Stem Msj FDA

IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, ) Civil Action No. 1:10-CV-01327-RMC)

Plaintiff, ))

v. ))

REGENERATIVE SCIENCES, LLC, et al., ))

Defendants. )

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Plaintiff, the United States of America, pursuant to Fed. R. Civ. P. 56 and LCivR 7(h),

hereby moves for summary judgment in the above-captioned matter on the ground that there is no

genuine dispute as to any material fact and plaintiff is entitled to judgment as a matter of law. In

support of this motion, plaintiff relies upon its Memorandum of Law in Support of Summary

Judgment, its supporting Declarations, and Plaintiff’s Statement of Material Facts, attached to this

motion.

Wherefore, Plaintiff respectfully request that its motion be granted and summary judgment

be entered in its favor.

DATED this 7 day of January, 2011.th

Respectfully submitted,

TONY WESTAssistant Attorney General

ANN M. RAVELDeputy Assistant Attorney General

Case 1:10-cv-01327-RMC Document 19 Filed 01/07/11 Page 1 of 64

Of Counsel:

MARK B. CHILDRESSActing General Counsel

RALPH S. TYLERAssociate General CounselFood and Drug Division

ERIC M. BLUMBERGDeputy Chief Counsel, Litigation

PAIGE H. TAYLORSenior CounselFood and Drug Administration10903 New Hampshire Avenue Silver Spring, MD 20993-0002301-796-8720

EUGENE M. THIROLFDirector

/s/ PERHAM GORJITrial AttorneyOffice of Consumer LitigationCivil DivisionU.S. Department of Justice450 Fifth Street, N.W.Washington, D.C. 20001Phone: 202-353-3881Fax: [email protected]

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mailto:[email protected]



UNITED STATES OF AMERICA, ) Civil Action No. 1:10-CV-01327-RMC)

Plaintiff, ))

v. ))

REGENERATIVE SCIENCES, LLC, et al., ))

Defendants. )

MEMORANDUM OF LAW IN SUPPORT OFPLAINTIFF’S MOTION FOR SUMMARY JUDGMENT


TABLE OF CONTENTS

Page(s)

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATUTORY AND REGULATORY FRAMEWORK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

I. THE FDCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

II. THE PUBLIC HEALTH SERVICE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III. THE HCT/P RULE: 21 C.F.R. PART 1271. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

I. THE DEFENDANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

II. DEFENDANTS’ CULTURED CELL PRODUCT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

III. PRIOR WARNINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

I. STANDARD FOR SUMMARY JUDGMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

II. DEFENDANTS ARE VIOLATING THE FDCA BY CAUSING THE ADULTERATION OF THE CULTURED CELL PRODUCT. . . . . . . . . . . . . . . . 17

A. Defendants’ Cultured Cell Product is a Drug Subject to the FDCA. . . . . . . . . . . 18

1. The Cultured Cell Product is Intended to Treat Disease and to Affect the Structure and Function of the Body. . . . . . . . . . . . . . . . 18

2. The Cultured Cell Product Cannot Qualify for Regulation Solely Under 21 C.F.R. Part 1271 . . . . . . . . . . . . . . . . . . 20

B. Defendants’ Cultured Cell Product is Held for Sale After Shipment of One or More of its Components In Interstate Commerce. . . . . . . . . . . . . . . . . 22

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C. Defendants Adulterate Their Cultured Cell Product. . . . . . . . . . . . . . . . . . . . . . . 24

III. DEFENDANTS’ CULTURED CELL PRODUCT IS MISBRANDED. . . . . . . . . . . . . . 28

A. The Cultured Cell Product Is Misbranded Because It Is a Prescription Drug and Its Label Fails to Bear the Symbol “Rx only”. . . . . . . . . . 28

B. The Cultured Cell Product is Misbranded Because Its Labeling Fails to Bear Adequate Directions for Use. . . . . . . . . . . . . . . . . . . . . . . 29

III. DEFENDANTS’ VIOLATIONS ARE NOT EXCUSED BY THEIR CLAIM THAT THEY ARE ENGAGED IN THE PRACTICE OF MEDICINE. . . . . . . . . . . . . . 34

IV. THIS COURT SHOULD ISSUE A PERMANENT INJUNCTION RESTRAININGDEFENDANTS FROM FURTHER VIOLATIONS OF THE FDCA. . . . . . . . . . . . . . . 36

A. Legal Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

B. Defendants Will Continue to Violate the FDCA Unless Enjoined. . . . . . . . . . . . 39

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

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TABLE OF AUTHORITIES

FEDERAL CASES

Page(s)

*Abigail Alliance for Better Access to Developmental Drugs v. Eschenbach,495 F.3d 695 (D.C. Cir. 2007). .............................................................................................. 36

Actavis Elizabeth LLC v. FDA, 625 F.3d 760 (D.C. Cir. 2010). ................................................................................................ 4

*Action on Smoking and Health v. Harris,655 F.2d 236 (D.C. Cir. 1980). .......................................................................................... 4, 19

Alberty Food Prods. Co. v. United States,194 F.2d 463 (9th Cir. 1952). ................................................................................................ 31

*Anderson v. Liberty Lobby, Inc.,477 U.S. 242 (1986)............................................................................................................... 17

*Baker v. United States,932 F.2d 813 (9th Cir. 1991). ................................................................................................ 24

