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2
CIRM’s Initial Processes and Funding Model
As noted in Chapter 1, CIRM was founded in response to the uncertainty regarding the
availability of federal funds for stem cell research, particularly research employing human
embryonic stem (hES) cells, and with the aim of both moving stem cell research and its
applications forward and establishing California as a leader within the broader field of
regenerative medicine. This chapter reviews the origins of CIRM and the committee’s
assessment of the implications of those origins for the Institute’s ongoing work. The chapter then
examines the funding model that supports CIRM’s work, the impact of this economic
investment, and the consequences of CIRM’s funding model for the broader scientific enterprise.
Next is a comparison of CIRM’s funding model with comparable science funding programs in
other states. The final section presents the committee’s conclusions and recommendation
regarding the future of CIRM once the funds originally authorized for the Institute have been
expended.
ORIGINS OF CIRM
CIRM is in many ways a bold social innovation. Its 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. The various constituencies involved were united by their shared desire
to promote additional efforts in an arena of the biomedical frontier that they believed to be
especially promising and that was not expected to receive adequate support from the more
traditional sources of funding in biomedicine. In addition, they believed that a state initiative in
this arena would not only hasten the development of new disease treatments and/or cures but also
strengthen California’s position as one of the world’s major centers of biotechnology.1
Assembling such a broad coalition of citizens and institutions that were united in their
enthusiasm for stem cell research but had somewhat different agendas had implications not only
for the design of Proposition 71 but also for the ongoing programs and operations of CIRM. 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
1
California Stem Cell Research and Cures Initiative, Proposition 71 (2004) (codified at California Health and Safety
Codes § 125291.10-125291.85).
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2-2 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
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 perceived conflicts are one factor that have led some observers,
perhaps unfairly, to continue to question the integrity and independence of some of CIRM’s
decisions (Darnovsky, 2012; Hayden, 2008; Jensen, 2012). In addition, 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 (LHC, 2009). Moreover, these protections,
whatever their benefits, appear to some to shield CIRM from the normal accountability
mechanisms in place for state agencies (Darnovsky, 2012). The point the committee wishes to
stress here is that the manner in which an organization is created and sustained and the
understandable desire to protect its initial structure and objectives from being undermined have
long-term consequences that may be difficult to anticipate and address.
In adopting Proposition 71 in the 2004 general election, the voters of California approved an
amendment to the state constitution making it a constitutional right for California residents to
engage in stem cell research, including research using hES cells, and requiring the state to devote
considerable resources to such efforts and to the field of regenerative medicine more generally.
Once again, it is important to stress that this was accomplished at a time in the nation’s history
when, as outlined in Chapter 1, the ethics of research using hES cells was the focus of serious
disagreement in Washington, DC, and elsewhere; when future federal funding for research in this
arena was highly uncertain; and when additional methods of creating pluripotent stem cells by
reprogramming somatic cells (induced pluripotent stem cells) had not yet been demonstrated.
In addition to work to accelerate stem cell science and its translation into effective new
disease treatments and/or cures, another stated goal of the establishment of CIRM was to
invigorate California’s biotechnology sector and produce a set of economic benefits for the state
(Baker and Deal, 2004; Klein, 2012; Klein and Trounson, 2011). These potential economic
benefits ranged from improving economic productivity, to generating new high-paying jobs in
the biotechnology and related sectors, to lowering health care costs and thus improving the
state’s budget situation. CIRM’s central mission, however, is to “support and advance stem cell
research and regenerative medicine under the highest medical and ethical standards for the
discovery and development of therapies and cures” (CIRM, 2010, p. 2). Those eligible for CIRM
funds are California’s universities, hospitals, medical schools, and other research institutions,
including for-profit organizations doing research and development in this area.
Implications of CIRM’s Origins
The structure of the evolving coalition assembled to enact Proposition 71 and then reflected
in its articulation ensured broad buy-in to the overall project by a diverse array of stakeholders
that were able to convince the voters of California to support the initiative.2 Not surprisingly, the
need to keep such a broad coalition together had direct implications for CIRM’s governance
structure, for the claims made about the potential benefits of the initiative, and for the evolving
nature of CIRM’s programs. While all stakeholders were motivated by the strong desire to find
cures for certain currently intractable diseases, some members of the coalition and their
2
The energetic campaign for Proposition 71 included polling of the electorate to discern both their aspirations and
their concerns.
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-3
supporters were especially interested in the prospect of stable long-term support for a significant
and promising new area of biomedical research, others were most interested in the implications
for access and social justice, and still others in the benefits to the California economy and the
state’s taxpayers (YESon71, 2004). Needless to say, many supporters were interested in all of
these objectives. All stakeholders understood that achieving these objectives would require
significant progress on the scientific frontier; nonetheless, as stem cell research developed
rapidly in California and elsewhere, these varied interests conflicted at times, creating some
friction in the process of deciding about the allocation of CIRM funds among various priorities
or particular aspects of the frontier in this aspect of regenerative medicine (Adelson and
Weinberg, 2010). In short, the challenges confronted in dealing successfully with the political
processes surrounding attempts to require the government to fund scientific projects of any kind
can have consequences for the ongoing nature and integrity of the resulting scientific program.
