The governing board of California's stem cell agency has rejected all but three of 15 recommendations issued in June by an independent state oversight commission that says it is looking to improve the agency's governance by rooting out conflicts of interest.
The governing board, called the Independent Citizens Oversight Committee, echoed arguments made in recent months by its chairman Robert Klein, two lawyers retained by the California Institute for Regenerative Medicine, and a spokesman for the group in turning back almost all the policy proposals offered in a report designed to examine the governance of CIRM and ICOC.
That report, Stem Cell Research: Strengthening Governance to Further the Voters' Mandate, was carried out by the Milton Marks "Little Hoover" Commission on California State Government Organization and Economy.
Little Hoover recommended 15 changes that included shrinking the ICOC board from the current 29 members to 15; reducing the terms of members from eight to six years; changing the authority for appointing new board members; eliminating from the job description of ICOC chair Klein his day-to-day financial responsibility for the agency; and changing who can appoint Klein and CIRM's vice chairs from Gov. Arnold Schwarzenegger and other statewide elected officials, to the ICOC itself.
All these changes were rejected by ICOC, which sided with staff counsel as well as CIRM's outside counsel, James Harrison and Kari Krogseng, both of the San Leandro, Calif., law firm Remcho, Johansen & Purcell. The lawyers all agreed that the changes violated California's constitution, which prohibits the state legislature from amending an initiative unless it expressly permits such changes.
"There was nothing in this report that, really, I think, was unreasonable for us to consider. And I think, likewise, our response to them was extremely professional, and well thought-out, and reasoned," said Duane Roth, one of two vice chairs of the ICOC, and the president and CEO of Connect, a San Diego nonprofit organization that assists startup technology companies, according to a transcript from the first day of the ICOC's Aug. 19-20 meeting, which CIRM has made available on its web site.
Roman Reed, a stem cell research advocate whose paralysis in a 1994 college football accident inspired a state law that funds spinal cord research at the University of California system, urged the ICOC board not to support Little Hoover's proposed changes to Proposition 71 — the voter-approved measure adopted in 2004 that allowed California to spend $3 billion in bonds toward stem cell research, and created CIRM to decide and oversee the spending of those funds.
"Proposition 71 has been through the fires. It has been tried, tested, and true. While there's always room for improvement in anything, the wholesale do-over suggested by the Little Hoover Commission is contrary to the wishes of the California electorate and, therefore, must and should be rejected," Reed said, according to the transcript.
Under Proposition 71, state lawmakers have only been allowed since last year to amend the measure through bills that win at least 70 percent of the members of both the state Senate and Assembly, and are signed by Schwarzenegger. Prop 71 allows the Legislature to amend the act, but only through amendments deemed "to enhance the ability of the institute to further the purposes of the grant and loan programs created by the measure," according to the text of the measure.
CIRM staff and ICOC have contended that the reforms proposed by Little Hoover would hinder the agency's ability to carry out its mission and would not further the purposes of its grant and loan programs.
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Little Hoover disagrees. "It's not over. We wrote the report at the request of the legislature, and I think they're still interested in some of the recommendations we've made," Stuart Drown, executive director of the Little Hoover Commission, told BioRegion News this week.
At least some of Little Hoover's recommendations are expected to be debated next year by state lawmakers. State Sen. Elaine Alquist (D-San Jose), who chairs California's Senate Health Committee, remains committed to amending a bill she introduced on Feb. 25 to incorporate a yet-to-be-determined number of the Little Hoover recommendations concerning ICOC and CIRM governance, her spokesman, Russell Lopez, told BRN this week.
Alquist will propose the changes to CIRM governance as an amended version of Senate Bill 343. The measure requires recipients of CIRM grants to submit to the agency a plan for allowing uninsured state residents access to drugs funded by the agency, and for allowing the state and local governments to sell those drugs at any of three benchmark prices in the California Discount Prescription Drug Program, unless waived from the rule by the ICOC.
The original bill is similar to last year's Senate Bill 1565, introduced by then-state Sen. Sheila Kuehl (D-Santa Monica) with support by state Sen. George Runner (R-Lancaster). That bill, which was vetoed by Schwarzenegger [BRN, Sept. 29, 2008], also requested that Little Hoover examine the governance of CIRM and ICOC with an eye to preventing conflicts of interest — a study the commission agreed to conduct last fall, and made public on June 26.
Lopez said in June that the measure could not be taken up this year because Alquist and other legislative leaders had spent too much time hammering out state budget agreements with Schwarzenegger [BRN, July 6].
Under the Little Hoover recommendations, 11 of the new board's 15 members would be appointed by Schwarzenegger and confirmed by the state Senate. Two members would be named by the state legislature, the other two by UC President Mark Yudof
The commission argued that a smaller board would address what it called the challenge to ICOC operations posed by its 65-percent quorum — though Florez has noted that the University of California system board consists of 26 members.
Today's ICOC consists of 10 patient advocates, including Roth, who is bylaws vice chair, as well as Klein, statutory vice chairman Art Torres, and:
• Five executive officers from a UC campus with a medical school, chosen by UC's chancellors;
• Four executive officers from other California universities;
• Four executive officers from California research institutes; and
• Four executive officers of commercial life science entities.
The members from non-UC universities, research institutes, and bio businesses are now appointed by all of California's top statewide elected officials — Schwarzenegger, Lt. Gov. John Garamendi, Treasurer Bill Lockyer, and Controller John Chiang.
Each official names two patient advocates. Schwarzenegger fills the seats for advocates of Alzheimer's disease and spinal cord injury; Garamendi, MS/ALS and type II diabetes; Chiang, cancer and Parkinson's disease; and Lockyer, heart disease and type I diabetes. The state Senate Rules Committee appoints the ICOC's HIV/AIDS patient advocate, while Assembly Speaker Karen Bass (D-Los Angeles) names the mental health patient advocate.
