Hearing Addresses Royalties From Proposition 71-Funded Research
State lawmakers at a joint committee hearing in San Francisco on Monday discussed issues surrounding the debate over whether the state legally can seek royalty payments from stem cell treatments developed using Proposition 71 funding, the Contra Costa Times reports (Kleffman, Contra Costa Times, 11/1).
Federal rules bar states from benefiting financially from using tax-exempt bonds to fund a specific private enterprise rather than serving a general public good. In general, the Internal Revenue Service allows state and local governments to use tax-exempt bonds to fund public projects, such as bridges and roads, but prohibits states from sharing revenue with projects in which it acts as a business partner.
The state could retain royalty rights on treatments developed using Proposition 71 funding by issuing taxable bonds, but it would have to pay investors a higher interest rate on taxable investments (California Healthline, 10/25). Issuing taxable bonds could increase the cost of repaying the bonds to the state by as much as $1 billion, according to the Oakland Tribune (Vesely, Oakland Tribune, 11/1).
Sen. Deborah Ortiz (D-Sacramento), who led the hearing, said that the state faces challenges that could prevent it from ever receiving revenues through royalties or licensing agreements but encouraged stem cell leaders to look for other options to ensure a public benefit, the Times reports.
In lieu of royalties, some hearing attendants suggested requiring grant recipients to make their basic research findings and tools available to other researchers or creating a patent pool where companies would share their rights to inventions. In addition, the state could require a tiered pricing arrangement under which treatments developed using Proposition 71 funds would be made available to low-income residents at the lowest prices.
Patient advocates argued against requirements that might jeopardize research that could lead to new treatments (Contra Costa Times, 11/1).