Carolina Journal Weekly Report

February 25, 2002

In this issue

Feature 1 - Future of Cloning ‘Exciting’

Ahead of the Curve

Feature 2 - Counties Shoulder Costs

Capital Quotes

Feature 3 - A Question of Quality of Life

Coming Up

On the Cutting Edge


Future of Cloning 'Exciting'
Genetic cures may replace drugs, physician says

Scientists are on the verge of a breakthrough applying genetic therapy to diseases such as cancer and diabetes, making pharmaceuticals obsolete, an expert on cloning says/

"I think drug companies will go out of business, because we will treat genetically," Dr. Assad Meymandi said. "It's so exciting to have the knowledge of what we're going to do the next 10 or 11 years."

A practicing psychiatrist and neurologist from Raleigh, Meymandi touted the advancement and promise of therapeutic cloning at a John Locke Foundation luncheon Feb. 18. He is also a member of the Locke Foundation board of directors.

On the same day that Dolly the sheep-cloner Ian Wilmut spoke at UNC-Chapel Hill, Meymandi explained the science behind the controversial procedure, along with some of its benefits, moral problems, and methodical variations.

Meymandi differentiated between reproductive cloning and therapeutic cloning. Creating a clone such as Dolly requires removing DNA from a female egg and inserting a cell from the body of an animal to create another being. The cell is implanted in the uterus of a female animal, where the cell divides rapidly, growing into a being and is birthed. Meymandi said that type of cloning, especially of humans, "is probably immoral."

However, Meymandi was optimistic about human therapeutic benefits. Meymandi said the process still requires the removal of DNA and transfer of the nucleus. Then certain types of stem cells at the beginning of development are harvested. Living cells and tissues created from the stem cells are transferred to an ailing human, targeting mutated genes that cause disease. Meymandi used the example of former President Ronald Reagan, who has lost his memory to Alzheimer's disease. To cure the disease, Meymandi said, healthy brain cells could be cloned and inserted into Reagan's brain.

"You can grow your own 'anything you want,'" he said.

Meymandi added, though, that cloning needs to be part of "a moral, ethical system of health care."

"For the first time in the laboratory," Meymandi said, "you and I can make life. Does that make you and I God? No."

While saying reproductive cloning shouldn't be allowed, Meymandi admitted that there is evil in the world and that unethical people will practice cloning regardless of whether therapeutic cloning is permitted. He said scientists know that Saddam Hussein is trying to clone himself. Even if that is the case, and despite moral objections, Meymandi said, "I don't think you ought to dissuade Americans from doing therapeutic cloning."

Ahead of the Curve

Gov. Mike Easley said, when he announced cuts to deal with the state's $1 billion budget shortfall, that classrooms would be "held harmless," meaning instruction of students would not be negatively affected. However, several news reports this week revealed that county school systems around the state are considering cutbacks because Easley withheld $209 million in tax reimbursements to local governments. The High Point Enterprise reported that while Guilford County schools aren't under immediate scrutiny, county officials say "sparing the schools from cost-cutting is a short-term situation." According to the Chapel Hill News, Orange County schools face large reductions for capital spending and repairs and renovations. The Fayetteville Observer reported this week that the Scotland County school board approved a resolution to exempt the county from the state's mandated spending "floor," so it won't have to fund schools at the state's per-pupil average. The General Assembly must approve such a move.

Easley continued his lottery promotional campaign last week, meeting with the state board of education and higher education leaders at Salem College in Winston-Salem last week. Easley, however, seems to be the only voice of leadership speaking consistently about a state game as a solution for budget woes. Others, most notably State Treasurer Richard Moore, have made public statements against the idea.

Counties Shoulder Costs
Local leaders try to cope with Medicaid explosion

Gov. Mike Easley somehow soothed psyches Wednesday when he met with mayors from across the state, even though he promised nothing. Easley, in an effort to cope with North Carolina's $1 billion shortfall, is withholding $209 million in various taxes the state collects for counties and municipalities.

However, most local government leaders and managers still think that Easley is keeping money that doesn't belong to the state and that the General Assembly needs to change the way North Carolina administers Medicaid.

"If the state is serious about having 'one North Carolina,'" said Bertie County Manager Zee Lamb, "then that [Medicaid] policy is bad. It's disproportionately adverse to the poorest counties."

The state Medicaid shortfall, which is expected to reach $108 million if the federal government doesn't provide some late relief this fiscal year, compounds counties' financial problems with the program. If the $108 million is realized, the counties' shortfall could reach as high as $18 million.

North Carolina is one of the few states that passes a significant portion of Medicaid costs to its counties. The federal government this year pays almost 62 percent of Medicaid costs in North Carolina. The remainder of the bill goes to the state, which in turn passes 15 percent of its costs to counties.. The portion of total costs counties pay is just under 6 percent.

