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Braving Medicine’s Frontier

U.S. stem cell researchers fight with uncertain financing and esoteric restrictions. Can the science survive under these conditions?
September 1, 2005

On August 9, 2001, Mathew “Willy” Lensch sat with his wife in their Oregon living room and watched President George W. Bush speak to the nation. Millions of Americans had their TVs on, but unlike most of them, Lensch was, as he puts it, “on the edge of my chair, the rest of the universe ceasing to exist.”

Lensch was finishing his PhD in molecular and medical genetics. His research specialty was a genetic malady called Fanconi anemia, which often kills its victims before they reach adolescence. The disease is caused by the malfunctioning of special cells in the bone marrow: stem cells, the precursor cells that create and maintain the body’s supply of blood cells. Fanconi victims’ best hope for a cure, Lensch believed, lay in re-creating their missing blood cells from embryonic stem cells – stem cells derived from an early human embryo, which are unusually adaptable and changeable. Earlier that year, Lensch had accepted a position with a brand-new stem cell group that is now based at Children’s Hospital Boston, a prominent biomedical research center.

That evening, the president was addressing the nation about embryonic-stem-cell research – which was why Lensch was glued to the TV, watching “with fear and trepidation.” Extracting stem cells from an embryo unavoidably destroys it, and in 1996 the U.S. Congress prohibited the government from supporting embryo-destroying research. But despite this measure, scientists had found legal ways to obtain embryonic stem cells, and now some of the president’s supporters were urging him to outlaw embryonic-stem-cell research entirely. Lensch had switched on the television to find out whether what he believed was his chance to help cure an awful disease was going to vanish (along with his new job).

To his relief, Bush tried to find a middle ground. Arguing that scientists had already created “more than 60 genetically diverse stem cell lines,” the president decided to “allow federal funds to be used for research on these existing stem cell lines, where the life-and-death decision has already been made.” But Uncle Sam would not spend any money on new stem cell lines. With this compromise, Bush argued, researchers would be able “to explore the promise and potential of stem cell research without crossing a fundamental moral line.”

At first, Lensch was relieved, even elated. The administration had crafted regulations that allowed publicly funded research on existing embryonic stem cells and hadn’t called for the banning of privately funded research on new cell lines. “I really thought we might be up and running in a few months,” Lensch says.

Today, that reaction strikes him as naive. Bush’s apparently simple decision to withhold federal money inadvertently created an enormous regulatory maze that few scientists have managed to escape. Four years after the president’s speech, Lensch’s team has not yet been able to begin a full research program. Its story is not unusual: with a few exceptions, private funding sources – philanthropies and businesses – have not stepped into the gap left by Washington’s withdrawal. Nor have research groups been able to capitalize on federal funding for the study of existing stem cell lines, partly because they are fewer in number than Bush thought, and partly because of unexpected patent restrictions.

Worse, Lensch says, the small amount of stem cell research that has been permitted is taking place almost entirely without the benefit of public scrutiny. “When research is tied to the federal government, there’s a whole structure of oversight to make sure that it’s performed for the public good,” he says. “When you cut the tie, it’s the Wild West – there’s no rules.… In the name of preserving morality, the president’s decision has ended up creating moral anarchy.”

Early Start
In November 1998, James Thomson, a developmental biologist at the University of Wisconsin, Madison, announced that he had isolated human embryonic stem cells. (A few days later, John D. Gearhart of the Johns Hopkins University School of Medicine made a similar claim.) The quiet, publicity-shy Thomson eventually found himself on the cover of Time. Little wonder: embryonic stem cells, many researchers believe, will change medicine as dramatically as did antibiotics. But the thousands of press accounts rarely mentioned where Thomson isolated his stem cells, or why he did it there – something that, at least in the short run, may prove almost as important.

To biologists, embryonic stem cells are fascinating entities. After birth, almost every cell in the human body is committed to fulfilling a single function: a red blood cell is always and forever a red blood cell; a neuron is always and forever a neuron. Even bone marrow stem cells can transform themselves into only a few types of blood cells. Embryonic stem cells are different. They form in the first few days after sperm meets egg; about 30 of them cluster on the interior wall of the blastocyst – a hollow ball of about 150 cells that develops around the time the embryo reaches the uterus from the fallopian tube.