This is true for CIRM, but CIRM is not unique in this regard.
The nature of the vigorous and expensive campaign mounted to promote the passage of
Proposition 71 also had implications for the initial development and operations of CIRM. On the
one hand, the broad public mandate that resulted from the proposition’s passing easily
(59 percent to 41 percent) with the support of more than 7 million California voters gave CIRM
momentum to start rapidly and persevere through legal challenges that hindered the early
implementation of its programs (Hayden, 2008). On the other hand, the competitive nature of the
political campaign may have led some proponents of Proposition 71 to overpromise either
clinical or economic benefits of its passage. If this was the case, as some critics allege, it may
affect how voters evaluate CIRM and, equally important, how the Institute sets its funding
priorities in the years immediately ahead (Hiltzik, 2009). As discussed in Chapter 4, although
CIRM’s early emphasis was largely on funding investigators examining the fundamentals of
stem cell biology, the development of special facilities, and a wide variety of training programs,
the Institute is currently placing much greater emphasis on the translation of discoveries in the
laboratory towards the effective treatment of a wide range of disease areas.
Governance of CIRM
Proposition 71 outlined a detailed governance structure for CIRM. Most important, it
provided for a 29-member Independent Citizens Oversight Committee [ICOC] as the Institute’s
governing authority. The ICOC was to be composed of representatives of specific disease
advocacy groups, leaders of California’s research universities, and representatives of both
California’s biotechnology industry and other nonprofit California-based research institutions.
While this profile of the ICOC was understandably designed to include representatives of a broad
range of stakeholders most concerned and most knowledgeable about the future of regenerative
medicine, they were also the constituency expected to benefit most directly and immediately
from CIRM’s grants. Detail on the Institute’s governance structure and the committee’s
assessment of its effectiveness and challenges is presented in Chapter 3.
As noted above, one consequence of the context surrounding CIRM’s origins was the desire
to build into Proposition 71 an oversight structure that would be difficult to change and by its
design would be characterized by inherent conflicts of interest. Proposition 71 permitted
legislative modifications to CIRM for 3 years after its adoption and instituted a supermajority
requirement for legislative changes following this initial period. These restrictions offered CIRM
some genuine and useful protections from political interference—a real risk given the ethical
controversy surrounding hES cell research—but also created barriers to changes that might have
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2-4 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
helped the Institute optimize its operations in response to its accumulating experience within a
rapidly changing scientific field.
FUNDING OF CIRM AND ITS ECONOMIC IMPACT
CIRM’s Funding Model
One way in which CIRM differs from most other scientific research programs is its funding
model. Proposition 71 specified a financing scheme to support CIRM’s programs whereby the
state would issue general obligation bonds,3 effectively transferring the burden of financing
CIRM’S programs from current to future taxpayers. These bonds were estimated to cost the state
about $5.5 - 6.0 billion in interest and principal (Baker and Deal, 2004) over their 30-year life.4
Proposition 71 also required the state to capitalize all interest expenses during the first 5 years,
thus shielding the state’s general fund from any CIRM-related charges during this initial period.5
The critical underlying concepts of this funding model were twofold. First, as already noted,
it would provide a relatively stable source of funds in an important and exciting arena of
biomedical research where ongoing uncertainty regarding the availability of federal funding was
especially acute. In this respect, however, it is important to note that CIRM funding is
competitive for any particular institution or individual researcher or research group, and none is
assured of continued funding throughout the 10-year period. Thus while the availability of funds
for the field of regenerative medicine as a whole enjoyed a certain stability in California, there
were no such guarantees for individual researchers or research teams. Moreover, in both basic
and clinical research, even a decade is not a long time for the full maturation of important
research and development initiatives. Nevertheless, the availability of this substantial and
relatively stable funding source for the field of regenerative medicine has been important in
enabling CIRM to adopt strategic long-term goals; allowing grantees to attract more than
$1 billion in matching funds from private sources, primarily for facilities; and helping to make
California an attractive destination for both early-stage and established stem cell scientists
(Levine, 2006, 2012).
Second, this unique funding model was designed to spread the ultimate financial burden of
supporting CIRM’s efforts over those future cohorts of patients and taxpayers expected to be the
most likely beneficiaries of these efforts, who would also be the ones obligated to repay the
bonds. While many studies have estimated very high economic returns on investments in science
(e.g., Group et al., 2008; Health Economics Research; Mansfield, 1991, 1998; Murphy and
Topel, 2003; OTA, 1986), the economic impact of any particular scientific project or work in one
small arena of the scientific enterprise is subject to much greater uncertainty. Moreover,
3
General obligation bonds are a form of long-term borrowing in which the state issues municipal securities and
pledges its full faith and credit to their repayment. The bonds are repaid over many years through semiannual debt
service payments. The California Constitution requires that general obligation bonds be approved by a majority vote
of the public and sets repayment of general obligation debt above all other obligations of the state except those for
K-14 education (Department of General Services of State of California, 2010).
