Stem Cell Boondoggle

The Sacramento Bee reports that the advocates of stem cell research who passed Prop 71 are retreating from their claims that the research would pay for itself. The legislators offering the money for the research want to have strings attached in the form of royalties or discounts. But the advocates who promised the benefits of the measure don't want any strings on their money.

Proposition 71 supporters are doing a flip-flop. Biotech firms and university officials are saying that royalties and discounted care would discourage "innovation" and diminish the potential for medical breakthroughs. To drive home this point, they are now throwing cold water on the idea that stem cell research will be very profitable.

If embryonic stem cell research had the potential to pay for itself from royalties and savings then venture capitalists would already have been funding the research. The state should not think it can do better than private venture capitalists at finding profitable research investments. There are also additional legal difficulties in the state using tax-exempt bonds to finance for-profit research.

California faces obstacles in issuing tax-exempt bonds for certain stem cell grants. In a May 23 letter to state Treasurer Phil Angelides, the state's bond counsel warned that patents and royalties resulting from state grants might be construed as taxable "assets," making them ineligible for financing by tax-exempt bonds.

Apparently, Angelides and leaders of the stem-cell institute have known about these challenges for some time, but haven't said anything. To flush out this issue, this page filed an open records request for all memos written by the treasurer's bond counsel on Proposition 71 prior to its passage. Angelides rejected those requests, citing attorney-client privilege.

Other lawsuits have prevented the state from selling the bonds and spending the proceeds. Is it not too late to pull the plug and save the state from spending $3 billion on research that offers little benefit to the state?