposition 71 and all should benefit. It's imperative that the California Institute of Regenerative Medicine's IP rules be based on three principles: affordability, accessibility and accountability. The committee has not ensured that drugs or therapies would be sold at an affordable price for all Californians.

Certainly drug firms are entitled to fair profits; they just aren't entitled to charge exorbitant rates for their products when taxpayers directly funded the research that made a drug possible in the first place.

It's essential that the state attorney general has the right to intervene in cases of "unreasonable" pricing of Prop. 71-funded drugs or cures. What's unreasonable could be determined through a public process. There is still time to fix the university and nonprofit rules as well; the oversight committee will soon open a period of public comment on the plan just adopted. In writing IP rules for business, the oversight committee must remember that Californians never intended to write a blank check for biotech. If a patentable discovery results from Prop. 71-funded research by a business, the state should own it through a patent pool. Rights to profitably commercialize the discovery could be licensed back to the firm.

If Prop. funds research, perhaps a clinical trial, for a treatment already covered by a patent owned by a business, California should receive a fair commission. The state should be able to take cash payments or, like any venture capitalist, negotiate an equity share -- stock -- in the business.

The results of taxpayer-funded stem-cell research could save your or a loved one's life. Don't let your eyes glaze over; intellectual property rules based on affordability, accessibility and accountability will keep Prop. 71's promise to California's voters.





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