CareToLive v. von Eschenbach,525 F. Supp. 2d 952 (S.D. Ohio 2007). ................................................................................... 5

Cason v. District of Columbia,580 F. Supp. 2d 76 (D.D.C. 2008). ........................................................................................ 18

Cowan v. United States,5 F. Supp. 2d 1235 (N.D. Okla. 1998). .................................................................................. 36

*Estee Lauder, Inc. v. FDA,727 F. Supp. 1 (D.D.C. 1989). ................................................................................................. 4

*FTC v. Morton Salt Co.,334 U.S. 37 (1948)................................................................................................................. 20

*Harry C. Crooker & Sons, Inc. v. Occupational Safety and Health Review Comm'n,537 F.3d 79 (1st Cir. 2008). ................................................................................................... 21

*Authorities upon which we chiefly rely are marked with asterisks

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Hecht Co. v. Bowles,321 U.S. 321 (1944)............................................................................................................... 38

John D. Copanos and Sons, Inc. v. FDA,854 F.2d 510 (D.C. Cir. 1988). .............................................................................................. 26

Kordel v. United States,335 U.S. 345 (1948)............................................................................................................... 37

Lambert v. Yellowley,272 U.S. 582 (1926)......................................................................................................... 36

Nat'l Nutritional Foods Ass'n v. Mathews,557 F.2d 325 (2d Cir. 1977)................................................................................................. 3, 4

National Ass'n of Pharm. Mfrs. v. FDA,637 F.2d 877 (2d Cir. 1981)................................................................................................... 25

Nature Food Centres, Inc. v. United States,310 F.2d 67 (1st Cir. 1962). ................................................................................................... 30

*Novartis Pharms. Corp. v. Leavitt,435 F.3d 344 (D.C. Cir. 2006). .............................................................................................. 22

Regenerative Sciences, Inc. v. FDA,Civ. No. 1:09-cv-00411-WYD (D. Colo. 2009). ............................................................. 15, 20

Regenerative Sciences, Inc. v. FDA,Civ. No. 1:10-cv-01055-RMC (D.D.C. 2010) . ...................................................................... 15

*Thomas Jefferson University v. Shalala,512 U.S. 504 (1994)............................................................................................................... 22

*United States Air Tour Ass'n v. FAA,298 F.3d 997 (D.C. Cir. 2002). .............................................................................................. 22

United States v. 9/1 Kg. Containers,854 F.2d 173 (7th Cir. 1988). .......................................................................................... 32, 35

United States v. 789 Cases, More or Less, of Latex Surgeons' Gloves,799 F. Supp. 1275 (D.P.R. 1992)........................................................................................... 26

*United States v. Algon Chemical, Inc.,879 F.2d 1154 (3d Cir. 1989)........................................................................................... 30, 35

iv


*United States v. An Article of Device . . . "Hubbard Electrometer,",333 F. Supp. 357 (D.D.C. 1971). ........................................................................................... 31

United States v. An Article of Drug . . . Mykocert,345 F. Supp. 571 (N.D. Ill. 1972). ......................................................................................... 32

United States v. Article of Device,731 F.2d 1253 (7th Cir. 1984). .............................................................................................. 32

United States v. Articles of Device,527 F.2d 1008 (6th Cir. 1976). .............................................................................................. 32

United States v. Articles of Drug . . . Hydralazine HCL,568 F. Supp. 29 (D.N.J. 1983). .............................................................................................. 23

*United States v. Articles of Drug (Rucker Pharmacal),625 F.2d 665 (5th Cir. 1980). ................................................................................... 30, 31, 32

United States v. Baxter Healthcare Corp.,712 F. Supp. 1352 (N.D. Ill. 1989), aff'd, 901 F.2d 1401 (7th Cir. 1990). ............................ 32

United States v. Calise,217 F. Supp. 705 (S.D.N.Y. 1962)........................................................................................... 5

*United States v. City and County of San Francisco,310 U.S. 16 (1940)................................................................................................................. 37

*United States v. Dianovin Pharms., Inc.,475 F.2d 100 (1st Cir. 1973). ................................................................................................. 24

*United States v. Diapulse Corp. of Am.,457 F.2d 25 (2d Cir. 1972)............................................................................................... 37, 38

United States v. Diapulse Corp. of Am.,514 F.2d 1097 (2d. Cir.), cert. denied, 423 U.S. 838 (1975). ................................................ 23

United States v. Dotterweich,320 U.S. 277 (1943)............................................................................................................... 37

*United States v. Endotec, Inc.,563 F.3d 1187 (11th Cir. 2009). ............................................................................................ 21

United States v. Endotec, Inc.,No. 6:06-1281-Orl, 2009 U.S. Dist. LEXIS 93985 (M.D. Fla. Sept. 28, 2009). ................... 38

v


*United States v. Evers,643 F.2d 1043 (5th Cir. 1981). ........................................................................................ 23, 35

*United States v. Genendo Pharm., N.V.,485 F.3d 958 (7th Cir. 2007). ................................................................................................ 22

United States v. H.W. Andersen Products, Inc.,No. 2:95cv00315, 1997 U.S. Dist. LEXIS 3080 (M.D. N.C. Jan, 24, 1997)......................... 38