These 30 cells – from which researchers derive embryonic-stem-cell lines – are identical, but as the embryo grows they differentiate into the more than 200 types of cells that make up the human body. Not only are harvested embryonic stem cells a powerful new tool for studying disease, scientists believe, but they may lead to a new era of regenerative medicine, in which sick people effectively replace their damaged parts. In theory, doctors should be able to stimulate them when needed to grow replacement tissues and organs – producing new hearts and livers in a petri dish, so to speak.

Thomson obtained his stem cells from embryos created at in-vitro fertilization (IVF) clinics in Wisconsin and Israel. Because IVF frequently fails, doctors use drugs to induce female patients to “superovulate,” producing as many as 15 eggs at once. These are placed into a bath of sperm, creating multiple fertilized eggs. Each egg is allowed to divide, usually into an embryo of six to eight cells. Doctors then insert several embryos through a catheter into the woman’s uterus and hope that one attaches successfully. The rest are usually frozen in liquid nitrogen.

Since 1978, the year the first successful IVF baby was born, U.S. clinics alone have built up a surplus of more than 400,000 frozen embryos, according to a 2003 study by Rand, a nonprofit think tank in Santa Monica, CA. Clinics preserve more than 90 percent of these frozen embryos in case couples want to try for additional pregnancies. About 2.8 percent are donated to research.

After receiving his six- to eight-cell embryos, Thomson grew them to blastocyst stage and then extracted their stem cells, destroying them in the process. He destroyed many embryos, in fact, because most frozen embryos either don’t survive thawing or can’t produce cell lines that will survive for long. Thomson needed 36 embryos to establish his five cell lines. Other researchers have required even more. Researchers at Eastern Virginia Medical School in Norfolk, VA, used more than 100 IVF embryos to create three embryonic-stem-cell lines in 2001.

Because of the U.S. Congress’s 1996 prohibition on using federal money for “research in which a human embryo or embryos are destroyed,” Thomson could not work in his own laboratory, which was supported by the National Institutes of Health and the National Science Foundation. Instead he created a second workplace from scratch, a couple of windowless rooms at the edge of campus, three kilometers from his main lab – “fairly primitive conditions,” as he puts it, “with only the bare necessities.”

Unable to use his own technicians (their salaries were covered in part by federal grants), Thomson did most of the bench work himself, rising before dawn for days on end and going to bed late at night. He funded the research with money from the Wisconsin Alumni Research Foundation (WARF), an independent nonprofit that has sponsored UW-Madison research since 1925, and Geron, a biotech startup in Menlo Park, CA. (Geron also backed Gearhart’s research and that of a stem cell group at the University of California, San Francisco.)

As per Thomson’s agreement with his university, he awarded WARF the basic patents on embryonic stem cells. After a legal dustup, Geron won the exclusive commercial rights to three major potential stem-cell uses. Despite controlling the sole supply of the hottest discovery in cell biology since DNA, WARF was not bombarded by requests for the right to work with Thomson’s stem cell lines. “Scientists questioned whether or not they should risk their career on a field that had so much political and financial controversy around it,” says Andrew Cohn, government and public relations manager at WARF.

Geron could not fund an entire field of research single-handedly, says David Greenwood, the company’s chief financial officer. Nor could it get access to capital through the route of partnering with pharmaceutical companies. Even though it is widely believed that stem cells will ultimately become the center of a huge new medical industry, Geron president Thomas Okarma has said, drug companies so fear today’s controversies that they remain “completely uninterested.” Most venture capital firms are leery, too.

“The administration says it is letting us go ahead, within certain broad guidelines,” says Greenwood. “Meanwhile, there is legislation dropped into every session of Congress that would literally criminalize what we do.” (The current version of the legislation would impose a prison term of “not more than 10 years” on anyone who inserted genetic material into embryo cells, which many researchers would like to do to study the development of particular genetic conditions.)