4
This estimate reflects not only interest costs on the general obligation bonds but also a provision calling for all
interest costs during the first 5 years to be capitalized.
5
This provision also allowed for the possibility that by the time any associated charges impacted the general fund,
the fiscal benefits of CIRM’s activities might already be supplementing general fund revenues. Although not
specifically provided for in Proposition 71, from time to time the state may choose to meet its obligations to CIRM
by issuing commercial paper pending a large placement of general obligation debt by the state.
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-5
scientific progress made in one particular locale, such as California, is dependent on
complementary scientific developments elsewhere. Thus in the globalized world of biomedical
research, it is always a challenge to isolate the actual dividends that can be attributed to any local
efforts from those due to discoveries made elsewhere, or in the present context, even those
resulting from efforts in California not funded by CIRM. In any case, if the best efforts in stem
cell research in California and elsewhere were not to yield clinical or other benefits to the next
generation, that generation would bear a cost burden not offset by any corresponding clinical
benefit or any long-term economic benefits to the state.6
In many ways, investments in research and development appear to be analogous to more
prosaic infrastructure investments in, for example, roads, bridges, and power networks, which
often are financed through the issuance of long-term bonds. Perhaps the most significant
difference, however, is the uncertainty surrounding investments in the biomedical enterprise and
the precise nature and timing of the benefits expected to accrue. This is especially true, as noted
above, if the investments are focused in one particular arena of the biomedical frontier. In such
cases, it is particularly difficult to decide whether the risks should be borne by current or future
generations of taxpayers. It is, of course, attractive to be relieved of annual negotiations over the
allocation of current tax revenues, but as a general approach to financing research and
development, the CIRM model simply replaces the annual discussion surrounding the allocation
of current tax revenues with arguments over the allocation of future tax revenues. If, however,
particular initiatives are viewed as a modest complement to the more standard “pay as you go”
model of biomedical research funding, these matters are not of great concern.
In summary, there are two principal differences between the CIRM funding model and the
more conventional model used, for example by the National Institutes of Health (NIH) and
private foundations: the use of long-term bond financing for contemporary research, and the
stability of the state’s financial commitment to CIRM and the field of regenerative medicine over
the 10-year period. It is also important to note that although CIRM’s funding as provided through
the terms of Proposition 71 is assured for only 10 years, the Institute itself has no such time limit,
and if additional funds were to become available or if the bond proceeds were not fully allocated,
CIRM’s activities could continue for a longer period. On the other hand, it is worth
reemphasizing that the timeline for continued funding of particular scientists or scientific
projects is much more limited than CIRM’s horizons, usually 3-4 years (CIRM, 2012a). This
situation is in fact analogous to that of NIH, in which funding for the institutes tends not to shift
dramatically from year to year, but the funding of particular researchers and research areas may
shift relatively rapidly.7 Of course, continued funding is always much more uncertain in areas
where there are serious ethical controversies.
It is quite clear that the overall stability of CIRM funding facilitated a longer-term outlook
and thus the prioritizing of crucial long-term investments in both specialized facilities and human
capital. These are substantial benefits. On the other hand, while the relative stability CIRM
offered the field of regenerative medicine in California was a notable improvement over the
uncertain prospects for federal funding, especially for hES cell research, the roughly 10- to 15-
year period for expending the agency’s initial bond funding, as noted above, is not a long time in
6
Studies that estimate the economic returns on investments in science and technology do have their critics, who
focus on the methodologies used to estimate those returns. A concise summary of such views is provided by
Macilwain (2010).
7
It is useful at this point to note that annual NIH funding for biomedical research in California is roughly 10 times
the CIRM annual budget.
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2-6 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
which to realize the full benefits of basic or clinical biomedical research. Thus, the creation of
CIRM and the development of its programs almost immediately raised questions about its long-
term future and the impact of the expiration of its funding on the full career path of scientists
recruited to the field or the state. CIRM has developed an initial transition plan, but as the end of
its bond funding draws closer, this uncertainty persists, creating challenges for both the Institute
and scientists in the field. In essence, CIRM faced and continues to face the unusual challenge of
ramping up a major new program in biomedical research and making the associated long-term
investments while knowing that the generous state support enjoyed by the program might be
limited to 10 years.
Perhaps the best way to consider the role of CIRM, as well as its distinctive funding model,
is both as a creative supplement to the more traditional sources of biomedical research funding in
the United States and as an innovative initiative designed to strengthen California’s
biotechnology efforts. Whenever an exciting portion of the biomedical research enterprise is
operating under conditions of uncertainty and/or inadequate commitments by traditional funding
sources, this model can provide a strategic opportunity for a state to make an investment aimed
at both maximizing the vitality of efforts in that state and giving the state’s biomedical enterprise
a long-term competitive edge (Klein and Trounson, 2011). The appropriateness of the particular
approach selected by California voters in approving Proposition 71 for other states likely varies,
depending on the nature of the science to be supported, the health and vitality of the state’s other
research institutions and their investments in research and development, the state’s financial
situation, and the willingness of voters and/or legislatures to impose costs on future generations
in exchange for potential but uncertain benefits. It is clear, however, that CIRM’s perceived
success did not go unnoticed by other states, which responded in some cases with initiatives and
models of their own in the area of regenerative medicine and/or in the broader biomedical arena,
some of which are discussed below.