United States v. Kasz Enterprises,No. 930455P, 1994 U.S. Dist. LEXIS 8597 (D. R.I. May 6, 1994)....................................... 38

United States v. Lane Labs-USA, Inc.,324 F. Supp. 2d 547 (D.N.J. 2004). ....................................................................................... 37

United States v. Livdahl,356 F. Supp. 2d 1289 (S.D. Fla. 2005). ................................................................................. 38

*United States v. Loran Medical Systems, Inc.,25 F. Supp. 2d 1082 (C.D. Cal. 1997). .............................................................................. 5, 35

United States v. Miami Serpentarium Labs., Inc., 1981-82 FDC L. Rptr. Dev. Trans. Binder ¶ 38,164 at 38,931 ........................................ 33

United States v. Microsoft Corp.,147 F.3d 935 (D.C. Cir. 1998). .............................................................................................. 38

United States v. Nutri-cology, Inc.,982 F.2d 394 (9th Cir. 1992). .......................................................................................... 37, 38

*United States v. Odessa Union Warehouse Co-Op,833 F.2d 172 (9th Cir. 1987). .......................................................................................... 37, 38

United States v. Premo Pharm. Labs., Inc.,511 F. Supp. 958 (D.N.J. 1981). ............................................................................................ 32

United States v. Pro-Ag, Inc.,796 F. Supp. 1219 (D. Minn. 1991)....................................................................................... 38

United States v. Radix Laboratories, Inc.,963 F.2d 1034 (7th Cir. 1992). .............................................................................................. 26

United States v. Richlyn Laboratories, Inc.,827 F. Supp. 1145 (E.D. Pa. 1992). ....................................................................................... 38

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*United States v. Rutherford,442 U.S. 544 (1979)............................................................................................................... 36

United States v. Rx Depot, Inc.,290 F. Supp. 2d 1238 (N.D. Okla. 2003). ........................................................................ 37, 38

United States v. Spectro,544 F.2d 1175 (3d Cir. 1976)................................................................................................. 37

United States v. Sullivan,332 U.S. 689 (1948)............................................................................................................... 23

*United States v. Torigian Labs., Inc.,577 F. Supp. 1514 (E.D.N.Y. 1984), aff'd without op., 751 F.2d 373 (2d Cir. N.Y. 1984) ................................................................................... 23

United States v. Two Units, More or Less, of an Article or Device, Consisting of a PowerUnit and a Chair,49 F.3d 479 (9th Cir. 1994). .................................................................................................. 30

United States v. Undetermined Quantities of Articles of Drug,145 F. Supp. 2d 692 (D. Md. 2001). ................................................................................ 33, 34

*United States v. W.T. Grant Co.,345 U.S. 629 (1953)............................................................................................................... 37

United States v. Western Serum Co.,498 F. Supp. 863 (D. Ariz. 1980), aff'd, 666 F.2d 335 (9th Cir. 1982). ................................ 26

United States v. Writers & Research, Inc.,113 F.3d 8 (2d Cir. 1997)......................................................................................................... 3

Weinberger v. Hynson, Westcott, & Dunning, Inc.,412 U.S. 609 (1973)............................................................................................................... 33

*Whitaker v. Thompson,353 F.3d 947 (D.C. Cir. 2003). ................................................................................................ 3

FEDERAL STATUTES

21 U.S.C. §§ 301-399b. ................................................................................................................. 1

*21 U.S.C. § 321(g)(1)(B). .................................................................................................... 18, 28

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*21 U.S.C. § 321(g)(1)(C). ................................................................................................ 3, 18, 28

21 U.S.C. § 321(g)(1)(D). ............................................................................................................ 23

21 U.S.C. § 321(p)(1) . ................................................................................................................. 33

21 U.S.C. § 321(p)(2). ................................................................................................................. 33

21 U.S.C. § 331(d). ........................................................................................................................ 4

21 U.S.C. § 331(k). ............................................................................................................... passim

*21 U.S.C. § 332............................................................................................................................ 2

21 U.S.C. § 332(a). ...................................................................................................................... 36

21 U.S.C. § 351.............................................................................................................................. 4

*21 U.S.C. § 351(a)(2)(B). ............................................................................................ 1, 4, 13, 25

21 U.S.C. § 352.............................................................................................................................. 4

*21 U.S.C. § 352(f)(1). ......................................................................................................... passim

21 U.S.C. § 353(b)(1). ................................................................................................................. 31

*21 U.S.C. § 353(b)(1)(A). .......................................................................................................... 28

*21 U.S.C. § 353(b)(4). .................................................................................................. 1, 4, 28 29

21 U.S.C. § 353(b)(4)(A). ............................................................................................................ 29

21 U.S.C. § 355(a). ........................................................................................................................ 4

*21 U.S.C. § 379a. ....................................................................................................................... 24

21 U.S.C. § 396............................................................................................................................ 35

42 U.S.C. § 202.............................................................................................................................. 6

42 U.S.C. § 262.............................................................................................................................. 4

42 U.S.C. § 262(i). ................................................................................................................... 5, 20

*42 U.S.C. § 262(j). ....................................................................................................................... 5

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*42 U.S.C. § 264........................................................................................................................ 5, 8

42 U.S.C. § 264(a). .................................................................................................................... 5, 7

FEDERAL REGULATIONS

*21 C.F.R. § 201.5. ............................................................................................................... 30, 31