Even Thomson could not make much headway. “If you do a quick PubMed search on my name,” he says in an e-mail, “you will see from 1998-2001 we published almost nothing. We had little or no access to standard equipment because of the prohibition on the use of federal funds that was in effect at that time, and it severely limited what we could do.”

Then came Bush’s announcement, which Cohn says led “a lot of people” to decide “that they could now go ahead.”

One of them was Willy Lensch.

Patent Problems
From the beginning, Lensch was sure that Bush’s cell lines would not be enough. To begin with, many of them were probably abnormal. The genetic information in eggs and sperm is so often fraught with random errors and mismatches that the resulting embryos are frequently not viable. Embryos from IVF clinics are no exception, so researchers cannot assume that the stem cell lines derived from them are genetically normal.

But even when lines are normal, they degrade over time. Creating enough stem cells for a single lab’s experiments – let alone for distribution to other labs – requires coaxing the cells to divide over and over. Across many generations, the cells accumulate random genetic mistakes. In consequence, Lensch says, “you always need new supplies of cell lines. There’s no escaping it.”

At the time Lensch came to Massachusetts, the National Institutes of Health was compiling a list of stem cell lines created before the president’s speech, all of which were approved for federally funded research. Wanting to work with as many as possible, Lensch and his coworkers contacted stem cell researchers everywhere from San Francisco to Stockholm to Melbourne, asking to borrow samples in the sort of free exchange that has long characterized scientific research.

To Lensch’s dismay, he says, “there were lots of closed doors, lots of nos, lots of no-answers.” Driven by greed (the huge potential commercial impact of embryonic stem cells) and fear (the huge potential for liability), laboratories around the world refused to share data and expertise. A colleague forwarded to Lensch an e-mail from a Swedish scientist who flatly explained that his group was not letting other Swedes work with its stem cell lines, or even conducting experiments with them itself at the time.

An Australian group was willing to make its stem cells available, Lensch says, “but it was during the foot-and-mouth outbreak there.” To export the cells to the U.S., the Australians “had to provide documentation that they were free of agriculturally important infections. And of course nobody in Australia had tested the lines for foot-and-mouth disease,” he says. Six months after joining his new lab, Lensch had only a single line, from Thomson’s collaborator, Joseph Itskovitz-Eldor of the Technion-Israel Institute of Technology, in Haifa.

All the while, he was negotiating for two lines with the University of California, San Francisco (UCSF), another Geron-funded lab. In the past, Lensch says, a researcher who borrowed materials developed by a second researcher usually came back after making an interesting discovery to offer coauthorship of the resulting paper, thus spreading around the glory. As universities have become more intent on exploiting their intellectual property financially, they have begun asking borrowers to sign formal “materials transfer agreements” that spell out what can be done with borrowed materials.

Usually the agreements authorize specific researchers to work with the materials, describe what the materials can be used for, and list the circumstances under which the materials’ creators must be given credit in publications. The UCSF agreement, in Lensch’s view, went further. “To begin with, they could stop your research at any time,” he says. “And whatever I could make with [the two stem cell lines], they would continue to own. In effect, I became an employee of UCSF.”

Lensch eventually obtained both cell lines from UCSF in September 2002. But Harvard University, which is affiliated with Children’s Hospital Boston, is still negotiating licensing terms with WARF, whose stem cell patents cover a wide range of applications. According to Patrick Taylor, chief counsel for research affairs at Children’s Hospital, WARF is protecting its intellectual property with an “unfortunate perseverance” that, in a kind of negative synergy, has coupled with the Bush regulations to impede stem cell research.

WARF’s Cohn denies that the foundation has created hurdles. “Our goal is to distribute the cells as quickly and painlessly as possible for both researchers and us,” he says, noting that some 250 research teams now use WARF lines. “We don’t make money doing this. In fact, we lose money doing this – $1.3 million so far. It’s part of our commitment to moving the science forward.”

