California Clinic Chain Wins It’s Case with the FDA: What Implications Will this Have?

A big event happened this week that may shake up what we all thought we knew about the FDA regulation of autologous orthobiologics. Let’s review what happened and how the ruling may change things. Let’s also review the fascinating and long history of the FDA’s regulation over your own tissues.

What Just Happened?

The court ruling on August 30th by the US District Court (Central District of California) was in favor of the defendant doctors who ran a chain of clinics that processed fat tissue to get the stem cell fraction out (called Stromal Vascular Fraction or SVF). The FDA took the position that digesting the fat to break the cells out of their collagen matrix went beyond what the agency allowed for “minimal manipulation”, making the resultant product a drug that required clinical trials and agency approval. The doctors contended that they were not altering the fat any more than many surgical procedures that were regulated by the state medical board. The judge agreed with the doctors, which could have the effect of blowing up the FDA’s regulatory paradigm for autologous tissues.

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What is Minimal Manipulation?

First, we’re talking about autologous biologics here, which are products made from your own tissues. Nothing in this discussion or this court case applies to someone else’s donor cells.

The FDA drew a line in the sand many years ago to separate what is considered processed tissue (361) and a cell drug (351). As it applies to this case, that manipulation line allowed the processor to do certain minimal things to a patient’s own tissue and have it be “minimally manipulated”. As long as other items like homologous use were true, the agency would generally consider this not to be a drug. This was also linked into part of the 21 CFR 1271.15(b) same surgical procedure exemption, which we will discuss in more detail below.

Around 2017 the FDA began to clamp down on things like digested fat and SVF claiming this was over that line and as such, if a doctor produced this in their office, this was the production of a drug requiring full FDA approvals. The agency, therefore, inspected this California clinic chain and claimed that the SVF they were producing was an unapproved drug product. 

The History of the FDA’s Regulation of Autologous Biologics

The law surrounding the FDA’s position that autologous biologics can be classified as drugs is an interesting story in and of itself. Around 2005, the FDA snuck in a single word change to its 21 CFR 1271 regulations that was only listed in the federal register and would have been missed by all but the most ardent regulatory watchers. This changed the 1271 regs from into “another” human to into “a” human. So before that change, the drug regulations and the concept of minimal manipulation only applied to donor cells (allogeneic), but after the change, the minimal manipulation standard suddenly applied to autologous as well.

The regulatory history of the FDA’s position is worth noting. In order for this type of change to occur, federal agencies would have to have extensive comment and rulemaking. While some of this was done, there was no warning of this single word change. In addition, congress creates the laws and the federal agencies can interpret those laws by coloring within the lines authorized by congress. For this one, the FDA claimed that it was relying on the Public Health Service Act (PHSA), which was a 1970s law that only applied to donor organ transplants and the need to perform infectious disease testing. Hence, for this and many other reasons you’ll see below, several legal scholars believed that a successful challenge to the autologous minimal manipulation rule was inevitable.

Changes to “Regulatory Deference”

Before we get into exactly what the judge found, it’s worth noting that these cases where the regulated challenge the regulator are always hard to win because of the concept of “regulatory deference”. What that means is that judges usually defer to the agency to create and interpret its own rules and rarely do they get into the weeds of whether the agency is correctly interpreting its own regulations. As it was explained to me many years ago, it’s like the government getting spotted 20 points in a 21-point football game. The little guy can win, but it’s very unlikely.

However, that 20-point advantage recently changed with a landmark case on regulatory deference. I had previously blogged on this new test based on a 2019 ruling in a case called Kisor v Wilke. Kisor was mentioned by the judge here in his past decision on the government’s Summary Judgement motion:

” While the Court cites the SSP Exception Guidance for illustrative purposes, the FDA’s interpretation of the SSP Exception advanced therein, specifically that the SVF Process does not fall within the SSP Exception, is not entitled to deference. First, as explained above, the SSP Exception is unambiguous. See Kisor v. Wilkie, 139 S. Ct. 2400, 2414 (2019)”

Then the judge again cited Kisor in his ruling from just this week:

“Further, the SSP Exception is unambiguous, thus there is no need for deference to the FDA’s interpretation. See Kisor v. Wilkie, 139 S. Ct. 2400, 2414 (2019).”

Why is this a big deal? Because Kisor in 2019 blew apart decades of automatic deference to the federal agencies. Basically, it leveled that 20-point advantage a bit.

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The Same Surgical Procedure Exemption

At the heart of this ruling is the judge’s understanding of the Same Surgical Procedure Exemption (SSPE) found at 21 CFR 1271.15(b). That provides that if a doctor takes tissue from a patient and returns it to the patient in the same surgical procedure, then that procedure may be exempt from being regulated as a cellular drug. The agency in this case stated that the SVF procedure wasn’t covered under the SSPE because the cells that came out weren’t the same ones that were back in the patient (after the collagen had been digested). They also discussed that it was their position that the tissue was more than minimally manipulated.