21 C.F.R. § 201.100. .................................................................................................................... 33

21 C.F.R. 201.100(b). .................................................................................................................. 33

21 C.F.R. 201.100 (c)(1). ............................................................................................................. 33

21 C.F.R. § 201.115. .................................................................................................................... 33

21 C.F.R. § 201.128. ................................................................................................................ 4, 19

21 C.F.R. Parts 210-211 ......................................................................................................... 13, 25

21 C.F.R. § 211.42(c)(10)(iii). ..................................................................................................... 16

21 C.F.R. § 211.42(c)(10)(iv). ............................................................................................... 14, 16

21 C.F.R. § 211.42(c)(10)(v). ...................................................................................................... 16

21 C.F.R. § 211.113(b). ......................................................................................................... 14, 16

21 C.F.R. § 211.160(b). ............................................................................................................... 14

21 C.F.R. § 211.165(a)........................................................................................................... 14, 16

21 C.F.R. § 211.165(b). ......................................................................................................... 14, 16

21 C.F.R. Parts 600-680......................................................................................................... 13, 25

21 C.F.R. § 610.12. ................................................................................................................ 14, 16

21 C.F.R. Part 1271 .............................................................................................................. passim

21 C.F.R. § 1271.3(a)................................................................................................................... 12

21 C.F.R. § 1271.3(d). ................................................................................................................... 7

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*21 C.F.R. § 1271.3(f)(2). ................................................................................................. 9, 18, 21

*21 C.F.R.§ 1271.10. ..................................................................................................................... 8

21 C.F.R. § 1271.10(a)............................................................................................. 8, 9, 20, 22, 23

21 C.F.R. § 1271.10(a)(1). ................................................................................................. 8, 18, 21

21 C.F.R. § 1271.10(a)(3). ........................................................................................................... 23

21 C.F.R. § 1271.15. ...................................................................................................................... 8

*21 C.F.R. § 1271.20. .................................................................................................... 8, 9, 20, 22

59 Fed. Reg. 59820 (Nov. 18, 1994)............................................................................................ 34

62 Fed. Reg. 9721 (Mar. 4, 1997). ................................................................................................. 7

63 Fed. Reg. 26744 (May 14, 1998). ............................................................................................. 6

66 Fed. Reg. 1508 (Jan. 8, 2001). .................................................................................................. 7

66 Fed. Reg. 5447 (Jan. 19, 2001). ....................................................................................... passim

69 Fed. Reg. 29786 (May 25, 2004). ............................................................................................. 7

69 Fed. Reg. 68612 (Nov. 24, 2004).............................................................................................. 7

FEDERAL RULES

Fed. R. Civ. P. 56(c). ................................................................................................................... 17

HISTORY

1966 Reorg. Plan No. 3, eff. June 25, 1966, 80 Stat. 1610........................................................... 5

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INTRODUCTION

Plaintiff, United States of America, seeks to enjoin Regenerative Sciences, LLC (“RS

LLC”), a corporation, and Christopher J. Centeno, M.D., John R. Schultz, M.D., and Michelle R.

Cheever, individuals (collectively, “Defendants”), from violating the Federal Food, Drug, and

Cosmetic Act (“FDCA”), 21 U.S.C. §§ 301-399b. Defendants manufacture, hold for sale, and

distribute an unapproved injectable biological drug product, referred to here as the “cultured cell

product,” which Defendants promote as a safe alternative to traditional surgery for a variety of

orthopedic conditions, including osteoarthritis, bulging lumbar discs, and non-healing bone

fractures. Defendants violate the FDCA’s prohibition on adulterating and misbranding a drug

while it is held for sale after one or more of the drug’s components have been shipped in interstate

commerce.

Under the FDCA, a drug is deemed to be adulterated if it is not manufactured, processed,

or held in compliance with “current good manufacturing practice” (“CGMP”). 21 U.S.C.

§ 351(a)(2)(B). FDA inspections of RS LLC in 2009 and 2010 revealed serious and obvious

violations of CGMP at RS LLC’s manufacturing facility. The inspections documented that

Defendants fail to perform critical tests that are absolutely essential to help assure the safety of

patients who receive the drug (e.g., tests for sterility and for the presence of endotoxins (which

cause fevers) and mycoplasma (a pathogenic genus of bacteria)). Defendants also have a grossly

inadequate environmental monitoring program and failed to use proper aseptic technique in

manufacturing the cultured cell product, among other violations.

FDA’s inspections also documented that Defendants cause their cultured cell product to be

misbranded. Under 21 U.S.C. § 353(b)(4), a prescription drug’s label must bear the symbol “Rx

only” at all times before it is dispensed. Defendants’ cultured cell product is a prescription drug


and its label does not bear the “Rx only” symbol. In addition, under 21 U.S.C. § 352(f)(1), a

drug’s labeling must bear adequate directions for use. The labeling on Defendants’ cultured cell

product is missing essentially all of the information required to provide adequate directions for

use.

The material facts regarding Defendants’ violations of the FDCA are either admitted or are

beyond dispute. Defendants admit that their cultured cell product is intended to treat orthopedic

conditions and injuries, which makes it a drug under the FDCA. Defendants likewise admit that

FDA’s 2009 and 2010 inspections of RS LLC show they do not process the cultured cell product

in compliance with CGMP and that it contains a component that has been shipped in interstate

commerce. Defendants also have admitted how they label the cultured cell product.