But because WARF holds patents so fundamental to stem cell research, Taylor says, it effectively controls much of the field. WARF obtained such rights, Taylor argues, only because the “federal abdication of funding” meant that it had anomalously few rivals. And while the government demands that the researchers it backs minimally restrict their colleagues, most private organizations don’t. So privatizing every aspect of this fundamental new research will lead to “a thicket of conflicting patents” that will make it “extremely difficult to do any research.”

Exemplifying Taylor’s worries are the hundreds of patents, patent filings, and exclusive licenses with which Geron has further locked up prime intellectual property. The company might provoke less complaint if it were a pharmaceutical giant like Merck or Pfizer that can support researchers around the world. But Geron has spent only $90 million on stem cell research since 1995. As Geron’s Greenwood admits, the company can support only a handful of labs, which have free access to its intellectual property. Everyone else is out in the cold.

The result, in Taylor’s view, is a classic instance of the law of unintended consequences: because the federal government won’t support most stem cell research, the work must be sponsored by private industry. But no corporation will support research that it can’t benefit from. The same regulations that open the door for private industry also effectively shut it.

Daley’s Dilemma

Children’s Hospital is near a Boston neighborhood historically full of doctors that is referred to, predictably, as Pill Hill. Children’s has almost a dozen buildings on its main campus and more than 4,000 doctors, nurses, and staff members overall. One of its buildings houses the world’s biggest pediatric research lab.

In an upper-floor wing of another, smaller building is Lensch’s new stem cell lab. To the casual visitor, it looks much like any other biomedical research center. There are long lines of lab benches punctuated by computer screens and white and gray machines. Shelves are crammed with bottles and jars bearing cryptic, hand-scrawled labels. The only slight oddity is that several small rooms in this otherwise tightly packed space are empty of everything but a few boxes and pieces of what looks like discarded equipment. In these unused spaces, Children’s Hospital hopes to experiment with embryonic stem cells.

The separate rooms are a consequence, in part, of George Daley’s conclusion that pushing stem cell research forward would require shifting from federally supported “presidential” cell lines to “nonpresidential” lines – ones that had not been isolated before Bush’s 2001 speech. Daley, who directs Lensch’s research, first arrived at Children’s in November 2003, lured by its offer of a brand-new facility and some startup money. (Until then, he had worked at MIT’s Whitehead Institute for Biomedical Research.) A prominent blood researcher, Daley wanted to unlock the mechanisms of bone marrow diseases like leukemia and aplastic anemia. He quickly saw the potential of embryonic stem cells and won one of the first NIH grants to study them.

As Daley discovered when planning the stem cell facility, “going nonpresidential” meant that he had to ensure that it was not supported by federal money. The rules created endless bureaucratic tangles and drove up costs enormously. Says Erik Halvorsen of Harvard’s Office of Technology Development, which handles licensing on the stem cell lines developed by Harvard researcher Douglas Melton, at first “nobody understood what it meant when you couldn’t use federal funds. Did that mean [the government couldn’t pay for] anything in the lab space? Did that include things down to the level of the individual pipette? What if federally approved and nonfederally approved research were in two adjoining rooms? Did that mean the government could pay up to a certain percentage for things like heating?”

To be “on the safe side,” he says, Harvard created a completely separate facility with brand-new equipment for Melton’s team. Children’s took another route, sequestering its stem cell work in special, isolated rooms – setting up a second laboratory, more or less, inside the first. The tools used by a research group – such as electron microscopes, DNA synthesizers, and centrifuges – can together cost up to a million dollars per scientist. Laboratories typically reduce those costs by sharing equipment among research teams.

But as a practical matter, that won’t work for stem cell research, because most scientific equipment at major research institutions is at least partly funded by the federal government. Inadvertently, Daley says, the president’s decision made embryonic-stem-cell research much more expensive.

But equipment and facilities weren’t the only added costs. To ensure that it was complying with federal guidelines, Taylor says, “Children’s gathered together the senior management from each of the affected areas – finance, intellectual property, sponsored research, compliance, clinical research, research ethics, and administration, together with legal and accounting staff.”