Economic Impact of the Investment in CIRM
California’s substantial investment in CIRM quite naturally raises the question of the actual
economic benefits generated by this investment and just how these benefits relate to the costs of
the program.8 While overall investments in science and technology have transformed society and
yielded enormous economic dividends, this does not mean that all investments in science and
technology produce substantial economic dividends (Maddison, 2007).
Many potential economic dividends can flow from thoughtful investments in biomedical
research. These include enhancing economic productivity, expanding employment opportunities,
and possibly providing some relief to government budgets through increased tax revenues and
declining health care costs. In estimating the economic impact of investments in biomedical
research, two broad tasks must be undertaken. First, the economic benefits of any health gains
must be compared against the costs of providing the new disease treatments and/or cures. At this
early stage in CIRM’s programs this component cannot be adequately assessed since the final
costs of developing any treatment is unknown as are both the benefits to be realized and the time
lag between the research investments and the development of new treatments. The second task is
to consider the direct and indirect gains in gross state domestic product (GSP) from CIRM’s
investments in the biomedical enterprise and any further economic activity these investments
8
The committee realizes that any health benefits generated by CIRM’s efforts not only may yield some economic
dividends but also have value in their own right regardless of their economic benefit.
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-7
stimulate. In this regard, while CIRM’s expenditure of $300 million a year clearly supports
additional employment within California’s research community, as would any thoughtful
investment of this magnitude, reliable estimates of the overall long-term economic impact on the
state’s economy must await the accumulation of more information and a better understanding of
the dynamics of the state’s contemporary economy. In particular and as already noted, the
economic rates of return are highly sensitive to the lag between research and development
expenditures and the deployment of new clinical modalities. In the case of CIRM’s research and
development portfolio, the length of this lag is presently unknown. However, it is important to
note that the same could be said of any investment in work in a new arena of the scientific
frontier.9
In short, assessing the long-term economic impact of particular biomedical research activities
is a complex task that requires considerable time and experience with any treatments and/or
cures that are developed. In addition, one must disentangle the dividends realized from scientific
work conducted elsewhere and from the efforts of CIRM-sponsored investigators. Thus, CIRM’s
long-term impact on such critical aspects of the California economy as employment, 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. In this respect, the
estimate of the Analysis Group (2008) that the CIRM program alone would support about 3,400
jobs as long as it was allocating about $300 million per year in research and development grants
appears quite reasonable to the committee. To put this estimate in context, however, total
employment in California is roughly 16 million, and NIH alone provides more than $3.5 billion
per year to California research institutions.
In conclusion, measuring the economic impact of biomedical research, especially work in a
specific arena such as regenerative medicine, remains a difficult and complex task. At this stage
of CIRM’s program, one can know only (1) that money has been borrowed and thoughtfully
spent on a highly promising arena of the biomedical frontier; (2) CIRM’s expenditures are
supporting approximately 3,400 jobs; (3) that CIRM resources have attracted substantial
additional private and institutional resources to this research arena in California; (4) that CIRM’s
training programs have made a direct contribution to the training of stem cell researchers and
research technicians; (5) that CIRM funding has led to the publication of more than 1,168
articles, the submission of 92 disclosures and 40 patent applications, and the finalizing of three
license agreements (as of July 2012); and (6) that CIRM has initiated energetic efforts to
translate the scientific results of its programs to the bedside. These are substantial achievements,
but assessing their longer-term economic impact is simply not possible with the information
currently available.
Consequences of CIRM’s Funding Model for the Broader Scientific Enterprise
While Proposition 71 clearly increased significantly the total national and international level
of resources devoted to this area of regenerative medicine, any prior constraints on how local
resources can be allocated entail at least some modest costs for the global enterprise. In this case,
the constraint is that the resources must be spent in California. While California has a large and
excellent biomedical research community, CIRM must operate under this constraint, and the
intellectual property regulations adopted by the Institute, for example, could impose transaction
9
The committee believes the decision to finance CIRM with future rather than current tax revenues has no
discernible long-term impact on California’s economy.
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2-8 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
costs on working with other groups outside of California. This constraint is understandable given
the direct burden of funding CIRM on future California’s taxpayers, but as already noted, it is
also true that CIRM’s programs benefit substantially from work carried on elsewhere and
financed by others. The committee does not believe this is currently a serious problem for CIRM
and the field of regenerative medicine. If many states were to adopt similar programs, however,
it would be important to consider the impact on the vitality of the overall national effort if
harmonization of policies and regulations were not achieved. This would be a particularly
important consideration as progress on the research frontier induced movement toward
commercialization, which is, for the most part, a national and international enterprise. Over time
there would be a national benefit in the harmonization of regulations. Since CIRM financed
researchers benefit, often for free, from research being conducted elsewhere and the
commercialization of any discoveries, it might be easier to attract business partners if one set of
national rules were understood and followed by all.
