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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.
Proposition 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 Proposition 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 certain critical aspects of the science of regenerative medicine and its
translation into treatments for a spectrum of currently intractable human diseases.
1
This summary does not include references. Citations for the findings presented in the summary appear in the
subsequent report chapters.
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S-2 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
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 last decade and a half 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 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 its impact on the field of regenerative medicine. This
report evaluates some of the unique aspects of CIRM’s origins, its governance structure, and its
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, university 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.
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SUMMARY S-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:
CIRM's initial processes—What can be learned from the history 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 medicine 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
community involvement needed to meet the institute's public responsibilities 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 advantages of CIRM's model for covering long-term
costs of medical research? Could aspects of this funding model serve as a paradigm
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.
Estimating the long-term economic impact of investments in a particular 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 their 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.
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Because the funding provided by Proposition 71 is limited to the $3 billion 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.
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 different perspectives, had implications not
only for the design of Proposition 71 but also for the ongoing programs and operations of CIRM.
While the restrictions on amending the administrative structure of CIRM established in
Proposition 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 Scientific and Medical Accountability
Standards Working Group, a 23-member Scientific and Medical Research Funding Working
Group (Grants Working 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 significant operational responsibilities in
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 full text of this recommendation.
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SUMMARY S-5
addition to managing the ICOC itself. 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 independent oversight because it relies on the ICOC to
function as both overseer and executer.
The committee believes good governance requires that the board delegate more authority and
responsibility for day-to-day affairs to the president 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 performance and legal
compliance, assess the performance of the president and the board, and
develop a plan for transitioning CIRM to sustainability. 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 compromises its stewardship over CIRM as a public institution.
The board’s 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 independent 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
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S-6 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
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, without 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 balance fresh perspectives with continuity.
The chair and other ICOC members should be prohibited from serving 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 occupied 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 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 conflicts, real or perceived, are inevitable given the provisions of
Proposition 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.
4
California Legislature (Sen. Bill No. 1064), approved by Governor September 30, 2010. Filed with Secretary of
State September 30, 2010.
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SUMMARY S-7
The presence of conflicts of interest for individual board members would be less cause for
concern if the board had more non-conflicted members. CIRM should address real and apparent
conflicts of interest, including and beyond financial interests, built into its governance structure
regardless 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 Policies.
CIRM should revise its definitions of conflict of interest to recognize 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 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 leadership 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 California. 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 international 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 fourteen 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.
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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 regenerative medicine. These
are the key objectives that, in part, reflect CIRM’s response to the 2010 External Advisory Panel
review. This shift is illustrated further by the July 26, 2012, announcement of an additional eight
disease team awards totaling approximately $151 million. These teams are 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 applications 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, the 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, translational,
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 individuals 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, longitudinal, and integrated advice to the
president regarding strategic priorities, 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 RFAs, suggesting RFAs that otherwise
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 challenges that cut across
particular diseases, decide which discoveries should progress toward the
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SUMMARY S-9
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 representatives 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 information 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 therapies to patients.
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.
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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 successfully
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 represent 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 operations. The ICOC
should remain responsible for oversight and articulation of an overall
strategic plan. However, grant management, funding recommendations, and
grant administration should be the responsibility of the CIRM scientific staff,
reporting to the president. This restructuring 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 development
and approval of RFAs, composition of the Grants Working Group,
reordering of rankings by CIRM staff, notification of applicants, 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 invention, 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 intellectual 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 implementing CIRM’s intellectual property
5
See main body of the report for full text of this recommendation.
6
35 U.S.C. § 202(c).
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SUMMARY S-11
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 policies 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 financial 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 “Californians 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 agreements on behalf of a
grantee or its exclusive licensee with respect to a CIRM-funded invention under three
circumstances: (1) the grantee, collaborator, 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 legitimate 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 creates uncertainty and risk for potential
developers of commercial products. CIRM might reduce some of the uncertainty arising from the
unfamiliarity 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.
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.
9
California Health and Safety Code § 125290.80; 17 California Code of Regulations § 100607.
10
17 California Code of Regulations § 100610(b).
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S-12 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
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 IP
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 effectiveness 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 Proposition 71. In the committee’s view, some recommendations (2-1, 4-
1, 4-3, 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 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 committee hopes its recommendations will be considered not
only now, but in the future as decisions are made.
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