When the fat stem cells hit the fire, will clinics sued by FDA opt to stop soon?

Will the adipose stem cell clinic firms facing permanent injunction suits by the FDA — U.S. Stem Cell Inc. (USRM) and California Stem Cell Treatment Center (CSCTC)/Cell Surgical Network (CSN) — cool it in the sense of voluntarily shutting down their commercial fat stem cell injections of customers soon pending the outcomes of the suits? Or will things heat up further?

In the interview I did last week with Patti Zettler she mentioned the possibility of a voluntary stop by the clinics. The more I think about it and read other things out there including a helpful piece on this situation by attorney Richard Jaffe, it seems like this is the most immediate question today related to this situation. Jaffe’s piece paints a pretty difficult picture for USRM and CSCTC/CSN. It seems like the companies are stuck between a rock and a hard place. So, what are they going to do?

Jaffe discusses potential factors for the two firms in favor and against shutting down the stem cell offerings, starting with those in favor of the firms stopping: “The FDA can seek a preliminary injunction barring treatment pending the outcome of the case” and “Potential criminal prosecution.” Keep in mind this is somewhat hypothetical at this point, as to the latter possibility, Jaffe lays out how this might unfold and possibly even end up in what he calls “Felony Land”. He writes that the felony possibility would hinge in large part on intent and he continues:

“Based on the operators’ prior receipt of the warning letters in late summer 2017, and more importantly, the fact that the operators are now being charged with FDA violations in a civil action, well that goes a long way towards proving they had intent or knowledge that what they are doing is illegal.”

If Jaffe’s right, that’s a big risk for USRM and CSCTC/CSN to take on if they opt not to cease doing what the FDA wants them to stop. Of course, Jaffe could be wrong. We’ll see soon how it plays out. One point of clarification on the above Jaffe quote is that to my knowledge based at least on what’s in the public domain, CSCTC/CSN has not yet received an actual warning letter, although the 483s on their inspections were notable.

Jaffe also mentions the relevance of the past USA vs. Regenerative Sciences case:

“…when the FDA filed a permanent injunction action against Regenerative Sciences and its physician owner, Chris Centeno, he decided to stop treating patients with his expanded cell, stem cell procedure pending the outcome of the case. Turned out he made the right decision since he lost both at the district and appellate court levels. I suspect that no criminal charges were brought against him in no small part because of that decision.”

I asked attorney Andrew S. Ittleman, who was counsel for Regenerative Sciences in the case, for his take on Jaffe’s point and about the relevance of the USA vs. Regenerative Sciences to the new suits:

“Regarding the Regenerative Sciences case, there was never a risk of criminal prosecution. Keep in mind that that case started more than 10 years ago, and at that time there was virtually none of the authority we have today defining the scope of FDA’s jurisdiction or the meaning of the terms in the Part 1271 regulations. That case is still instructive though, mainly because it reveals how unwilling the courts can be to wade into a technical dispute between a federal agency and a regulated business. Keep in mind that the government’s motion for summary judgment was granted and Regenerative’s counterclaims were dismissed before discovery even began! In matters like these, where the case is based on concepts which have been delegated by Congress to FDA and which the government describes as impacting the public health, expect the courts to defer to the agency and keep the litigation brief.”

Getting back to Jaffe, he goes on to list those factors he feels might favor the firms not choosing to shut down stem cell offerings at this point:

“Factors weighing for not closing down pending the end of the case:

1. There’s been no decision by a judge yet, and everyone is entitled to present a defense.

2. Their case is different from Chris Centeno’s case in the following ways: ____________,_______,______ (the defendants will have to fill in the blanks.

3. These folks are very, very motivated to seek vindication. Both Berman and Comella have been quoted in the stem cell press as expressing a high degree of motivation and belief in the righteousness of their actions, and caving-in just might not be in their DNA.

4. And here is the biggest factor and the consideration which could carry the day if they decide not to close down pending the outcome of the case:

Both operators have networks of physicians or franchisee physicians providing stem cell treatments throughout the country. (And that’s a big part of the reason why the FDA chose to go after these two first)….One way or the other, there might be some collateral legal/liability issues between the operators and their networkees.“

With all of this in mind, what happens next?

Jaffe has an overall prediction, “Having defended medical mavericks for a long time, my guess is that at least one of them (and probably both) is going to stay open, but we’ll see. It would be hard to overestimate the impact of these cases as they wind their way through the courts.”

Jaffe didn’t mention the additional possible considerations for USRM in deciding what to do based on the fact that it is a publicly-traded firm, which makes a big difference. Jaffe also could have mentioned that USRM itself disclosed it was subpoenaed by the SEC recently, which doesn’t exactly help lower the pressure on the firm.

Will one or both of these firms (including potentially CSN’s entire network of clinics) decide to stop taking customers perhaps even as early as in the coming week? The fact that we are even discussing this as a possibility shows just how different the stem cell clinic arena is today than it was just a week or two ago prior to the new FDA suits.