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Wellspring of Hope—and Lawsuits


Wellspring of Hope—and Lawsuits

January 16, 2020

This article originally appeared in Goldberg Segalla’s Product Liability Playbook. Read the issue here.

The stem cell’s reputation as a cure-all creates product-liability concerns.

They’re not much to see. Greatly magnified, some look like old Nerf balls—round, soft, and spiky. But stem cells are heralded as the be-all, end-all, and cure-all for every human condition from disease to aging, and there’s an ongoing tug of war between those who would exploit their promise for profit and the gathering forces that would rein them in—including the U.S. Food and Drug Administration, which has sought to increase oversight and enforcement of the stem-cell industry.

In June 2019, a Florida federal court entered a permanent injunction against U.S. Stem Cell Clinic and U.S. Stem Cell Inc., requiring an ex-manager of the former, Theodore Gradel, to notify the FDA if he intends to re-enter the biologics industry and to comply with any corrective actions the FDA orders. A 2017 FDA inspection found U.S. Stem Cell was administering its stem-cell product intravenously or by other means in purportedly treating an array of serious diseases or conditions, including Parkinson’s disease, amyotrophic lateral sclerosis, chronic obstructive pulmonary disease, heart disease, and pulmonary fibrosis.

The FDA never approved the biological products U.S. Stem Cell Clinic had manufactured for any use. The FDA cited U.S. Stem Cell for its failure to establish and follow appropriate written procedures to prevent microbiological contamination of products, which puts patients at risk for infection. The agency issued U.S. Stem Cell a warning letter in 2017 for marketing stem cell products without FDA approval and for significant deviations from current good manufacturing practice requirements.

Also in 2019, in April, the New York state attorney general filed suit against Image Plastic Surgery, Park Avenue Stem Cell, and a doctor named Joel B. Singer for allegedly engaging in fraudulent and illegal advertising regarding its stem cell procedures. This stem cell clinic markets adipose (fat) stem cell injections for a variety of health conditions. Cell Surgical Network owns Park Avenue Stem Cell. Cell Surgical, which has over 100 stem cell clinics across the nation, is facing a federal lawsuit and a number of patient lawsuits of its own.

According to the New York attorney general’s complaint, the New York defendants’ website led patients to believe that by undergoing their stem cell procedures, they were part of an “FDA-approved,” patient-funded clinical trial. But the FDA does not approve the types of preliminary trials touted on the site, and most clinical trials do not receive funding from patients.

Other misleading aspects of the website included testimonials from National Football League player Darrel Reid and radio show host Curtis Sliwa, founder of the New York City volunteer citizen safety-patrol force called the Guardian Angels. Available scientific evidence failed to back the claims Reid and Sliwa made, and the defendants failed to disclose that both men received free treatments in exchange for their testimonials.

The attorney general’s complaint seeks to permanently enjoin the defendants from engaging in the allegedly fraudulent, deceptive, and illegal acts, and practices, and directs the defendants to render an accounting of the name, address, and money received from each former and current customer. It also directs the defendants to make full monetary restitution and pay damages to all injured persons or entities; produce an accounting of profits and disgorge all profits resulting from the alleged fraudulent and illegal practices alleged herein. And it directs defendants to pay a civil penalty to the state of New York of up to $5,000 for each violation of state business law; awards the plaintiff additional costs of $2,000 against each defendant pursuant to state Civil Practice Law and Rules; and grants such other and further relief as the court deems just and proper.

Although this lawsuit is still pending, the message is that clinics can face legal ramifications from the FDA, the FTC, state attorney generals, state medical boards, patient lawsuits, attorneys investigating the clinics in anticipation of certifying class actions, and more.


Stem cell experimentation harkens back to the 1960s. It was then that two scientists, Dr. James Till and Dr. Ernest McColluch, discovered injecting bone marrow cells into mice caused the mice’s spleen cells to multiply and grow. From there, stem cell uses in regenerative medicine proliferated.

What caused the stem cell industry to explode, and the reason we hear so much about it today, is because modern science isolates and generates pluripotent stem cells. Pluripotent stem cells are “master” cells, which can theoretically produce any cell or tissue the body needs to repair itself. Pluripotent stem cells can also self-renew, meaning they can perpetually create more copies of themselves. This is significant because not all stem cells are pluripotent. Some stem cells can only be one kind of cell or tissue. But these master cells can make cells from all layers of the body.