Defendants’ principal defense to these charges is that the FDCA does not apply to them

because they are engaged in the “practice of medicine,” which is not regulated by FDA. But, as we

show below, the law is well-established that the “practice of medicine” defense does not apply to

drugs that have not been approved for any use, and it is undisputed that FDA has not approved RS

LLC’s cultured cell product for any purpose. Because the material facts are not in dispute and

Defendants are plainly violating the FDCA, the government is entitled to summary judgment as a

matter of law.

Congress vested federal courts with jurisdiction to enjoin violations of the FDCA under

21 U.S.C. § 332. Because Defendants refuse to comply with the law, indeed vigorously dispute

that they are subject to the FDCA, permanent injunctive relief is necessary to stop them from

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violating the FDCA and to protect the public health. In support of its motion for summary

judgment, the government submits this memorandum and the attached declarations.1

STATUTORY AND REGULATORY FRAMEWORK

I. THE FDCA

Under the FDCA, an “article” is a drug if it 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.” 21 U.S.C. § 321(g)(1)(B)&(C)). Thus, whether

any particular article is a drug depends on its “intended use.” See Whitaker v. Thompson, 353 F.3d

947, 953 (D.C. Cir. 2004) (under the FDCA, “classification of a substance as a ‘drug’ turns on the

nature of the claims advanced on its behalf”); United States v. Writers & Research, Inc., 113 F.3d

8, 11 (2d Cir. 1997) (“Regardless of the classification of a drug, if an article is intended for use in

the diagnosis, cure, mitigation, treatment, or prevention of disease in man it is defined as a drug”);

Nat’l Nutritional Foods Ass’n v. Mathews, 557 F.2d 325, 333 (2d Cir. 1977) (“[t]he vendors’

intent in selling the product to the public is the key element in this statutory definition.”).

“[I]t is well established that the ‘intended use’ of a product, within the meaning of the

[FDCA], is determined from its label, accompanying labeling, promotional claims, advertising,

Attached are the declarations of: Karen S. Kreuzer, Acting Director of FDA’s Denver1

District Office (“Kreuzer Dec.”) (Exhibit A); Steven R. Bauer, Ph.D., Chief, Cellular and TissueTherapies Branch, Division of Cellular and Gene Therapies, Office of Cellular, Tissue, and GeneTherapies (“OCTGT”), in FDA’s Center for Biologics Evaluation and Research (“CBER”)(“Bauer Dec.”) (Exhibit B); Kevin J. Shannon, M.D., Medical Officer, OCTGT, CBER(“Shannon Dec.”) (Exhibit C); Dennis E. Guilfoyle, Ph.D., FDA’s international expert inpharmaceutical microbiology (“Guilfoyle Dec.”) (Exhibit D); and George F. Muschler, M.D.,Vice Chairman of the Orthopaedic and Rheumatologic Institute and Vice Chairman of theDepartment of Biomedical Engineering, at the Cleveland Clinic, in Cleveland, Ohio (“MuschlerDec.”) (Exhibit E).

3


and any other relevant source.” Action on Smoking and Health v. Harris, 655 F.2d 236, 239 (D.C.

Cir. 1980) (internal citations omitted); see 21 C.F.R. § 201.128; Nat’l Nutritional Foods Ass’n,

557 F.2d at 333-34; Estee Lauder, Inc. v. FDA, 727 F. Supp. 1, 2 (D.D.C. 1989) (“Courts have

long held that the decision as to whether a product is a drug depends on its ‘intended use,’ which

can be determined from objective evidence such as the product’s current and past containers,

instructions, and advertisements.”).

The FDCA “deems” a drug to be adulterated and misbranded, unless it complies with the

requirements in 21 U.S.C. §§ 351, 352, and 353(b)(4). Of particular relevance here, section

351(a)(2)(B) deems a drug to be adulterated if it is not manufactured in compliance with CGMP,

section 352(f)(1) deems a drug to be misbranded if its labeling does not bear adequate directions

for use, and section 353(b)(4) deems a prescription drug to be misbranded if, at any time prior to

dispensing, its label fails to bear, at a minimum, the symbol “Rx only.” 2

II. THE PUBLIC HEALTH SERVICE ACT

FDA also regulates biological products under the Public Health Service Act (“PHSA”),

42 U.S.C. § 262. A “biological product” includes any “virus, therapeutic serum, toxin, antitoxin,

vaccine, blood, blood component or derivative, allergenic product, protein (except any chemically

Under the FDCA, a drug is a “new drug” unless it is generally recognized, among2

experts qualified by scientific training and experience to evaluate the safety and effectiveness ofdrugs, as safe and effective for use under the conditions prescribed, recommended, or suggestedin its labeling. 21 U.S.C. § 321(p)(1). Moreover, even if as a result of investigations todetermine its safety and effectiveness a drug has become generally recognized as safe andeffective for the conditions suggested in its labeling, it remains a “new drug” if it has not,“otherwise than in such investigations, been used to a material extent or for a material time undersuch conditions.” 21 U.S.C. § 321(p)(2). The statute prohibits introducing a new drug intointerstate commerce unless that drug is the subject of an approved new drug application orabbreviated new drug application. 21 U.S.C. §§ 331(d), 355(a); Actavis Elizabeth LLC v. FDA, –F.3d –, 2010 WL 4454301 *2 (D.C. Cir. Nov. 9, 2010).

