stemcell.jpgCalifornians approved Prop. 71 by an overwhelming majority, so $3 billion in state funding will be pumped into stem-cell research over the next ten years. But we’d like to take a closer look at the risks of implementation.

The press release issued by the Family Research Council screams “Calamity in California,” citing big ethical problems. For most Californians, that’s an extreme view.

Looking deeper at this program, which funds stem cell research at California hospitals, medical schools and universities, some big questions do arise. Proponents say this will help develop cures for things like cancer, heart disease, diabetes, Alzheimer’s, Parkinson’s, HIV/AIDS, multiple sclerosis, ALS, arthritis and spinal cord injuries, which may be true.

The significant number of supporters also say the research will boost jobs and economic growth in California. The research is likely to create spin-offs that become job-creating start-ups, which is why pharmaceutical company executives and venture capitalists contributed $2.6 million to put this measure on the ballot. We mentioned Silicon Valley venture firm Kleiner Perkins in this posting earlier, but other names include Microsoft founder Bill Gates; eBay founder Pierre Omidyar; and William Bowes Jr., the founder of biotech giant Amgen.

The more intriguing questions about the program are whether there are conflicts of interests related to its implementation, and whether the proposition will pay for itself, as the proponents argue it will.

Proponents argue it will “reduce state health care costs and provide a boost to regional economies and the state at large.” Prop 71 won’t increase or create any taxes, they say:

It authorizes tax-free state bonds that will provide an average of $295 million per year over ten years to support stem cell research at California’s universities, medical schools and research facilities. These bonds will be self-financing during the first five years, so there’s no cost to the state’s general fund during this period of economic recovery.

What they don’t say is that debt payments are delayed until after the first five years, so there’s no free lunch here!

They continue:

Prop 71 is also expected to help reduce California’s skyrocketing health care spending costs, which now total more than $110 billion per year. By leading to new cures that reduce our health care costs by only one percent, Prop 71 will pay for itself.

That’s also not certain. The Legislative Analyst estimates there would be a $6 billion cost of the bonds over 30 years to pay off both the principal ($3 billion) and interest ($3 billion), and that potential state and local revenue gains and cost savings “are unknown.” Here’s an even-handed article (sorry if you get hit by a free registration page) written by the Merc’s Lisa Krieger last month about some of the pros and cons.

More opinionated, and critical of Prop. 71 is Merc columnist Scott Herhold in this piece recently (again, possible registration page):

The proponents have financed a study by a Stanford professor who estimated that the measure could return the state between $6.4 and $12.6 billion over the payout period. But the report was littered with the language of the boom: “plausible,” “scenarios,” “potential.” We’re talking basic research, which can take a long time to produce a cure — and a return on the investment. To take just one example, the assumption that royalties from stem cell therapies will produce up to $1.1 billion for the state seems incredibly optimistic. The UC system received only $67 million in 2003 from its 900-odd patents. And the notion that stem-cell therapies will reduce health costs defies recent medical history: As new cures have been found, costs have soared.

What about implementation? The California Nurses Association argued it is unfair that the financial benefit would go to private companies that could patent any medical discoveries. Well, it’s not quite that simple, either. The next step is for the state to set up a California Institute for Regenerative Medicine to regulate research and channel grants and loans. A 29-member oversight committee will be appointed by state officials and certain UC campus Chancellors. It will have a staff of up to 50 employees exempt from state civil service requirements.

The devil will be in the details. The oversight committee is charged with creating standards that require all grants and loans “be subject to agreements allowing the state to financially benefit from patents, royalties, and licenses resulting from the research activities funded under the measure,” according to the Legislative Analyst. Opponents say they’ll be watching the process to make sure the public is benefited. They plan to form an alliance to monitor grants. Opponents also say the research poses risks to women who may not be aware of the effects of high dose hormones and egg extraction procedures when they participate in the research.

Here’s the response from Deborah Burger, president of the 58,000-member California Nurses Association, as quoted by the Sacramento Bee: The vote “just reaffirms my view that Californians really do care about their fellow citizens..It will be our job as nurses and as the alliance for responsible research to really monitor and make sure the public money has been well spent.”

The measure separately makes it a state constitutional right to perform stem cell research, but prohibits human cloning research.