Amends the Public Health Service Act to require the Secretary of Health and Human Services to develop techniques for the isolation, derivation, production, or testing of stem cells, including pluripotent stem cells that have the flexibility of embryonic stem cells (whether or not they have an embryonic source), that may result in improved understanding of or treatments for diseases and other adverse health conditions, provided that such techniques do not involve: (1) the creation of a human embryo or embryos for research purposes; or (2) the destruction or discarding of, or risk of injury to, a human embryo of embryos other than those that are naturally dead. Requires the Secretary to: (1) provide guidance concerning the next steps required for additional research; (2) prioritize research with the greatest potential for near-term clinical benefits; (3) take into account techniques outlined by the President's Council on Bioethics and any other appropriate techniques and research; and (4) require assurances from grant applicants, in the case of research involving stem cells from a naturally dead embryo, that no alteration of the timing, methods, or procedures used to create, maintain, or intervene in the development of a human embryo was made solely for the purpose of deriving the stem cells. Sets forth reporting requirements. Authorizes appropriations.

Directs the Secretary to enter into a contract with the Institute of Medicine to conduct a study to: (1) recommend an optimal structure for an amniotic and placental stem cell bank program; and (2) address pertinent issues to maximize the potential of such technology.