The managers conducted Talmudic studies of the 106 sections of the U.S. Office of Management and Budget’s Circular A-21 that establish the “cost accounting standards” for distinguishing unallowable “facilities and administration costs,” which for Children’s included the heating and janitorial expenses for the stem cell rooms. In the process, Daley says, they ended up “creating an entire parallel oversight system, which sounds easy but, if you’ve ever tried it, is time consuming and expensive.”

As an example, Daley cites the internal registration sheet, common to almost all research facilities, which scientists periodically fill out “to let their institutions know who is doing what.” According to Daley, the lab administrators charged with designing the relevant form for the Children’s stem cell program wanted it to ask scientists to certify that their experiments “were being reviewed by Finance to ensure they were privately funded, had institutional review-board clearance, had clinical-studies application, had obtained their lines through a proper materials transfer agreement, and so on.”

At the top of the form, researchers are asked to describe the purposes of their research. “We’ve had an enormous back-and-forth about how much information to provide,” Daley says. Scientists want maximum flexibility to take advantage of serendipitous discoveries on the lab bench, whereas lawyers want the thickest paper trail possible. With animal experiments, Daley says, standards have been worked out. “Since nobody has worked in embryonic stem cells, we’ve had to set that balance all over again. That’s okay, but now we have no guidance from the federal government. Everybody’s off on their own, wondering if they are doing the right thing.” Designing the registration sheet, he says, consumed hundreds of hours of time.

Despite all the effort invested in untangling the federal restrictions, Lensch says, some questions are still unanswered. “If you have a stem cell line, it’s alive,” Lensch says. “If you break the cells open and extract their RNA, that’s not alive. But it’s a derivative [of the live cell lines], so you still can’t work with it. Now, the data you generate from that RNA – can they be included in an NIH-approved experiment?” If researchers experiment on nonpresidential embryonic stem cells “in a building floating in space over international waters and publish the results, is it complicit for a federally funded researcher to read it? Can an editor or publisher at a federally funded institution publish it? Believe me, we have been wondering that.” Nobody in the group, he says, “wants to end up making license plates.”

Even as regulations upped costs, they shrank the financing pool. Not only has the ban on federal funding closed the coffers of NIH and NSF and created inhospitable conditions for industry, but it has also scared off much private philanthropy. Among those saying no to embryonic-stem-cell research are the American Heart Association and the American Cancer Society.

With many funding sources shut off, researchers must seek support from wealthy individuals and smaller groups, such as the Juvenile Diabetes Research Foundation. In the future, researchers in stem-cell-friendly places like California, Massachusetts, and Wisconsin may be able to draw on special earmarked funds created by state legislatures, though state funding is already raising a new set of legal and logistical questions.

Researchers can cobble together funding from these and other sources, but many at Children’s still bemoan the federal government’s lack of involvement. NIH usually awards long-term, relatively open grants. Unsurprisingly, smaller outfits tend to be more narrowly focused; they typically give short-term grants with specific benchmarks. But in brand-new fields like stem cells, researchers are bound to need more latitude.

More important, Daley says, the federal government sets the rules in the research world. For decades, NIH and NSF have gradually established a set of procedures that all institutions must follow if they are to receive federal research funding. The rules range from the need to obtain informed consent from research subjects to requirements for transparency in record-keeping. When the government suddenly absents itself, Daley says, nobody knows whether the rules still apply and whether they will be enforced.

“If things get worse, the best scientists may simply drop out,” Taylor says. “That would be a tragedy. Who will be left then – the people who want to make headlines cloning babies?”

Made in Korea
“We’ll get through this,” Daley says. “But it’s terribly frustrating having to move at a crawl when the science is so exciting – and when other nations are flying ahead.” In May, Daley learned with a pang that Korean scientists had discovered how to create patient-specific embryonic stem cells – exactly the kind of breakthrough work that he and Lensch want to do in trying to understand genetic blood diseases. “No disrespect to them,” Lensch says, “but I couldn’t help thinking that we could have done that.” He sighs. “I really do think that we could’ve done that if we’d had the chance.”

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