CIRM IN THE CONTEXT OF OTHER STATE-BASED SCIENCE AND
TECHNOLOGY INITIATIVES
Historically, the states took little direct interest in stimulating the vitality of the scientific
enterprise within their borders, although their support for state colleges and universities certainly
advanced their scientific enterprise indirectly. In the initial post–World War II decades, the states
greatly expanded their support for postsecondary education, but for the most part left science
policy to initiatives of the federal government. Subsequently, however, the states began to
assume a more independent role in science and technology policy as a means of enhancing their
economic prospects through improvements to their research and development base, as well as
providing new opportunities for their citizens. Indeed, many states began to notice that states
with a tradition of support for research within their systems of higher education attracted
technology-intense industries, which were growing in importance.
Although CIRM is unique among state programs in many respects, it reflects this pattern of
state efforts over the last few decades to support initiatives in science and technology. Although
there is substantial heterogeneity among such state programs, reflecting in part the role of states
as policy laboratories, several trends have been observed in the development of these programs
over time (Plosila, 2004). Often a key element in this dynamic has been greater recognition by
state policy makers of the potential role of particular components of university research
programs in state and regional economic development. Over time, the result has been a number
of initiatives to support targeted university-based research. These research funding policies
represent a shift from earlier state policies that tended to focus on recruiting existing firms or
large-scale scientific projects, such as the Microelectronics Computer Consortium and the
Superconducting Super Collider (Plosila, 2004). The creation of CIRM by California voters and
the agency’s focus on advancing stem cell science and the field of regenerative medicine fall
squarely within these larger trends.
As states focused their targeted science and technology policy initiatives more on certain
university-based efforts in the 1980s and 1990s, a wide variety of programs were developed
(Berglund and Coburn, 1995). A recent examination of the development of state science policies
has identified three major classes of programs intended to build state scientific capacity:
university research grant programs, eminent scholars programs, and centers of excellence
programs (Feldman et al., in press). Of these, CIRM most closely parallels university research
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-9
grant programs, the oldest of which date to the early 1980s, which have been adopted in some
form by nearly 30 states. Initially, most of these programs supported a broad range of science,
but states have increasingly narrowed their focus so as to develop expertise and competitive
advantage in a specific area (e.g., information technology or biosciences). A focus on life
sciences or health-related research has been particularly common over the last decade, as at least
17 states have chosen to contribute at least a portion of their tobacco settlement funds to support
such research (NGA, 2001). At the same time, it should be noted that, while specialization and
focus can have substantial benefits, they must be balanced by the realization that scientific
progress in specific areas usually depends on complementary developments in other arenas of the
scientific frontier and in other geographic areas. Other common state programs include those
designed to attract highly productive researchers to a state. These programs—often termed
eminent scholars programs—date to the 1960s, when Virginia adopted its program, and have
gained in popularity in recent decades. CIRM’s research leadership grants, which provide
funding to recruit leading stem cell scientists to California, fall within the tradition of these
programs.
The value and impact of these state programs designed to fund research grants or to recruit
scientists should be assessed in the broader context of a state’s support for its overall research
and development enterprise, including, for example, its research universities. If these programs
come at the expense of other key aspects of the state’s investments in the vitality of its research
and development enterprise, they may represent at best little more than a reallocation of existing
funds and may have little if any net effect on either the enterprise or its economic prospects.
Even as these supportive policies have been adopted, numerous states have taken action to
restrict scientific inquiry in morally contentious areas. Many of these state policies have focused
on fetal and embryonic research. These policies take several forms, including an outright ban on
research using aborted fetal tissue or human embryos created in vitro; a ban on specific
techniques, such as somatic cell nuclear transfer; or a restriction on the use of state funding for
certain research. Befitting the ethically contentious nature of these fields, some states have
adopted essentially opposite policies, indicating that specific types of research are legal in the
state. In some cases, including California’s, these rules have accompanied or been followed by
state funding, while in other cases, they are stand-alone policies. States adopting these sorts of
supportive policies have pursued two main strategies: (1) identifying and establishing the legality
of specific research techniques, or (2) adopting laws indicating that any research legal under
federal law is legal under state law.10
Comparison of CIRM and Analogous State Science Funding Programs
While CIRM fits into some of the broader patterns seen in state science and technology
policy, it differs from other state-based efforts on several important dimensions. To provide an
additional perspective on CIRM and better understand how it is similar to and different from
other state science funding programs, the committee reviewed a small number of other state
programs that are comparable in some ways to CIRM. It is important to note that the committee
is not evaluating these programs, but reviewing some of their key characteristics to provide
additional perspective on CIRM.
10
More information on these state laws can be found in Andrews (2004) and in a National Conference of State
Legislatures (NCSL) database updated through 2008 (NCSL, 2008).