A Science-Minded Judge Likely Moved the Needle in this Case

The other challenge in these cases is that few judges have the science education to want to get into the weeds regarding biotechnology. Hence, again, they mentally defer to what the federal agency is telling them is wrong because doing anything else requires learning the concepts and jargon. However, here, this judge dove in with both feet:

“The SVF Cells are not altered, chemically or biologically, at any point during the SVF Surgical Procedure. There are no genes added to or removed from the SVF Cells during the SVF Surgical Procedure. The SVF Surgical Procedure does not change the size or genetic makeup of the SVF Cells. The procedure does not alter the biological characteristics of the SVF cells, nor does it affect their ability to proliferate.”

That paragraph from this decision shows that he was unafraid to get into the scientific concepts behind the same surgical procedure exemption. Ultimately the judge concludes:

“Unlike manufactured drugs, the SVF Surgical Procedure does not create any cellular or tissue-based product that did not previously exist within the patient.”

Hence, the judge didn’t buy the FDA’s argument that the cells were more than minimally manipulated and were changed by the digestion of the collagen.

The Practice of Medicine vs. Drug Law

Another central issue here is what defines the practice of medicine as regulated by the state medical boards (in this case California), and what is a drug regulated by the FDA? Here the judge states that the definition of the practice of medicine and how a drug is defined by the FDA are very close:

“The Federal Food, Drug, and Cosmetic Act (“FDCA”) defines a drug as any “article,” or component thereof, that is “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease” or is “intended to affect the structure or any function of the body of man or other animals.” See 21 U.S.C. § 321(g)(1)(B), (C), and (D). However, surgical procedures—standard in the practice of medicine—are also intended for the diagnosis, cure, mitigation, treatment, or prevention of disease. When passing the FDCA, Congress explicitly rejected any attempt to “limit or interfere with the authority of a health care practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease within a legitimate health care practitioner-patient relationship. U.S.C. § 396. Indeed, Congress recognized the limitations of the FDA and rejected “any intent to directly regulate the practice of medicine.” Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 351 n.5 (2001).”

Note that the judge brings up that congress has expressly prohibited the FDA from interfering with the practice of medicine. He goes on:

“The line between “drug” and “procedure” is especially muddy when licensed medical doctors enter a patient’s body, extract that patient’s cells, and reintroduce those cells to that patient after some amount of cellular processing. The United States argues that this scenario constitutes the production of FDCA drugs. Defendants argue that this is mere surgery, the exclusive province of the medical practitioners, and not something which the FDCA may regulate.
The Court concludes that neither Defendants’ SVF Surgical Procedure nor its Expanded MSC Procedure are “drugs” within the meaning of the FDCA.”

Here the judge sides with the doctors that processing the patient’s own tissue is the practice of medicine and not creating a new drug. Then there is a serious “wow” in the judge’s take. He throws culture-expanded cells in with SVF as being exempt from FDA regulation! More on that topic can be found below.

The Expanded MSC Procedure

Perhaps the most earth-shattering part of this judge’s fact-finding and conclusions is that the judge considered the doctor’s use of culture-expanded MSCs covered by the same surgical procedure exemption!  That means that this judge placed cells that are grown in a lab for weeks in the same legal category as fat processed in a lab on the same day. How did that work? The judge only focused on the physician’s use of the cells and since a third party was making the cells, the doctor’s use qualified under the SSPE.

Now before anyone begins purchasing cell manufacturing services to culture expand and store cells, realize that the FDA shut down the first third-party lab used by these doctors (see letter to American Cryostem). The doctors have apparently since moved on to another lab, but I suspect that FDA’s next move will be to shut down that lab.

The Death Nell of the Minimal Manipulation Concept as It Applies to the SSPE?

It’s been long considered that the idea of minimal manipulation applies to the SSPE, but here the judge blows that up:

“The SSP Exception does not have any requirement that the HCT/Ps be unaltered before reinsertion into the patient. See 21 C.F.R. § 1271.15(b). Any reference to whether the HCT/Ps are manipulated and/or altered are located in a different, inapplicable, regulation 21 C.F.R. § 1271.10 (discussing “minimal manipulation”).”

“Regardless, the SVF Surgical Procedure does not alter the biological characteristics of the SVF Cells and those cells remain “such HCT/P” that were removed from the patient. There is no evidence that the cells are anything other than autologous cells removed from, belonging to, and returned back to the patient.”

So because the definition of minimal manipulation lives in a different part of the regulation than the SSPE, according to this judge, one doesn’t apply to the other.

Long-term Implications for this New Surprising Ruling?

After speaking with an FDA legal expert, if a physician wanted to use SVF using their own lab in Los Angeles and surrounding communities until this is overturned, that physician would likely be within their rights to do so. This DOES NOT apply to non-FDA approved or cleared devices that automatically manufacture SVF, as the FDA still maintains full control over those device approvals.