4


synthesized polypeptide), or analogous product . . ., applicable to the prevention, treatment, or cure

of a disease or condition of human beings.” 42 U.S.C. § 262(i). A product may be both a drug

and a biological product. See, e.g., CareToLive v. von Eschenbach, 525 F. Supp. 2d 952, 957

(S.D. Ohio 2007) (“Biological products can also be drugs, and are generally subject to the same

statutory and regulatory requirements that apply to drugs”); United States v. Loran Med. Sys., Inc.,

25 F. Supp. 2d 1082, 1084 (C.D. Cal. 1997) (cell product made from neonatal rabbit and human

fetal cells was a drug and a biological product); United States v. Calise, 217 F. Supp. 705, 708-09

(S.D.N.Y. 1962). A product that has been licensed under the PHSA is not required also to have an

approved new drug application under the FDCA; in every other respect, however, the FDCA

applies, including the provisions applicable to adulteration and misbranding of drugs. 42 U.S.C.

§ 262(j).

In a separate provision, the PHSA grants FDA broad authority to issue regulations to

prevent the transmission of communicable diseases. Section 361(a) of the PHSA, 42 U.S.C.

§ 264, provides:

The Surgeon General, with the approval of the Secretary, is authorized to makeand enforce such regulations as in his judgment are necessary to prevent theintroduction, transmission, or spread of communicable diseases from foreigncountries into the States or possessions, or from one State or possession into anyother State or possession. For purposes of carrying out and enforcing suchregulations, the Surgeon General may provide for such inspection, fumigation,disinfection, sanitation, pest extermination, destruction of animals or articles foundto be so infected or contaminated as to be sources of dangerous infection to humanbeings, and other measures, as in his judgment may be necessary.

42 U.S.C. § 264(a) (emphasis added). This authority has been delegated to FDA.3

The statute grants this authority to the Surgeon General, with the approval of the3

Secretary. The Office of Surgeon General was abolished by section 3 of 1966 Reorg. Plan No. 3,eff. June 25, 1966, 80 Stat. 1610, and all of its functions were transferred to the Secretary of

5


III. THE HCT/P RULE: 21 C.F.R. PART 1271

In 1997, FDA announced a new proposed approach for regulating human cells, tissues, and

cellular or tissue-based products (“HCT/Ps”). See Proposed Approach to Regulation of Cellular

and Tissue-Based Products, FDA Dkt. No. 97N-0068 (Feb. 28, 1997) (“Proposed Approach”)

(available at http://www.fda.gov/downloads/BiologicsBloodVaccines/GuidanceCompliance

RegulatoryInformation/Guidances/Tissue/UCM062601.pdf). Prior to that time, FDA had

regulated human cellular and tissue based products on a case-by-case basis, responding as the

agency determined appropriate to the particular characteristics of and concerns raised by each type

of product. Establishment Registration and Listing for Manufacturers of Human Cellular and

Tissue-Based Products; Proposed Rule, 63 Fed. Reg. 26744 (May 14, 1998) (“Proposed

Registration Rule”); Proposed Approach at 6.

Although FDA is authorized to apply all of the requirements in the FDCA and PHSA to

every product that meets the definition of “drug” and “biological product,” in developing a new,

comprehensive scheme for regulation of HCT/Ps, the agency chose a tiered, risked-based approach

that would provide only the degree of government oversight necessary to protect the public health.

Proposed Approach at 6; see also Proposed Registration Rule, 63 Fed. Reg. 26745. The agency

explained that the new framework would “ensure that innovation and product development in this

rapidly growing medical field could proceed unhindered by unnecessary regulation,” while at the

same time providing “physicians and patients with the assurance of safety that the public has come

to expect from drugs, biologics, medical devices and other medical products overseen by the

Health, Education, and Welfare (now Secretary of HHS)) by section 1 of 1966 Reorg. Plan No. 3,set out under 42 U.S.C. § 202. The HHS Secretary’s authority has been delegated to FDA. SeeFDA Staff Manual Guide 1410.10.1.A.3.

6


FDA.” See Proposed Approach at 7; see also Proposed Approach to Regulation of Cellular and

Tissue-Based Products; Availability and Public Meeting, 62 Fed. Reg. 9721 (Mar. 4, 1997).

To implement this tiered approach, FDA issued, through notice and comment rulemaking,

several regulations invoking its communicable disease authority under section 361 of the PHSA,

42 U.S.C. § 264. See Human Cells, Tissues, and Cellular and Tissue-Based Products;

Establishment Registration and Listing; Final Rule, 66 Fed. Reg. 5447 (Jan. 19, 2001) (“Final

Registration Rule”); Eligibility Determination for Donors of Human Cells, Tissues, and Cellular

and Tissue-Based Products; Final Rule, 69 Fed. Reg. 29786 (May 25, 2004); Current Good Tissue

Practice for Human Cell, Tissue, and Cellular and Tissue-Based Product Establishments;

