If you are in the business of providing autologous stem cell transplants during the same surgical procedure for therapeutic purposes, the next couple of months are going to be very consequential for you because of the decisions in the two big cases in the field.

The appeal of the US Stem cell case is now under consideration by the appellate court. Oral argument was held on January 13th. By some accounts, the judges gave the government a hard time. But you can judge for yourself. Here is a link to the 30-minute oral argument.

https://www.ca11.uscourts.gov/oral-argument-recordings?page=1 (its on page 2)

I have always thought that the FDA was in the wrong on the basic issue of whether under its regulations, MSC or SVF same surgical procedures were regulatable under the FDA’s new drug. And that’s for a pretty simple reason. I asked the FDA several times when I was pondering whether to issue what I think might have been the first opinion letter for a facility back in the early 2000s. I was assured a couple of times by different FDA personnel that as long as it was all done in the same surgical procedure (which precluded meaningful expansion/culturing of the cells), the FDA had no jurisdiction over the procedure.

But alas, things changed with the proliferation of these clinics and the increasingly shall I say aggressive advertising engaged by some. The FDA tried to reinterpret its position and tried to amend the regulations with a clever one-word change which it argued made it all subject to the New Drug laws. Since that time, there have been numerous warning letters, and of course, the final FDA’s guidance documents explaining why when a doctor removes a body part and reimplants it, somehow that body part gets transformed into an FDA regulatable drug which cannot be put back into you unless and until the FDA approves testing with other people whose more or less similar body parts are safe to put back into those other persons and does something helpful.  I felt that could only make sense to a regulator, bench scientists, or people who can’t see the forest for the trees.  But that’s just my opinion.

On the other hand, the feds and the states have what I consider to be a nasty doctrine called judicial deference to administrative agencies. It is what it sounds like, and it is a big reason why many complain about the power of the administrative state. To lawyers like me who practice before administrative agencies and/or challenge administrative findings in court, it is always an uphill and frustrating battle. Frankly, it is not a fair fight. And thus, despite believing that the FDA was wrong, under judicial deference to administrative agencies’ determination of the meaning of their own regulations, I thought the FDA would prevail in the US Stem Cell case and in the California case as well.

However, in the last few years, the increasingly conservative Supreme Court has taken notice of the issue, and slowly, a few judges starting writing dissents complaining about it. One or two of them have started to call for the elimination of the whole deference to administrative agency program (and here like in pandemic law, Justice Gorsuch is leading the charge).  But in the summer of 2019, the Supremes limited judicial deference to an agency’s interpretation of its own regulation to cases where the regulation is ambiguous. That’s a start but didn’t go far enough for the vocal minority.

That decision came a month after the district court in the US Stem Cell case issued its summary judgment ruling granting the FDA’s request for a permanent injunction on the grounds that the FDA law and regulations make SVF (stromal vascular fraction) a drug, and that was in part based on the fact that the FDA said so in its Guidance documents, in other words, judicial deference to the all-knowing (or at least all-powerful) FDA.

You all know by now that California District Judge Jessie Bernal took a different view and held that as long as the SVF removed was the same SVF reimplanted that it would not be subject to FDA oversight under the SSP (same surgical procedure) exemption under 21 CFR 1271.15, or at least so he thought and expressed in his opinion denying summary judgment.

Well folks, on Tuesday, January 26, 2021, the FDA’s injunction trial will start against Cell Surgical Network. All the pre-trial paperwork has been on file for many months.  It seems like the trial will take place by Zoom, but that’s more of an assumption on my part since I have not seen anything official about that in the docket. Since the paperwork is already on file (including the parties’ proposed findings of fact and conclusions of law), and because the judge has already ruled on the core issue, I wouldn’t expect him to take too long to issue his decision. I would say inside of 30 days, maybe 45 at the latest.

There is another factor that might propel the judge to issue a quick decision, namely the fact that the Eleventh Circuit Court of Appeals will be issuing its decision on the US stem cell case in the next couple of months. District Judge Bernal may want to give his views on this core issue before the appellate court does and might prefer that the appellate court reacts to his decision, rather than the other way around, given the fact that his is the “inferior” court.

If one of the two court cases resolve in favor of the stem cell transplanters, of course, look to a resurgence of these facilities offering and further aggressively advertising of these services.  That will lead to further action by the state AG’s against these facilities under state consumer protection laws, and possibly by the FTC, though it has not been a significant player in the space. I would guess the FTC is allowing the FDA to clean-up the field via the warning letters.  If both stem cell transplanters lose, then the field will just stick to the new HCT/P’s being used like bone marrow and other more exotic products which are a half step ahead of the FDA (for now).  Either way, I do not see any major restriction on the field, in the short to medium term, and as suggested, I think things could open-up big time if one or both decisions hold that these same surgical procedures are not regulatable by the FDA, But (and there is usually a but), even if that happens, that might just switch the battle to the medical boards, which is probably where the fight should have always been.   And on and on it will go.

Rick Jaffe, Esq.