INSIGHT: FDA’s Aggressive Enforcement Against Stem Cell Companies Starting to Ripen

June 27, 2019, 8:01 AM

Earlier in 2019, we warned stem cell companies of the Food and Drug Administration’s longstanding—and increasing—interest in regulating developers of stem cell products.

In light of the FDA’s efforts, the Southern District of Florida has just enjoined a stem cell clinic from injecting patients with a stem cell product that originated from the patients’ own adipose tissue.

The injunction follows a June 3 decision, on summary judgment, that the clinic’s activity violated the federal Food, Drug, and Cosmetic Act (United States v. US Stem Cell Clinic LLC). This decision is a striking example of how aggressive the FDA will be in asserting itself over the stem cell industry and is a stark warning for stem cell companies.

Stem cell based products are regulated as “human cells, tissues, and cellular- or tissue-based products” (HCT/Ps). Since January, the FDA has sent warning letters to another stem cell clinic, a manufacturer of products derived from umbilical cords, and 20 unidentified manufacturers and health care providers. The FDA has focused its regulatory efforts on stem cell clinics but intends to regulate other regenerative medicine products following a period of “enforcement discretion.”

The Recent Decision

On May 9, 2018, the FDA sued US Stem Cell Clinic in the U.S. District Court for the Southern District of Florida. The challenged procedure involved removing patients’ adipose tissue, extracting stromal and vascular stem cells known as the stromal vascular fraction (SVF), and inserting the extracted SVF into those same patients.

US Stem Cell argued that this procedure fell within the regulatory exception for removing and reinserting HCT/Ps in a single surgical procedure, and that the procedure was subject to the lighter regulation of HCT/Ps intended for homologous use.

On June 3, Judge Urusla Ungaro ruled in favor of the FDA. The court held that the FDA regulations were ambiguous as to whether the situation before her was considered a single surgical procedure: Human tissue was removed from the patient, cells were extracted from that tissue, and those cells were reinserted into the patient.

The FDA argued that the surgical procedure exception required that the removed HCT/P be reinserted in the same form and, because the isolated SVF was no longer the adipose tissue that had been removed from the patient, US Stem Cell’s procedure was not within the exception.

The court accepted the FDA’s interpretation of its own regulations under the doctrine of Auer deference, which is often cited by courts to uphold agency actions. The court therefore held that US Stem Cell’s practices were not exempt from FDA regulation as involving the removal and implantation of HCT/Ps during a single surgical procedure.

The court also accepted the FDA’s argument that the SVF was not intended for homologous use because treatment of disease differed significantly from the natural function of naturally occurring SVF and the adipose tissue from which it was extracted.

Because it was not intended solely for homologous use, and was intended for use treating disease, the court determined that the SVF was a “drug” under the Federal Food, Drug, and Cosmetic Act. Therefore, it was subject to the full extent of regulation by the FDA, which would include extensive pre-approval requirements. The court accordingly held that the SVF was adulterated and misbranded under federal law because it was not manufactured according to CGMP and it did not provide instructions for safe use by a lay person.

Finding a reasonable likelihood that US Stem Cell would continue to violate U.S. law, the court held that the FDA was entitled to an injunction. On June 25, the court ordered US Stem Cell to cease isolating, processing, or distributing SVF until the FDA finds it in compliance. US Stem Cell has said that it would no longer offer the adipose/SVF procedure. An appeal is still possible, however.

What Does This Mean for Stem Cell Developers?

Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, called the court’s decision “a victory for the FDA’s work to stop these bad actors and to protect patients.”

This decision, however, was not a total victory for the FDA. In particular, the court’s description of the regulation as “ambiguous” may hinder future efforts to enforce the regulation should the U.S. Supreme Court overturn Auer in Kisor v. Wilkie. Nevertheless, the trend of decisions suggests that courts may take a broad view of FDA regulatory authority over stem cell products. That US Stem Cell was not able to settle the case should also worry regenerative medicine producers.

Stem cell clinics should prepare themselves for enforcement action by the FDA. Yet the FDA has also made no secret of its desire to regulate other regenerative medicine products. The FDA’s stated period of enforcement discretion will last until November 2020. Producers of regenerative medicine should evaluate their products and ensure that they are in compliance by then.

The FDA sued another stem cell clinic the same day it sued US Stem Cell. (United States v. Cal. Stem Cell Treatment Ctr. Inc.) That case is scheduled to be tried on Oct. 1, 2019, in the U.S. District Court for the Central District of California.

Regenerative medicine producers should keep a wary eye on this trial to see if the FDA will be as successful before jurors as it has been before judges. They should also pay attention to the Supreme Court’s forthcoming decision in Kisor to learn how much deference courts will give FDA in future enforcement actions. Nevertheless, prevention is better than a cure, even when that cure is regenerative medicine. It’s time for the the regenerative medicine industry to take stock of their product lines and, if necessary, prepare for a legal battle.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Chad Landmon is a partner at Axinn, Veltrop & Harkrider, LLP, where he chairs the firm’s FDA and Intellectual Property Practice Groups and regularly works with companies developing drugs, biologics and regenerative medicine and human tissue products. Jonathan Knowles is an associate at Axinn.

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