Inspection and Enforcement; Final Rule, 69 Fed. Reg. 68612 (Nov. 24, 2004). 4

The regulations define HCT/Ps as “articles containing or consisting of human cells or

tissues that are intended for implantation, transplantation, infusion, or transfer into a human

recipient.” 21 C.F.R. § 1271.3(d). FDA determined that, in limited circumstances not applicable

here, certain HCT/Ps can be effectively regulated solely by controlling the infectious disease risks

they present. Under the agency’s regulatory framework, such products are regulated only under

the agency’s HCT/P regulations (21 C.F.R. Part 1271), even if such HCT/Ps would otherwise meet

the FDCA’s definition of a “drug” or the PHSA’s definition of a “biological product.” Such

products are sometimes referred to as “361 HCT/Ps,” after the communicable disease provision in

As noted supra, section 361 of the PHSA authorizes FDA to make and enforce4

regulations to prevent the introduction, transmission, or spread of communicable disease. 42U.S.C. § 264(a). Because HCT/Ps are derivatives of the human body, they pose a potential riskof transmitting communicable diseases. See Current Good Tissue Practice for Manufacturers ofHuman Cellular and Tissue-Based Products; Inspection and Enforcement; Proposed Rule, 66Fed. Reg. 1508, 1509 (Jan. 8, 2001).

7


section 361 of the PHSA, 42 U.S.C. § 264. All other human and tissue-based products are

regulated as drugs, devices, and/or biological drugs because they may present a greater degree of

risk. 21 C.F.R. 1271.20; Final Registration Rule, 66 Fed. Reg. at 5450. 5

FDA regulates an HCT/P solely under section 361 of the PHSA (42 U.S.C. § 264) and the

regulations in 21 C.F.R. Part 1271 if it meets four criteria, which are set forth in

21 C.F.R.§ 1271.10. One of these criteria is that the cells or tissue be “minimally manipulated.” 6

21 C.F.R. § 1271.10(a)(1). For cells (like Defendants’ cultured cell product), minimal7

There are also exceptions from 21 C.F.R. Part 1271 set forth in 21 C.F.R. § 1271.15, but5

they are not applicable to the cultured cell product at issue here. See 21 C.F.R. § 1271.15; Ex. B(Bauer Dec.) at 30 n.1.

21 C.F.R. § 1271.10(a) provides, 6

(a) An HCT/P is regulated solely under section 361 of the [PHSA] and theregulations in this part if it meets all of the following criteria:(1) The HCT/P is minimally manipulated;(2) The HCT/P is intended for homologous use only, as reflected by the labeling,advertising, or other indications of the manufacturer’s objective intent;(3) The manufacture of the HCT/P does not involve the combination of the cellsor tissues with another article, except for water, crystalloids, or a sterilizing,preserving, or storage agent, provided that the addition of water, crystalloids, orthe sterilizing, preserving, or storage agent does not raise new clinical safetyconcerns with respect to the HCT/P; and(4) Either:(i) The HCT/P does not have a systemic effect and is not dependent upon the metabolicactivity of living cells for its primary function; or(ii) The HCT/P has a systemic effect or is dependent upon the metabolic activity of livingcells for its primary function, and:(a ) Is for autologous use;(b ) Is for allogeneic use in a first-degree or second-degree blood relative; or(c ) Is for reproductive use.

In developing the regulatory approach, the agency focused on public health and7

regulatory concerns, including how transmission of communicable disease can be prevented;what processing controls are necessary, e.g., to prevent contamination that could result in anunsafe or ineffective product, and to preserve integrity and function so that products will work as

8


manipulation means “processing that does not alter the relevant biological characteristics of cells

or tissues.” 21 C.F.R. § 1271.3(f)(2). Products that are more than “minimally manipulated” or that

fail to meet any of the remaining criteria in section 1271.10(a) remain subject to the provisions of

the FDCA and the PHSA, including the FDCA’s adulteration, misbranding, and premarket

approval requirements. 21 C.F.R. § 1271.20; Final Registration Rule, 66 Fed. Reg. 5449, 5456.

STATEMENT OF FACTS

I. THE DEFENDANTS

RS LLC is incorporated under the laws of Colorado. The laboratory where Defendants

manufacture the cultured cell product is located at 6850 West 116th Avenue, Unit D, Broomfield,

Colorado. See First Amended Answer (“Answer” ) ¶ 4; Ex. A (Kreuzer Dec.) ¶ 5. Defendants Dr.8

Centeno and Dr. Schultz are the majority shareholders of RS LLC. Counterclaims ¶ 4.

Dr. Centeno also serves as the company’s Medical Director and Acting Chief Executive

Officer. Answer ¶ 5. He is the person most responsible for the overall operation of the company.

Id. Defendant Schultz serves on RS LLC’s board of directors. Id. ¶ 6. 9

they are intended; and how clinical safety and effectiveness can be assured. Proposed Approachat 9. One of the factors FDA considered particularly relevant to these questions is the extent ofprocessing the cells undergo. For example, the agency noted, inter alia, that “[i]mproperhandling . . . can allow cells or tissues to become contaminated (e.g., bacterial contaminationduring collection, processing, storage, or transplantation, or cross contamination from othercontaminated tissues).” Id. at 15. The agency also explained that clinical safety andeffectiveness concerns depend in part on the extent of manipulation of the cells or tissues. Id.at 11.

Defendants Answer and its Counterclaims appear in the same document (Dkt No. 15-1),8

both starting with paragraphs numbered 1. To avoid confusion, we cite the two portions of thedocument separately.