Of course, with any promising scientific advancement comes the opportunity for profit— and for exploitation. Some providers market stem cell treatments as regenerative therapies for cosmetic procedures and serious medical conditions without FDA review or approval.

In many cases, there is no evidence to support these providers’ claims. Without FDA or other regulatory oversight, patients could be susceptible to unsafe and expensive treatments, as they are often not covered through insurance. Since these products and treatments are widely available through stem cell clinics, hospitals, chiropractors and doctors, there are many avenues for contaminated treatments or unscrupulous practitioners to harm the general public.

As a remedy, the FDA sought to increase oversight and enforcement of the industry. The FDA regulates human cells, tissues, and cellular and tissue-based products, or HCT/Ps. As the FDA considers stem cell products to be HCT/ Ps, it regulates them under the Public Health Service Act.

The Federal Food, Drug, and Cosmetic Act could also regulate HCT/Ps as biological products, drugs, or devices that require pre-market approval. Such products must be studied in human subjects under an investigational new drug, or IND, application and approval under a Biologics Licensing Application. The FDA also reviews how each product will be manufactured to ensure the product’s safety, purity, and potency.

In November 2017, the FDA announced a comprehensive policy for HCT/Ps involving regenerative medicinal products and novel cellular therapies. The policy involves certain provisions of the 21st Century Cures Act, including establishing a legal threshold for when a product is subject to FDA premarket approval. As part of its announcement, the FDA informed stem cell firms and providers about its enforcement discretion until November 2020. This gives stem cell treatment providers and manufacturers time to comply with the new premarket approval policies. However, products that raise safety concerns, even before 2020, will trigger FDA action.

On November 29, 2018, the FDA issued a warning letter to Genetech, a company that processed umbilical cord blood into unapproved human cellular products for allogeneic use, and subsequently distributed by Liveyon, LLC. The FDA cited Genentech for marketing stem cell products without FDA approval and for significantly deviating from current Good Manufacturing Practices (cGMP) and current Good Tissue Practices (cGTP) for manufacturing HCT/Ps.

The FDA indicated Genetech’s violations could have led to microbial contamination, which potentially caused serious blood infections in patients. The FDA’s warning letter cited 19 violations, including deficient donor-eligibility practices; uncontrolled environment; unvalidated manufacturing processes; lack of defined areas or a control system to prevent contamination and mix-ups; lack of control over the components used in production; and failure to establish and implement quality control systems and processes.

Genetech voluntarily recalled its product, and suspended shipments, pending resolution of the FDA investigation. However, the FDA warned Genetech that failure to take corrective action and cure its deficiencies could result in regulatory action, including seizure and/or injunction.

As in Genetech’s case, where the company is defunct, and its insurance policy is likely insufficient to settle claims with plaintiff-patients, attorneys all over the country are generating class actions against providers who administered contaminated stem cell infusions or injections under theories of medical malpractice or product liability.

Another example is StemGenex, an operator of a La Jolla, California, clinic that received warnings from the FDA that its stem cell treatments were illegal. Although the clinic filed for bankruptcy in September 2019, they still face a class-action lawsuit in San Diego federal court by several former customers who claim they were misled by its advertising and marketing.

In addition to ensuring FDA compliance to avoid regulatory consequences, companies should remember that, without FDA approval, they cannot assert any bars to product-liability claims and consequently expose themselves to an entirely other area of litigation.

Even the most well-intentioned could face FDA scrutiny or looming litigation. Recent FDA warning letters and lawsuits provide insight as to how companies and providers can minimize the risk of regulatory noncompliance and product-liability litigation.

In December 2018, the FDA sent letters to a number of stem cell product manufacturers and treatment providers. These letters underscored the FDA’s current policy and encouraged reaching out to the FDA well in advance of November 2020 to determine whether their products were subject to premarket approval requirements.

Stem cell providers would do well to heed the FDA’s guidelines and bring their companies into compliance immediately. However, FDA regulations are not the only concerns.

The Product Liability Playbook is collaborative effort of Goldberg Segalla’s Product Liability practice group examining the latest practices, emerging developments, and influential court decisions in product liability law. View our most recent issue.