Can you use SVF outside of LA? The problem is that this court’s decision doesn’t apply outside of the LA metro area. That’s an important one to understand, as beginning to offer SVF in New York, Florida, or San Francisco would likely result in an FDA challenge and a big legal bill!

My legal expert thinks that it’s likely that the FDA will appeal this to the 9th circuit. If it does so, then it may be a year or more before the issues are settled. Will the 9th circuit also rely on Kisor deference? Will they defer to the fact finder (this judge) who dug deep into the science? There are certainly risks if the FDA loses at appeal, with the current SCOTUS less likely to defer to the idea of federalism and federal agencies in general.

The D.C. Circuit Split Decision

It’s been a decade and a half since I’ve had to deal with the FDA, so until this case came across my desk this week, I hadn’t thought much about our history with the agency. Way back when in 2005, we were culturing autologous mesenchymal stem cells in our own practice and had many of the same legal arguments as found in this case. The FDA disagreed and we did what these SVF doctors did, we took the agency to court. Regrettably, we didn’t win that case in the district court and lost at appeal. We’ve long since moved on from that and have focused our practice and provider network on the types of autologous biologics that the FDA clearly permits.

However, a old Vanderbilt law review article on the limits of federal power that mentioned our case may have telegraphed what happened in this one:

“The D.C. Circuit’s determination that the FDA has authority to regulate the (culture-expanded) Regenexx Procedure as a drug stands on a remarkably thin reed. The court accepted the government’s finding that the stem cells were more than minimally manipulated because substances were added to the cell culture that affected cell differentiation. But the court left open the possibility that future defendants could challenge this point with additional evidence. If providers can show that the culturing process does not alter cells’ relevant biological characteristics, then, like autologous cord blood administration, autologous stem cell therapy should be exempt from drug regulation and subject only to section 361 of the PHSA.”

What’s interesting here is again that the California judge bought the argument that the cells aren’t changed by the SVF enzyme or culture expansion. Is that true? It all depends on how deep you look. On the one hand, from a doctor’s perspective, you could probably show that the cells after culture expansion are basically the same as the ones that were harvested from the patient in terms of their ability to repair or mitigate pain. On the other hand, if we use a big enough magnifying glass, a scientist could show that culture expansion does change the cell surface markers on cells and other characteristics (1). Having said that, as I’ve always said, when handling cells, as a researcher, just about anything will change things like gene expression within cells. For example, simple cutting, chopping, or shaping of transplanted tissue that happens in surgeries every day likely changes some characteristics of the component cells.

It should be noted that the agency never submitted any samples of either the SVF or cultured product for testing and it has missed its chance to do so in this case. Why? Legally, if they appeal, the agency can’t submit any more evidence.

Finally, if this case is appealed and this decision is upheld in the 9th circuit, that would create a circuit split on the issue of autologous cultured cells between the 9th Circuit on one side and the D.C. Circuit on the other. In addition, I haven’t gotten into the other existing decision of the 11th circuit on SVF, which has previously upheld the FDA’s position that it is a drug. Hence, on that issue, there would be a circuit split between the 9th and 11th circuits. Those types of split decisions are the stock and trade of the Supreme Court and our current SCOTUS is no fan of big government.

Will this Change Anything that Regenexx is Doing?

No. Since we believe that it’s more likely than not that this California case will lose at appeal and it will be years before all of this is settled in the courts, we will not be changing anything about what we offer here in the U.S.

The Sad Part About this Decision

On a personal note, given that this case took years because of COVID, one of the defendants, Mark Berman is no longer alive, having himself succumbed to COVID at age 69. I knew Mark well enough to speak on the phone and I know he’s smiling up there, having been vindicated by this district court judge.

The upshot? As I wrote way back when this district court judge seemed not to drink the FDA Kool-aid, this one could change everything we thought we knew. Will the FDA appeal? We will soon know the answer to that one.

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(1) Yang, YH.K., Ogando, C.R., Wang See, C. et al. Changes in phenotype and differentiation potential of human mesenchymal stem cells aging in vitro. Stem Cell Res Ther 9, 131 (2018). https://doi.org/10.1186/s13287-018-0876-3

Chris Centeno, MD is a specialist in regenerative medicine and the new field of Interventional Orthopedics. Centeno pioneered orthopedic stem cell procedures in 2005 and is responsible for a large amount of the published research on stem cell use for orthopedic applications. View Profile

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NOTE: This blog post provides general information to help the reader better understand regenerative medicine, musculoskeletal health, and related subjects. All content provided in this blog, website, or any linked materials, including text, graphics, images, patient profiles, outcomes, and information, are not intended and should not be considered or used as a substitute for medical advice, diagnosis, or treatment. Please always consult with a professional and certified healthcare provider to discuss if a treatment is right for you.

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