In addition, North Carolina is only one of four states that requires its counties to foot 100 percent of nonfederal administrative costs associated with Medicaid. County social services employees approve eligibility.

"I think it's fair to say that North Carolina counties are among those that are responsible for the highest costs for Medicaid," said Marilee Sanz, associate legislative director for the National Association of Counties.

Counties complain because the state charges them, but they have no decision-making responsibility over eligibility or costs.

"There's very little [they] can do to reign in cost containment," said Rebecca Troutman, director of research for the North Carolina Association of County Commissioners.

Worse for poor counties is that a higher percentage of their residents are eligible for Medicaid, resulting in higher percentages of their budgets paying for the insurance plan. Twenty-one of North Carolina's 100 counties have at least 25 percent of their populations eligible for Medicaid.

For example, one-third of the populations of both Hertford and Robeson counties were eligible for Medicaid, according to statistics compiled by NCACC. Each county devoted 14 percent of its budget for the program in 2001-02. Hertford, according to its budget, would require 26 cents of its property tax rate to pay for Medicaid; Robeson would require 31 cents. Cost overruns this year will take a larger chunk.

"When it costs our citizens 26 cents and Wake County two (actually three) cents [for Medicaid]," said Hertford County Manager Donald Craft, "you can see how a wealthy county can grow exponentially greater than we can. The way Medicaid is set up penalizes counties like ours."

Hertford County stands to lose more than $261,000 from revenues withheld by Easley, yet the county will receive no relief on its Medicaid overage.

"I imagine they can do it legally," Craft said, "but ethically or morally is another issue."

Capital Quotes

“We have to hang on one more year.”

— Gov. Mike Easley, as quoted by the Winston-Salem Journal, addressing a gathering in Winston-Salem of education leaders from across the state. Easley expected the state to again face budget problems in the fiscal year that begins July 1. He also restated his desire to protect classroom instruction from budget cuts, a position seemingly at odds with his recent cut of $209 million in funds for local governments. Counties pick up a portion of school costs.

“The people who are going to complain are going to complain anyway. You can't turn this stuff off like a light switch. This is something that requires judgment and skillful planning.”

Parks Helms, chairman of the Mecklenburg County commissioners, commenting to The Charlotte Observer on whether the county will put a bond referendum before voters in November despite the weak economy. Helms had previously indicated he will support $215 million in bonds for school construction. Charlotte residents, meanwhile, could also be asked to approve $220 million in bonds for affordable housing and road improvements.

“We're not happy. The county doesn't feel it has improved enough to move up.”

Phyllis Owens, executive director of Columbus County's Economic Development Commission, discussing the county's latest state economic health rating with the Wilmington Star. The state places counties in one of five tiers, which determine the amount of tax credits available for job creation in a county. A $15,000 per-job tax credit may be available per job created in a Tier 1 county; the amount falls as a county's economic health allows higher classifications. The tax credit is only $500 in Tier 5 counties. Columbus's rating was recently upgraded from Tier 1 to Tier 2.

A Question of Quality of Life
CEO challenges state leaders at issues forum

North Carolina has a long way to go if it expects to live up to the dream of the Research Triangle Park when it was created 30 years ago, the CEO of a biotech firm told state leaders at a summit in Raleigh.

"North Carolina is in danger of becoming a victim of its own success," said Jim Mullen, president and CEO of Boston-based biotech firm Biogen. Compared with other leading biotech areas in the United States, such as Princeton, N.J.; San Diego; Cambridge, Mass.; and Baltimore, North Carolina has a lower cost of living. So why aren't current firms expanding or new ones relocating here, Mullen asked.

Mullen said companies have "concerns with quality of life, including school systems that are more bad than good, diminishing infrastructure capacities, and few transportation options" in North Carolina.

Former Gov. Jim Hunt was the host of the Emerging Issues Forum at North Carolina State University Feb. 11-12. Other speakers were U.S. Secretary of Health and Human Services Tommy Thompson, U.S. Sen. John Edwards, Gov. Mike Easley, Reps. Bob Etheridge and David Price, N.C. Secretary of Commerce Jim Fain, N.C. Agriculture Commissioner Meg Scott Phipps, University of North Carolina President Molly Broad and NCSU Chancellor Marye Anne Fox.

Fox announced at the forum the formation of the Institute for Emerging Issues, and Hunt was named chairman of the board. The institute will be based at NCSU's Centennial Campus and will be used to "create ongoing collaborations between leaders in academia, government, business, nonprofits, foundations, and the media," she said. 

North Carolina is home to 140 biotech companies, 72 contract research organizations, and testing companies generating more than $7 billion in revenues. They employ about 32,000 people and have annual payrolls of about $1.6 billion. Their employees pay more than $100 million each year in income taxes.

