Stem Cell Institute’s Legality Goes to Trial

The stem cell institute that California voters willed into existence with their approval of a $3-billion bond measure goes on trial today.

The lawsuit, to be heard by an Alameda County Superior Court judge, is relatively simple: Opponents contend the lack of direct state control over the institute’s finances is unconstitutional.

The state attorney general’s office and the institute’s lawyer counter that the measure amended the state constitution to allow for such independence.

The dispute has frozen one of California’s boldest experiments: to create an embryonic stem cell research industry that has been deemed off-limits for federal funding by the Bush administration.

Beyond the dry legal question, the trial will offer the San Francisco-based California Institute for Regenerative Science a forum to press its case that it has been and will be accountable to the public.

Since inception, the institute has been embroiled in a debate over the workings of its citizen oversight committee, which over a decade will dole out an amount comparable to the annual gross national product of Papua New Guinea to advance the relatively young science.

“This agency has been under a microscope for the last year and been subject to a fair degree of criticism,” said institute attorney James Harrison. “In some sense, this trial gives us a chance to prove what this agency has accomplished and how accountable it has been.”

Many key decisions -- about ethical standards for research, whether revenue from patented findings would be shared with the state, if indigent Californians would be ensured access to treatments -- had not been made when the lawsuits were filed.

But now they have been, after nearly five dozen public meetings and hours of spirited discussion with patients’ groups, researchers, legislators, taxpayer watchdogs, stem cell skeptics and more.

Proposition 71, known as the Stem Cell Research and Cures Act, was approved by 59% of voters in November 2004 to allocate $300 million a year for a decade. It created the institute and its governing body, the 29-member Independent Citizen’s Oversight Committee. (The initiative’s high-powered backer, Robert Klein, was selected to chair it.)

Although most committee members are appointed by elected officials, the proposition was designed to insulate the governing board from politics, so it forbade legislative intervention for three years.

It also made the committee responsible for the details of governance, including such relatively minor issues as compensation of institute staff and broader ones of grant disbursal for research and construction of laboratories.

The crux of the two consolidated lawsuits -- one by People’s Advocate and the National Tax Limitation Foundation, the second by the California Family Bioethics Council -- is that lack of direct state management and control of the taxpayer funds violates the state constitution.

“There is one major big wrong with this thing,” said Ted Costa, who heads People’s Advocate, a taxpayer organization active in the recall of Gov. Gray Davis. “There is absolutely no oversight from the Legislature.”

Institute leaders believe they are on firm legal ground, as do some independent legal scholars.

“I think this should be an easy winner for the defendants,” said Hank Greely, a law professor and chairman of the steering committee of the Stanford Center for Biomedical Ethics.

Although the institute’s opponents have attacked its legal foundations, two of the organizations involved oppose the institute because stem cells are sometimes drawn from embryos discarded by fertility clinics.

Adult stem cells have been used to treat heart, liver and other diseases. But embryonic ones, culled before cells begin to differentiate, have the promise of more versatility and could replace abnormal cells in a range of organs. People with spinal cord injuries and diseases that include childhood diabetes, Alzheimer’s and Parkinson’s have high hopes for stem cell research.

The Napa-based Life Legal Defense Foundation, which opposes abortion and euthanasia and fought for the life of Terri Schiavo, the brain-damaged Florida woman at the center of an end-of-life case last year, is the counsel for the first lawsuit.

“Obviously we are a pro-life group,” said executive director Dana Cody, who has known Costa for years and suggested they team up. But the legal challenge “is a taxpayer issue, not a life issue.”

The second plaintiff was created by the Christian conservative California Family Council specifically to sue the institute, said director Ron Prentice.

“There are other avenues of stem cell research that have proven much more beneficial to curative therapies,” Prentice said. “On top of that, the people of California are being hoodwinked into a very expensive and unproven research ... fraught with conflicts of interest.”

Cody has pledged to appeal all the way to the California Supreme Court, if needed, so even a series of rulings in the institute’s favor would not clear the state to issue bonds until spring 2007, officials have said.

Klein has secured a state loan and private contributions to operate the institute in the meantime. And he’s hoping to arrange for so-called anticipation bonds that are not backed by a payment guarantee by the state.

Despite the holdup, Proposition 71 nevertheless triggered a tsunami of interest, as universities eager for pieces of the research pie lured new talent to California and launched stem cell programs in anticipation of cash infusions.

Philanthropists Eli and Edythe Broad donated $25 million last week to build a stem cell research center at USC. The Broad Institute for Integrative Biology and Stem Cell Research is expected to be the largest such center in the state when it opens in 2008, the university said.

Klein wistfully called it “the highest-quality model of what Proposition 71 should be funding.”

California’s pioneering initiative has caused a backlash, as some states have enacted bans on publicly funded embryonic stem cell research. Yet others -- including Connecticut, New Jersey, Texas and Illinois -- have recently approved small amounts of state funding for research.

“While all this mud wrestling is going on in the California courts, Illinois is quietly and effectively distributing grants to researchers at some of the top institutions,” said Illinois state Sen. Jeffrey M. Schoenberg.

Although some may gloat over California’s messy public process, those involved say it has already produced compromises that will hold California’s grant recipients to higher standards than are applied elsewhere in the United States.

Revenues of more than $500,000 from patented inventions by universities and nonprofit research institutes will trigger a 25% return to the state, for example, in contrast to federal policies, which do not require payback.

And patented inventions must be shared among researchers here.

Among the ethical standards that exceed those nationwide are those that ensure women are not coerced to donate eggs, are compensated for out-of-pocket costs and are covered for any medical complications from egg donation.

“I have never, in 20 years of professional life serving on commissions, come across a process as welcoming of public input as the one followed by the standards working group,” said R. Alta Charo, a law and bioethics professor at the University of Wisconsin at Madison, who helped devise the standards.

Also, indigent patients will not pay more than the federal Medicaid price for any therapies that come from the California-funded research.

Not everyone is satisfied.

Hallye Jordan, spokeswoman for state Sen. Deborah Ortiz (D-Sacramento), said committee members have “made tremendous progress but still have a way to go.”

Ortiz and other legislators have called for a performance audit of the institute that would look at staff salaries and hiring, policies to manage potential conflicts of interest by oversight committee members and procedures to be used for doling out funds.

“We want California’s effort to be successful,” Jordan said. “The only way that can happen is if it has the continued confidence of the public.”