Editor's note: This is a longer version of the story that appeared in print.

Celling out
The directors of the $3 billion stem cell institute have direct ties to the biotech firms that stand to gain

By Tali Woodward

Members of the panel charged with overseeing California's stem cell research program – and the $3 billion in taxpayer-financed grants it will distribute – work for, have investments in, and are personally connected to the pharmaceutical and biotech companies poised to benefit from the grants.

Critics have long said that the structure of the panel, set up by last fall's Proposition 71, makes a mockery of its official name: the Independent Citizens Oversight Committee. The measure virtually guaranteed members of the 29-member board would have ties to the biotech industry. It was one of the main objections of people who were questioning the wisdom of Prop. 71 prior to the election (see "Cell Divide," 9/29/04).

But after several big biotech insiders were appointed to the committee in January, concern that those ties could skew the way money is doled out has only increased. Berkeley public interest attorney Charles Halpern, who has been closely monitoring the panel, told the Bay Guardian, "The basic principle is this: anyone handing out public funds should have undivided loyalty to the public interest, and the grants that they're giving out should not personally enrich them."

Seven of the most plugged-in ICOC members and their most significant connections are mapped out in this week's paper, including ICOC vice chair Edward Penhoet, who Halpern said "has his finger in every biotech pie." Penhoet has at least $3.3 million invested in biotech. That includes more than $1 million in Seattle-based ZymoGenetics, which, according to its Web site, conducts research using stem cells. Penhoet is the chair (and an investor in) Renovis, which is in a partnership with AstraZeneca, a stem cell firm. And Pehhoet founded and is still heavily invested in Chiron, which has a research partnership with City of Hope National Medical Center, also working with stem cells (fellow ICOC member Michael Friedman is that organization's president and CEO). Yet in January, Penhoet told the San Jose Mercury News, "I'm not aware that any investment I have or any board that I serve on is involved in stem cell research."

Although ICOC members are barred from voting to approve grants going to entities they work for, the language of Prop. 71 exempted the institute from many of the state's standard requirements. It also ensured that a majority of the ICOC will have ties to biotech – and some people say that constitutes a larger, more general conflict. The ICOC is "setting overall policies for the institute," Halpern said. "We want them to set those policies without considering their personal financial interests, or the interests of the institutions they work for."

Halpern and others have called on the ICOC to adopt clear policies to prevent conflicts based on the guidelines recently enacted by the National Institutes of Health. Those rules would bar the institute's leadership from investing in or being paid by any entity that receives grants or may be "substantially affected" by its work. They would also require all ICOC members to limit investments in such entities to $15,000.

Halpern told us, "So far they haven't done what's necessary to restore the credibility that this enterprise had on Nov. 7 – it's been a steady slide."

"I think any reasonable conflicts-of-interest provisions would require some serious divestment by board members – or require them to resign their positions on the board," said Jesse Reynolds, program director at Oakland's Center for Genetics and Society, which has been raising questions about this program since before the election. Reynolds also said that having people on the ICOC who, like Penhoet, are extensively connected to biotech "makes it all the more important to have the deliberations of the ICOC and its advisory groups fully open and transparent."

The ICOC is scheduled to discuss a conflict-of-interest policy for itself and for institute staff at its April 7 public meeting in Los Angeles.

Meanwhile, California state senators Deborah Ortiz and George Runner have introduced two bills and a constitutional amendment they say will address this and other issues with Prop. 71.

Information was drawn from corporate statements and press releases, the statements of economic interest ICOC members filed with the state's Fair Political Practices Commission, and research conducted by the Center for Genetics and Society (more information is available on the CGS Web site, www.genetics-and-society.org/policies/california). Research assistance by Momo Chang and Yenie Ra.

E-mail Tali Woodward