Prop 71: A direct role for states in research

Is California a trendsetter? 

By J. Mark Waxman, JD
General Counsel
CareGroup Healthcare System

Disappointed by a "funding gap" in the federal support of stem cell research, the citizens of California have made the decision to directly involve the State in the research effort. Through the provisions of the recently adopted Proposition 71 (Prop 71), a series of innovative and by some measures radical provisions significantly change the role of the State of California in this effort.

The essence of Prop 71 was to establish a mechanism ($295 million per year in bonds over a 10-year period) to fund stem cell research and research facilities; create a vehicle — the California Institute for Regenerative Medicine (Institute) — to award grants and loans for this purpose; and provide a series of processes to govern and oversee the effort, including the creation of standards which, among other things, would allow California the potential to receive a return on its investments.

The first component of Prop 71 is the establishment, through a state constitutional amendment, of the Institute.

The Constitutional Amendment provisions of Proposition 71 also take the unprecedented step of enshrining a specific right to conduct stem cell research, which includes not only adult stem cells, cord blood stem cells, but also pluripotent stem cells and/or progenitor cells. Pluripotent in this context means any stem cells that are capable of self-renewal and have "broad potential" to differentiate into multiple adult cell types. These cells may be derived from somatic cell nuclear transfer or from surplus products of in vitro fertilization when such products are donated "under appropriate informed consent procedures." Progenitor cells are multipotent or precursors cells that are "partially differentiated, but retain the ability to divide and give rise to differentiated cells."

The Citizen’s Oversight Committee

The Act is a complex series of statutes that will take some time to implement and interpret in all its phases and nuances. It begins with the creation of the Independent Citizen’s Oversight Committee (ICOC) to govern the Institute. This body, with 29 members, will be a politically appointed body with a diverse membership to include executive officers from several University of California campuses, representatives from disease advocacy groups, and experience clinical research faculty.

The statute goes on to prescribe a wide variety of rules and processes for Institute activities. Among the more interesting are:

1. The creation of a "citizen’s Financial Over-sight Committee," charged with reviewing the financial practices and audit of the Institute;
2. The applicability of competitive bidding requirements like those applicable to the University of California;
3. Conflict of interest requirements.

The Act expresses a "preference" from California suppliers. This element is to be implemented by standards to ensure grantees purchase goods and services from California suppliers as part of the overall effort to achieve a goal of more than 50% of such purchases from California suppliers.

Finally, the Act mandates that standards be established requiring that grants and loan awards come with intellectual property agreements that "balance" the state’s opportunity to benefit from patents, royalties and licenses with the need to assure that essential medical research is not unreasonably hindered by the IP agreements.

Accountability standards

The Act contains a series of provisions addressing accountability standards. Most important, the Act specifically provides that, notwithstanding "any other current or future state laws or regulations dealing with that study and research of pluripotent stem cells and/or progenitor cells, or other vital research opportunities," the Institute will develop its own scientific and medical standards. Those standards will address:

1. informed consent;
2. controls on human research;
3. prohibitions on the compensation of donors or participants, while permitting reimbursement of expenses;
4. patient privacy laws;
5. limitations on payments for cells;
6. time limits ("initially eight to 12 days after cell division begins") during which cells may be extracted from blasto cysts.

To ensure scientific and medical involvement, the Act establishes a series of Scientific and Medial Working Groups, designed to address funding, accountability standards, and research facilities. The conflict of interest rules applicable to members of these groups will be those applicable to NIH committee participation.

To assist the process, the ICOC will appoint its own ethics officer.


Awards are to be based upon a competitive evaluation. The Act establishes a series of statutory criteria for that evaluation — focusing on scientific merit in three classifications: research, therapy development, and clinical trials. In the prioritization process, the purposes of the Act – to fill a funding gap — are evidenced through the requirement that there is a high priority on funding pluripotent stem cell or progenitor cell research that will not likely be funded by encumbering federal limitations. And funding is not to be made in other research categories funded by NIH.

Other requirements include:

  • All funded facilities and equipment must be located solely within California;
  • Grantees will be required to pay "prevailing . . . rate wages" to construction workers building award funded facilities;
  • Grantees must be not-for-profit entities;
  • Grantees must raise matching funds for at least 20% of the award from non-Institute sources.

No funds may be used for research involving human reproductive cloning.

Amending the Act

The Act’s provisions significantly restrict the terms under which it may be amended. First, it can only be amended to enhance the ability of the Institute to further its purposes. Second, no amendments are allowed for two calendar years. Finally, amendment requires a 70% vote by both legislative houses prior to the governor’s approval. The hurdles clearly were designated to be very high.

What it all means

It is, of course, too early to understand the impact of Prop 71 in California and nationally. Nevertheless, several thoughts come to mind. First, and most obvious, it represents a very significant infusion of research dollars into embryonic (pluripotent or progenitor) stem cell research.

Second, through the adoption of the multiple standards for research, informed consent, and even reimbursement, the Institute will quickly become a thought leader and path breaker in these areas.

Third, the enactment of Prop 71 will put pressure on other states to respond. Their failure to do so could lead to a brain drain on work in this important area with long-term impact in this aspect of biotechnology development.

Finally, and most importantly, these efforts hopefully will speed the development of beneficial research for a significant number of the very serious diseases that afflict us.