Back in late August, Liveyon leader John Kosolcharoen pleaded to federal charges on stem cells.
What was Liveyon?
Liveyon was a splashy umbilical cord stem cell supplier company. I don’t know if the company is still active now.
One of its core products ended up sending dozens of people to the hospital due to contamination with E. coli and other pathogens.
Many who received the product became septic. Later some of these customers sued and I believe there were settlements. I never saw much detail about that side of things though. Perhaps the reason is that there were confidentiality agreements.
Many questions remain about this whole incident.
For example, how much money did Liveyon make from its customers? The federal case on stem cells with the guilty plea has provided some answers.
Kosolcharoen gets 3 years
The DOJ just put out a statement on Kosolcharoen’s sentencing for felony distribution of an unapproved drug. The drug here was marketed as umbilical cord stem cells.
The statement reports that the Liveyon leader gets three years in prison.
He is already serving time for a separate case related to healthcare fraud.
The feds haven’t successfully put anyone behind bars for stem cell crimes, at least not for a very long time. Last year a man received more than 200 years prison time at the state level for stem cell activities.
Liveyon made 10s of millions; how about other, still-active firms?
The DOJ statement also said that Liveyon made $21.6 million from customers just in two years. It’s a big number and this is just one firm.
Many stem cell manufacturers and clinics may be still making similar amounts of money from customers. In some cases probably illegally.
Most clinics do not advertise their financials. What data that are out there including surveys from here on The Niche indicate that stem cell therapy cost is often about $10,000 per customer. The cost of stem cell treatments in the U.S. is about $5,000-$10,000 a pop, but many customers get more than one injection. Keep in mind that the “therapy” here is unproven and has risks.
The profit margin is high so let’s say a clinic makes $7,000 profit on that $10K. If the clinic has a few hundred customers per year, then over just 2-3 years they could make many millions in profits. The numbers get much larger if you think about things collectively with perhaps as many as 2,000 clinics in the U.S. There are also dozens of related firms like suppliers that don’t inject patients but still profit.
Some clinics charge far higher prices. For example, Docere Clinics prices start at $25,000.
Getting back to Liveyon, how much, if anything, will past customers get via the DOJ action? Is there any money left?
A restitution hearing is set for Dec. 3.
Does this case mean more action on hundreds of other clinics?
Multiple state and federal agencies were involved in this case. Since they won, will they do more?
Does this prison sentence mean anything for the huge number of clinics, supplier firms, and their operators?
The FDA has been more active this year in terms of its volume of warnings to biologics firms. The agency also just won a big lawsuit on adipose cells.
In addition, we’ve seen state AGs take more action on unproven stem cells and even prevail. For example, the Georgia AG is seeking more than $17 million in just one stem cell case.
All of these trends could mean more is to come. Yet admittedly I’ve been over-optimistic in past years about authorities doing more about the stem cell clinic problem.
For example, in my own state of California, officials have done almost nothing despite this state having the most unproven clinics in America. Where’s the California AG’s office on all of this? Will U.S. Attorneys do more? There was this quote from the DOJ press release on Liveyon:
“Exploiting the hopes of patients suffering from serious illnesses is not merely greedy, it’s cruel,” said U.S. Attorney Martin Estrada for the Central District of California. “My office will continue to aggressively prosecute those who take advantage of victims’ fears and anxieties to line their pockets.”
Even if state or federal officials don’t increase their activity in the stem cell clinic space, could prison time for one or a few people (if you think more charges may be coming for others) in the clinic sphere be a deterrent? It does send a stronger message than an FDA warning or untitled letter.
I have to say this feels cathartic. I worked at Liveyon and rose all kinds of red flags before the FDA ever even came. While they did give me some funds to redesign the manufacturing process to be closed container, it became clear that they were just trying to exploit the loopholes in the law to make as much money as possible and appease anyone they felt they needed to in order to do that. Of course, John was “smarter” (per his own words) than all of us, but just not smart enough to stay out of jail.