One-third of the biotech companies in the state are major multinationals such as Biogen, Glaxo SmithKline, BASF, Bayer and Novozymes. Four of the world's largest testing companies - LabCorp, Quintiles Transnational, PPD and aaiPharma - have headquarters in North Carolina. 

Easley listened intently as Mullen offered suggestions on how to restore the vision for the Research Triangle Park. Investments in infrastructure, schools, and higher education focusing on research institutions were all on his list. 

"We must do three things," Easley said, seemingly taking Mullen's counsel to heart. "[We must] invest in science and math education...attract, retain, and invest in talented teachers more closely with industry leaders." 

Easley cited public support for such initiatives by reminding the audience about Smart Start and More at Four successes, and a $3.1 billion bond package voters passed last year to support higher education infrastructure cost.

The state's congressional delegation echoed Easley's remarks. "First we've got to improve our educational system, especially in science and math," Edwards said. "We need to make our entire state fertile ground for research, innovation and the kinds of startups that are driving Research Triangle Park and the Piedmont."

Coming Up

The John Locke Foundation will celebrate its 12th anniversary with a dinner Friday, March 22, at the North Raleigh Hilton. William Kristol, editor of The Weekly Standard and a Fox News Channel contributor, will be the featured speaker.

Widely recognized as one of the nation's leading political analysts and commentators, Kristol regularly appears on most of the major television public affairs shows. Before starting The Weekly Standard in 1995, Kristol led the Project for the Republican Future, where he helped shape the strategy that produced the 1994 Republican congressional victory. Kristol served as chief of staff to Vice President Dan Quayle during the Bush administration and to Secretary of Education William Bennett under President Reagan. Kristol also taught politics at the University of Pennsylvania and Harvard's Kennedy School of Government.

The cost of the anniversary and awards banquet is $30 per person. Reception and registration will begin at 6:30 p.m. Contact Kory Swanson at (919) 828-3876 or [email protected] for more information, or to register for the event.

On the Cutting Edge

Drug Patents

The Food and Drug Administration's mission to promote and protect public health has been subverted by a loophole in the Drug Price Competition and Patent Term Restoration (Hatch-Waxman) Act, experts say. The act was designed to promote generic competition while providing financial rewards for innovative firms that develop new drugs.

Generic drugs are priced 20 to 80 percent lower than the original, saving the public an estimated $10 billion annually. Most top-selling drugs with expired patents have generic versions, up from 36 percent in 1983.

Under Hatch-Waxman, generics were supposed to enter the market after the original lost its 20-year protection, but originator firms have fought it because they lose profits. When companies apply for new patents for existing drugs, the FDA accepts them as valid, thus allowing originator firms to extend monopolies more than two years.

The public pays a high cost even if the FDA allows a monopoly extension of even a year. It's estimated that between 2000 and 2005 a number of drugs with total annual sales of about $100 billion lose patent protection. Given a one-year delay of a generics' entry, with generics taking 50 percent of market share priced at 75 percent of the originals, the delay costs consumers $2 billion annually. Because the generic drug price continues to fall several years after introduction, $2 billion is a considerable underestimate of the cost of delaying their entry.

Some experts believe the best solution is for the FDA to withdraw from the business of protecting patents and concentrate on ensuring the safety and efficacy of the drugs it approves.

Reported in Regulation, Winter 2001.

Race and Infant Mortality

Black infant mortality is more than twice that of whites', according to the Centers for Disease Control and Prevention. And the rate for low-birthweight babies exhibits a similar gap.

Experts assert that low-birth-weights result in lower average I.Q. and achievement test scores, more frequent learning and attention disorders, and a greater likelihood of dropping out before finishing high school.

Professionals contend that better prenatal care leads to healthier births. That, they reason, should reduce the number of low-birthrate minority children later afflicted by learning disorders. Also, better-educated mothers would seek greater prenatal care, thus reducing infant mortalities.

But a curious anomaly has been noticed. The infant mortality rate experienced by black women who are college graduates is higher than that for white women who are high-school dropouts.

The idea that more education about prenatal care would eliminate disparities is a doubtful one because virtually every state now provides Medicaid to low-income pregnant women, with no consequent drop in the incidence of low birthweight or infant mortality for blacks.

In examining the causes of problem pregnancies, medical researchers increasingly study lifetime stress, not just stress during pregnancy. Many experts now conclude that stress causes release of hormones that weaken the uterus, leading to premature delivery or mortality.

The hormone changes can occur over a lifetime and build up from fear of violence, financial worries, or concerns over job insecurity.

Reported in the New York Times, 2-6-2002.




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Locke Foundation receives prior notice and appropriate credit is given.


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