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Given CIRM’s focus on stem cell research and regenerative medicine, the committee’s
comparison concentrated on other state programs specific to these fields. In addition to
California, five other states have adopted programs that provide funding specifically for stem cell
research, including research on hES cells (Karmali et al., 2010). These state programs vary in
scale, but none are as large as CIRM. New York’s program, the New York State Stem Cell
Science Research Fund (NYSTEM), is closest in size, with a $600 million, 11-year commitment.
Connecticut, a much smaller state than either California or New York, also has a long-term
program, with a $100 million 10-year commitment. Other states have chosen to provide funding
for stem cell research without a specific long-term commitment. These states include Maryland,
which has provided approximately $91 million in funding since 2006, and New Jersey and
Illinois, both of which provided stem cell–specific funding in the last decade. These latter two
programs were on a smaller scale than those of the other states (approximately $15 million each)
and are not awarding new grants, and thus are not considered further here. CIRM’s challenge—
creating and thoughtfully administering a much larger-scale funding program—distinguishes it in
important ways from these smaller state stem cell programs. For this reason, the committee also
included the Cancer Prevention Research Institute of Texas (CPRIT) in its comparison. While
the focus of this program differs from that of CIRM, the two have numerous similarities,
including the use of bond funding, a $3 billion total budget, and an approximately 10-year time
frame. These programs are described briefly below and also discussed in Chapters 3 and 5.
NYSTEM: New York’s Stem Cell Program
NYSTEM dates to early 2007, when, as part of the state’s 2007-2008 budget, the Legislature
and Governor Eliot Spitzer committed to providing $600 million in funding for stem cell
research over 11 years. With the adoption of this law, New York became the second-largest state
funder of stem cell research, behind California. Although the program is scheduled to continue
for 11 years, its funding is subject to the annual appropriations process and, because of budget
pressures, has lagged slightly behind the $50 million annual appropriation that was anticipated.
At one point, financial concerns led to a delay in issuing new requests for applications (RFAs)
and to an approximately year-long gap in funding of new awards, illustrating the benefits of the
more secure bond funding model used by CIRM. The program has a broad funding portfolio,
supporting various types of research grants and education and training efforts, as well as
renovation or improvement of shared laboratories. NYSTEM awards grants both in response to
broad investigator-initiated RFAs and for more targeted programs. One recent award focuses on
the use of somatic cell nuclear transfer to create hES cell lines. This research takes advantage of
NYSTEM’s decision to allow the compensation of oocyte donors for biomedical research
(Roxland, 2012) and would be unlikely to be undertaken by a CIRM-funded scientist given
CIRM’s rules against compensating egg donors and the difficulties scientists have experienced in
recruiting uncompensated donors (Egli et al., 2011). In late 2011, NYSTEM issued an RFA
(Consortia to Accelerate Therapeutic Applications of Stem Cells) intended specifically to move
stem cell research toward the clinic.
Connecticut’s Stem Cell Research Program
Connecticut’s stem cell research program was signed into law by then-Governor Jodi Rell on
June 5, 2005, making Connecticut the third state (after New Jersey and California) to develop a
program focused specifically on funding stem cell research. Through July 2012, the state had
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-11
awarded approximately $69 million in stem cell grants to Connecticut researchers. The initial act
creating the program appropriated $20 million for grants supporting embryonic or adult stem cell
research and specified that an additional $10 million should be dispersed from the state’s
Tobacco Settlement Fund for the following 8 fiscal years (through the fiscal year ending June 30,
2015). Connecticut’s stem cell research program typically offers one grant cycle per year. This
annual funding cycle includes investigator-initiated grants for established investigators as well as
smaller seed grants. Connecticut also funds larger group projects involving collaborations among
multiple laboratories. In the two most recent RFAs, the state explicitly indicated that it would
give priority to group projects that bring together academic and industry partners to focus on the
development of stem cell therapies for specific diseases. This program shares some similarities
with CIRM’s disease teams and represents Connecticut’s most direct effort to move its funding
toward translational research. Connecticut also provides funding for core facilities to support
stem cell research by multiple investigators, akin in principle to the infrastructure awards made
by CIRM early in its existence (see Chapter 4).
The Maryland Stem Cell Research Fund
Maryland’s stem cell research program was established through legislative action in 2006,
following a contentious multiyear debate. Specifically, then-Governor Bob Ehrlich signed the
Maryland Stem Cell Research Act of 2006 on April 6, 2006, creating the Maryland Stem Cell
Research Fund (MSCRF), designed to promote state-funded stem cell research through grants
and loans to both public and private entities in the state. Funding levels for the MSCRF are
determined each year by the General Assembly and have ranged from $10.4 million in 2011 to
$23 million in 2008. Through June 2012, Maryland had completed six rounds of funding,
awarding more than 250 grants totaling approximately $91 million. Maryland’s program
typically offers one funding cycle each year. This cycle includes a broad investigator-initiated
program designed for faculty with preliminary data, a smaller exploratory grant program, and
funding for postdoctoral fellowships. The MSCRF requires that funded grants include human
stem cell research but imposes no requirements on the specific type of human stem cells studied.
