Costly plan's benefits murky, say stem cell measure's critics

By Judy Silber
CONTRA COSTA TIMES

Lynn Fielder stood up, leaning on a cane as she took the microphone to 
speak. Her voice trembled, though not because of nervousness.

"What you've given me is hope and I want to thank you for that," said the 42-
year-old, who suffers from Parkinson's disease.

She was addressing Dr. Paul Berg, a Nobel Prize-winning Stanford 
University biologist, and Robert Klein, a businessman whose concern for his 
diabetic son led him to write the initiative known as Proposition 71. 
Speaking 
at Stanford, the duo were flush from victory at the ballot box. Californians 
had approved the measure, a $3 billion stem cell research initiative, with 59 
percent of the vote on Nov. 2.

But critics say the state's residents may not fully understand what they have 
endorsed. In a time of budget shortfalls, the state has taken on a $3 billion 
loan that with interest will be a $6 billion expense. They charge that the 
initiative will mean fewer dollars for essential state services. Further, 
they say 
it's unclear whether the state will ever benefit financially from this 
investment.

"California has the lowest credit rating in the country," said state Sen. Tom 
McClintock, the fiscally conservative Republican from Thousand Oaks. "This 
measure puts us $6 billion further behind."

"It's like a family where the banks have repossessed their car. They're being 
hounded by creditors. They're about to foreclose on their mortgage. And they 
decide to take out another credit card and max it out to give to the stem 
cell 
research foundation."

Backers of Prop. 71 counter that the infusion of money will push forward a 
promising field of research. Because of limitations put in place by President 
Bush in 2001, publicly funded researchers can work with only a small number 
of embryonic stem cell lines and cannot create new ones.

Embryonic stem cells can be coaxed into becoming virtually any cell type in 
the body. For this reason, they are considered apt replacements for diseased 
or injured tissue.

In campaigning for Prop. 71, Berg, Klein and a cast of Hollywood stars that 
included Gov. Arnold Schwarzenegger appealed to Californians' hearts and 
counted on the liberal state's willingness to snub Bush. They promised that 
pouring generous funds into the nascent field would accelerate the discovery 
of treatments or cures for serious ailments such as Parkinson's, diabetes, 
spinal cord injuries and Alzheimer's.

But opponents say that California will be stuck with a hefty bill for a 
narrow 
field of research with only hypothetical potential. If there were money to be 
made, pharmaceutical companies or venture capitalists would have already 
invested, they say.

"If this were such a good deal, you wouldn't have to go to the taxpayers to 
borrow money," said John Moorlach, treasurer of Orange County. "Pfizer and 
Bristol-Myers Squibb would be all over it."

To pay for the initiative, California will sell no more than $350 million in 
bonds a year for 10 years, and direct that money to support stem cell 
research. 
For the first five years, it will pay only the interest on the bonds, 
deferring 
repayment of the principal. After that, the state will pay $200 million each 
year for the next 30 out of its general funds.

The structure is meant to avoid a raid of the general fund right now, while 
the 
state is strapped for money.

But critics charge that it's not clear how California's budget will look five 
years from now either.

"If we can't afford it now, it's not clear to me why we can afford it five 
years 
from now," said Kim Rueben, an economist at the Public Policy Institute of 
California, a nonprofit, nonpartisan research group.

The $200 million per year is small compared to the state's current budget of 
$105 billion. But as an example of what that much money can buy, the budget 
allocated $234 million for the AIDS drug assistance program in 2004.

Klein insists the state is taking a sound risk. He points to an economic 
analysis co-authored by a Stanford health policy professor and consultant. 
The analysis, paid for by the Yes on 71 campaign, laid out three ways in 
which the state will benefit economically.

First, it said the measure will create new jobs and attract high-paid 
scientists 
from out of state. In turn, that will spur consumer spending and increase the 
state's sales and income taxes, the study found. Second, new therapies will 
cut 
medical spending, eventually saving California billions of dollars a year. 
Finally, the study pointed to money that will flow from stem cell patents and 
licenses and that the state will now share.

Klein admits that most medical treatments tend to raise costs. However, 
that's 
not always true -- vaccines save money because they prevent disease.

If stem cell therapies can improve the health of patients, or better yet cure 
them, health care costs will fall, Klein said. "You'll eliminate years of 
treatment and people being in wheelchairs and a loss of work. That's both a 
direct medical savings and a savings for society."

But health economists say it's guesswork whether costs will decline. Health 
care costs have been rising, in part because of expensive new technologies.

"It's very hard to predict," said John Hoadley, a research professor at the 
Health Policy Institute of Georgetown University. "Whether the new costs are 
more than the costs that you avoid ... it's all very speculative."

That Prop. 71 will stir California's economy is also an erroneous assumption, 
said Stephen Shmanske, a professor of economics at Cal State Hayward.

It's one thing if a society decides to invest idle resources, Shmanske said. 
That's new economic activity. But it's quite another to invest when times are 
tight.

"When an economy is up against scarcity, if you spend money and use 
resources one way, it means that you can't spend them and use them another 
way," Shmanske said.

The third potential source of money will come from licensing the intellectual 
property created under the measure. California will receive a percentage -- 
not yet determined -- of money earned through patents or licenses issued as a 
result of the state grants.

It's unknown how much stem cell patents and licenses can bring in. The Yes 
on 71 economic report found that the UC system, Stanford and the City of 
Hope earned only $166 million in royalties from their combined intellectual 
property in 2003. That's less than the annual amount to pay back the stem 
cell 
loan.

Supporters still say they're confident that the initiative will pay off.

"Is the state prepared to make an investment ... of spending roughly $200 
million a year on the chance of being able to produce radical changes for 
disease?" Berg asked. "I look at that and say, 'That's not a big investment,' 
if 
it can possibly bring about the kinds of cures that we're talking about."

But some scientists question the optimism about stem cell research.

Dr. Krys Bankiewicz, a professor at UC San Francisco, has spent his career 
exploring ways to fix a damaged brain. He's all for research, but he was 
annoyed during the campaign to hear the wild enthusiasm about stem cells 
and their potential to cure brain disorders.

It's no simple matter to fix a damaged brain, Bankiewicz said. Take 
Parkinson's, for example, he said. Patients lack the neurotransmitter 
dopamine. But you can't just inject new dopamine-producing cells into the 
brain and expect to cure patients, he said.

A successful therapy would require properly integrating the new neurons into 
the brain's complicated wiring system. And scientists don't yet know how to 
do that, he said.

"For patients' sakes, we shouldn't be saying we'll be curing them any time 
soon," Bankiewicz said. "It's not going to happen in the next 10 to 15 years."


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Judy Silber covers biotechnology and the business of health care. Reach her 
at 925-977-8507 or [log in to unmask]  


 


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