ICOC also rejected three Little Hoover recommendations that the governing board acknowledged could be carried out without a new voter referendum being needed, whether by CIRM or through legislation:
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• Identify all applicants in connection with formal requests for applications for grant funding — CIRM won't do so because no other funding agency identifies applicants for failed applications except for Connecticut, which grants much smaller amounts than CIRM, agency spokesman Don Gibbons told BRN.
• Remove the 15-scientist cap on the Grants Working Group — CIRM has about 150 scientists and alternates available for peer review, so the cap has "really never presented a problem," Torres said at the ICOC meeting.
• Require the Citizens Financial Accountability Oversight Committee, or CFAOC, to conduct performance reviews of CIRM in addition to its financial audits of the stem cell agency. "We don't necessarily think that a financial accountability oversight committee can do a performance audit of our mission, because our mission is about the science," Gibbons said, adding that in 2010, an outside panel of scientists is set to review that mission in accordance with CIRM's current strategic plan, itself in process of being reviewed (See separate report).
Also rejected by the ICOC was a Little Hoover recommendation that the governing board amend its bylaws by authorizing the removal of members for cause. Torres cited the absence of such a rule from the bylaws of Little Hoover and other state boards, which allow majorities to seek removals of members by the office of state Attorney General Jerry Brown.
Little Hoover Commission's Drown said his agency would not comment on ICOC's action, and generally does not comment on responses by state agencies to its reports. The ICOC acted in accordance with the recommendations made to the governing board by its Legislative Subcommittee in an 8-0 vote with one abstention.
ICOC and CIRM have found support from one member of Little Hoover. State Senate Majority Leader Dean Florez (D-Shafter) wrote in a July 6 letter that the dispute over amending Proposition 71 could "create the risk of litigation." Florez also wrote that governance changes sought by Little Hoover would vest too much power over ICOC appointments with Schwarzenegger and his successors, and offered no compelling reason for shrinking the size of the governing board from 29 to 15 members.
"It is not clear to me that, given the scientific, financial, commercial, and governmental issues with which CIRM has to deal, a smaller board would be better suited to achieve CIRM's mission," Florez wrote.
Little Hoover acknowledged the litigation potential in its report, but defended its recommendations as being beneficial for the stem cell agency and in keeping with Prop 71.
"While the commission understands there is a potential controversy here, which could lead to litigation, this is a sufficiently open question that persuades the commission to recommend the following governance changes in the interest of furthering the purpose of Proposition 71 and improving the prospects for long-term success of the agency's mission," the report concluded. "In improving efficiency and transparency at CIRM, the commission believes that the recommendations will further the voters' mandate."
CIRM has taken up three recommendations included in the Little Hoover report, though Gibbons told BRN the agency had begun before the commission report came out to amend its minutes to adopt a leadership succession plan, include vote tallies and recusals by the board of directors on future grant applications, and modify the "triage," or internal pre-application, process by which CIRM tries to ease the workload on the peer-review panel in light of the 15-person cap on outside peer reviewers.
CIRM will consider another Little Hoover suggestion, lifting its 50-employee cap. According to the ICOC transcript, CIRM President Alan Trounson said the issue would need revisiting "in the medium to long term."
"We are rising very quickly to the maximum of 50 people, and so we will become handicapped under that in due course," Trounson said.
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The ICOC also agreed to poll its scientific grant reviewers on whether they would resign if their statements of economic interests were made public — a poll that Gibbons said was being carried out late this week.
The peer-reviewer poll recommendation generated nearly an hour of discussion by ICOC members, capped by a failed motion by board member Jeff Sheehy to not endorse the grant reviewer poll recommendation. That motion failed 12-7.
Sheehy, communications manager at the University of California, San Francisco, cited an instance where a member of CIRM's Grants Working Group, which advises ICOC on grants applications, resigned because of the extent of disclosure required of its members — namely information on professional conflicts of interest, as well as completion of California's Form 700: Statement of Economic Interests financial disclosure forms required of all appointees to state panels as well as elected officials.
Among information sought by Form 700: The fair market value range of stocks, bonds or other investments; the income and assets of business entities and/or trusts; interests in real property; and sources of gross income of $500 or more, though according to the form, "A source of income must be reported only if the source is located in, doing business in, planning to do business in, or has done business during the previous two years in your agency's jurisdiction."
"Asking the question itself did have a negative impact on our ability to recruit working group members," the transcript quoted Sheehy as saying. "We have a more rigorous conflict-of-interest process than any agency in the country as far as I'm aware of that review scientific grants, that these include the personal co-publication, mentor/mentee relationships, a whole host of relationships that are not considered by the Form 700, and that these conflict-of-interest disclosures are audited by the independent auditor of the state.
"I think we are not in any way jeopardizing our accountability to the public by not going through this exercise," Sheehy added.
ICOC Chairman Robert Klein disagreed, saying, according to the transcript, that he didn't want to him or ICOC to be perceived as being against transparency: "If we are to vote against this, it will be spun in the other direction."
Klein added, however, that he would be open to rejecting additional disclosure of grants working group members "if any significant portion of our working group were to say that this is not acceptable.
"I would, personally speaking as an individual, believe that we shouldn't adopt the procedure that may lose some of the best talent in the country, because the quality of our peer reviewers is vital to accomplishing our mission."
Trounson countered that while losing grants working group members due to disclosure rules "would be a concern for me," he supported polling members of the panel because the agency's management did not want to appear it was shrugging off the Little Hoover report.
"Management was trying to be reasonable. But [the report] didn't say that we had to take action on whatever we found," Trounson told the ICOC.