In early 2012, Maryland issued a new RFA focused on preclinical and clinical research, which
specifically targets for-profit companies conducting stem cell research in the state.
The Cancer Prevention Research Institute of Texas
CPRIT was established following passage of a constitutional amendment by Texas voters in
2007 that authorized the state to issue $3 billion in bonds to support cancer research and
prevention programs. CPRIT’s authorizing legislation was modeled, at least in part, on CIRM,
but with a focus on a less controversial research field (Ackerman, 2007). CPRIT’s tasks include
implementing the Texas Cancer Plan, increasing the research capacity of the state’s institutions
of higher education, and expediting innovation in cancer research. CPRIT funds awards for both
basic and translational cancer-related research; commercialization awards, designed to help bring
cancer-fighting drugs and appropriate medical devices to market; and cancer prevention awards,
designed to support evidence-based screening and prevention projects and, ultimately, increase
cancer survival rates. CPRIT research grants must be supported by matching funds from another
source equal to one-half of the CPRIT award. These matching funds must be spent in the same
general area of cancer research as the CPRIT-funded project and can come from a range of
sources, including federal sources such as NIH, state sources, and unencumbered university
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2-12 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
funds, as well as nongovernmental funds (e.g., private funds, venture capital investors,
foundation grants). Through August 2012, CPRIT had awarded 429 grants totaling
approximately $760 million. CPRIT encountered controversy in May 2012 when its chief
scientific officer resigned, citing concerns about the Institute’s scientific review process (Weber,
2012).
Summary of Comparable State Programs
The above brief review of comparable state programs illustrates that state policy makers have
a range of options to consider when attempting to support biomedical research and encourage
biotechnology-related economic development. These programs differ substantially in their
origins, their scale, their duration, and their financing mechanisms, among other characteristics
(as discussed in greater detail in Chapters 3 and 5). As was the case with CIRM, each of these
policy designs and implementation choices can affect how the program operates and how well it
fulfills its goals and the goals of the taxpayers who provide it with financial support. A high-
level summary of CIRM and the comparable programs discussed in this section is shown in
Table 2-1.
TABLE 2-1 Characteristics of CIRM and Comparable Funding Programs
California New York Connecticut Maryland Texas
Origin Voter initiative Legislature Legislature Legislature Voter
Initiative
Financial $3 billion $600 million $100 million Not specified $3 billion
commitment
Funding Bonds Annual Annual Annual Bonds
mechanism appropriations appropriations appropriations
(tobacco
settlement
funds)
Awards ~$1.6 billion ~$221 million ~$69 million ~$91 million ~$760 million
announced to
date
Approximate 10 years 11 years 10 years Open-ended 10 years
duration
First awards 2006 2008 2006 2007 2009
NOTE: Funding totals as of August 2012.
SOURCES: California Program: http://www.cirm.ca.gov; New York Program: http://stemcell.ny.gov; Connecticut
Program: http://www.ct.gov/dph/cwp/view.asp?a=3142&q=389702&dphNav_GID=1825; Maryland Program:
http://www.mscrf.org; Texas Program: http://www.cprit.state.tx.us.
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-13
CONCLUSIONS AND RECOMMENDATION
In many ways, CIRM represents an extraordinary experiment resulting from the dedication,
interest, drive, and imagination of its sponsors. Its initial efforts to establish human and physical
capital certainly are necessary steps toward the development of a scientific environment for
regenerative medicine in California that is conducive to establishing and sustaining leadership in
this area of medical research and to eventual clinical success. Moreover, the work of CIRM-
sponsored researchers continues to enrich regenerative medicine everywhere, just as CIRM’s
efforts continue to benefit from and be inspired by many exciting new developments in
regenerative medicine taking place both within and outside of California. The CIRM funding
model, like all investments on the scientific frontier, represents a wager on the future, but the
distinctive aspect of this model is the imposition of current research costs on future generations.
If all goes well, the costs and benefits will be experienced by the same cohort of taxpayers.
Given the uncertainty of progress in any specific arena of the biomedical frontier, however, the
costs could be shouldered by a generation that neither approved nor benefited from this
investment.
Regarding the origins of and funding model used by CIRM, the committee reached the
following conclusions.
The creation of CIRM was the result of the efforts of a broad-based coalition of
California citizens that was successful in mobilizing a significant state investment in a
particular arena of the biomedical frontier. At the time of its establishment CIRM was an
imaginative social innovation.
To support both an initial set of investments in facilities and an initial and ongoing stream
of research in this arena, Proposition 71 included a financing mechanism that, although
no longer unique in the area of scientific research, was a funding innovation at the time.
Instead of being financed by current tax revenues, these investments have been financed
by future tax revenues through the issuance of long-term general obligation bonds of the
State of California. As a result, the costs of these contemporary investments in the
science of regenerative medicine have been transferred to future cohorts of taxpayers,
who were presumed to be the principal beneficiaries of CIRM’s programs.
The stability offered by the terms of Proposition 71 to critical aspects of the field of
regenerative medicine in California has allowed CIRM to engage in long-term planning;
develop a comprehensive long-term funding strategy, including support for training,
infrastructure, and research; attract significant private funding to its capital projects; and
recruit scientists to the state. At the very least this should enable California to sustain an
enhanced presence in this arena over the longer term.
The CIRM initiative, although unusual in its size and with many distinctive features, falls
into a long-term pattern of initiatives by individual states that promote the vitality of
particular aspects of their research and development sectors.
It is not possible at this stage of CIRM’s work to provide any reliable estimate of its long-
term economic impact, particularly with respect to initial projections of cost savings to
the state’s health care budget.
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2-14 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
For other states and countries that may look to CIRM’s funding paradigm for their own
initiatives, the committee offers the following observations:
The development of a broad coalition of supporters facilitated both the passage and
implementation of CIRM. Such coalition building and substantial financial resources are
probably a necessary condition for other states or countries developing targeted research
funding programs dependent on the support of a broad constituency.
States vary in their use and availability of a public initiative mechanism that can require
state government to undertake particular initiatives independently of the state legislature
and/or administration. Where such a mechanism is available, it offers the benefits of wide
public engagement, but also entails the danger that regardless of how well intentioned
these initiatives are, they may produce an overall portfolio of state research and
development efforts that is suboptimal. This is also a danger of any action by state
government that pursues particular interests at the expense of a broader set of needs. As
with all efforts to promote science, moreover, whether by voter initiative, research
proposal, or legislative initiative, it is necessary to guard against the risk of overselling
the program’s potential benefits in an effort to win the necessary support.
The appropriateness of the CIRM model for other states depends greatly on various
contextual factors. In particular, it depends on the health and vitality of the state’s
existing research institutions, its financial situation, and its willingness to transfer the
risks and costs as well as the potential benefits to the next generation.
CIRM is a dynamic organization that continues to be in a constant state of transition. Given
the time frame established by Proposition 71, the committee believes it is important 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 give increased attention
to industry inputs since the latter are crucial a fuller understanding of what it will take to attract
the much larger sums required to take laboratory findings to the “bedside.” As part of its 2012
Strategic Plan, CIRM set forth plans to establish a platform to enable grantees, and industry,
among others, to continue their pursuit of CIRM’s mission after the institute’s bond funding
expires (CIRM, 2012b). The committee agrees with this goal. In addition, CIRM should share
with the public any plans to obtain private-sector support for its ongoing activities and how any
such arrangements may affect continuing public obligations, including those related to CIRM-
funded intellectual property and its access plans (see the discussion in Chapter 5).
CIRM and those it has funded have set in motion a significant scientific enterprise. Whether
or not the state of California will choose to continue its support beyond the $3 billion already
committed, there is an obligation to both the resulting scientific enterprise and the citizens of
California to try to sustain the most promising initiatives. In principle there are a wide variety of
initiatives that might at least in part substitute for the initial decade of support from the state,
These might include new and novel partnerships with industry, or other funders of biomedical
research and/or the expansion of efforts with CIRM’s existing partners both of which could
attract new funding sources. If developments emanating from CIRM supported research projects
suggest promising clinical possibilities very large sums will be required to take these
developments to the bedside and the closer the partnership with CIRM and California’s venture
capital and biotechnology industry the more likely that real dividends will ensue. Indeed such
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CIRM’S INITIAL PROCESSES AND FUNDING MODEL 2-15
relationships might be key to realizing the initial expectations of substantial dividends flowing
from the entire effort. In support of CIRM’s strategic planning goal with respect to enabling
grantees and others to carry on CIRM’s work, the committee makes the following
recommendation.
Recommendation 2-1.11 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 the following key
strategic areas:
How, if at all, CIRM intends to obtain funding after the bond
proceeds have been spent, including the continuing role, if any, of
additional state support and plans to obtain private-sector funding
(e.g., from private foundations, industry, venture capitalists, other
institutions), in anticipation of declining state support and/or in
recognition of the need for a much larger investment of funds to take
research findings through clinical trials. Particularly important is
understanding how such developments might affect CIRM’s ability to
meet its obligations to the public, including (1) how management
intends to ensure oversight of the ongoing responsibilities of grantees
to the state, and (2) how intellectual property, access plans, licensing
of intellectual property, and revenue sharing will be managed.
A more detailed description of the nonprofit venture philanthropy
fund proposed in CIRM’s 2012 Strategic Plan and how this
organization would interface with the Institute.
How any new funding models would impact the role and structure of
the ICOC.
The next three chapters contain the committee’s principal findings, conclusions, and
recommendations on the implementation and operations of CIRM, including its governance
structure (Chapter 3); the nature, scope, and accomplishments of its scientific program
(Chapter 4); and its intellectual property policies (Chapter 5).
11
In the committee’s view, this recommendation can be carried out by CIRM without legislative action.
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2-16 THE CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINE
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