Dr. Centeno and Dr. Schultz jointly own Centeno Schultz, P.C., a Colorado corporation9

that does business as the Centeno-Schultz Clinic (“the Clinic”) and is located at 403 Summit

9


Defendant Michelle R. Cheever is RS LLC’s Laboratory Director. Answer ¶ 7. She is

responsible for the day-to-day operations of the RS LLC laboratory. Id. (admitting sentence but

objecting to any inference that Ms. Cheever is the most responsible person for the operations of the

laboratory); Ex. A (Kreuzer Dec.) ¶ 7 and Ex. 46 (SOP 124.2) at 2 (stating that the “Laboratory

Director is responsible for all procedures and administrative operations of the facility.”); Id. Ex.10

48 (SOP 126.3) at 2 (same). Ms. Cheever participated in drafting the company’s laboratory

procedures. Answer ¶ 7; Ex. A (Kreuzer Dec.) Ex. 46 (SOP 124.2) at 1 (stating that SOPs should

be revised and approved by the Laboratory Director and Medical Director). Ms. Cheever holds

equity ownership in RS LLC. Answer ¶ 7; see also Ex. A (Kreuzer Dec.) Ex. 30 at 81 (article

authored by defendants Centeno, Schultz, and Cheever stating that they all have “equity ownership

in Regenerative Sciences”).

II. DEFENDANTS’ CULTURED CELL PRODUCT

RS LLC promotes “the Regenexx™ procedure,” in which patients are injected with the

cultured cell product, to treat orthopedic conditions, including osteoarthritis, non-healing bone

fractures, avascular necrosis, and bulging lumbar discs. See Answer ¶ 16; Ex. A (Kreuzer Dec.)

Ex. 27. When a patient undergoes the Regenexx™ procedure, the Centeno-Schultz Clinic11

Blvd, Suite 201, Broomfield, Colorado. Answer ¶ 8. The Clinic is not named as a defendant inthis suit.

Attached to Exhibit A (Kreuzer Dec.) are 64 numerical exhibits, which are cited in this10

brief as “Ex. A (Kreuzer Dec.) Ex. __”.

Although Defendants often refer to the “Regenexx procedure,” they claim that the11

cultured cells are responsible for the alleged treatment effect. See, e.g., Counterclaims ¶¶ 5, 10(explaining the “Regenexx procedure” and how the cells are “placed back into the patient’s

10


aspirates (withdraws using a needle) bone marrow from the patient’s hip or synovial fluid (fluid in

the joint) from the patient’s knee and also draws some whole blood from the patient. Answer ¶ 10.

These materials are sent to RS LLC. Counterclaims ¶ 5; Ex. A (Kreuzer Dec.) ¶ 8 and Ex. 42

(SOP 114.2) at 2.

RS LLC isolates what it describes as mesenchymal stem cells (“MSCs”) from the bone12

marrow or synovial fluid, expands them using growth factors from the patient’s blood (e.g., platelet

lysate) and reagents (e.g., Dulbecco’s Modified Eagle’s Medium), and combines them with other

drug products (such as heparin and doxycycline). Answer ¶ 11. The process of expanding the cells

typically takes two to three weeks and involves multiple steps in which the cells are centrifuged

(with certain cell and plasma layers then removed) and placed in culture media in an incubator,13

thereby causing the cells to divide and expand in number. Id. When the cells expand to a certain

point, they are exposed to an enzyme, trypsin, which digests some of the proteins on the surface of

injured area (i.e. knee, hip, rotator cuff), typically 4-6 weeks after they were removed. The stemcells then begin to repair the patient’s degenerated or injured area.”) (emphasis added); seealso Complaint filed in Regenerative Sciences v. FDA, Civ. No. 1:10-cv-01055-RMC (D.D.C.)(Dkt. No. 1) ¶¶ 11, 14-15 (“RS DC Complaint”) (RS LLC alleges that the Regenexx “Procedureis for the treatment of orthopedic injuries and arthritis,” and that the “Procedure requires theremoval of stem cells and other tissue from a donor patient, the expansion of the stem cells, andthe placement of the stem cells in the same patient for the treatment of the patient’sdegenerated or injured area of the body.”) (emphasis added).

Mesenchymal stem cells are a type of multipotent stem cell, meaning they can give rise12

to several, but not all, different cell types found in the body. See Ex. B (Bauer Dec.) ¶¶ 12-14.

Culturing is defined as ex vivo (that is, outside the living body) support of living cells. 13

In culture, cells grow and respond to the tissue culture flasks and the composition of the culturemedia in which they are maintained. Under these conditions, some of the cells originally isolatedfrom the body do not survive, and others preferentially expand in number. During this selectionprocess, surviving cells adapt to grow in the artificial conditions of tissue culture. Ex. B (BauerDec.) ¶ 37.

11


the cells and causes the cells to detach from the plastic flask in which they were contained. Id.

RS LLC then harvests the detached cells, treats them with media to stop the action of the trypsin,

washes them with fresh media, and either puts the cells into other flasks for further expansion,

prepares them for cryo-preservation, or prepares them for injection. Id.

Ultimately, after manipulating the cells by selective culturing and expansion over a two to

three week period (and, in some cases, following cryo-preservation), RS LLC places the expanded

cells, along with a drug product that has moved in interstate commerce and “other additives,” into a

syringe. Answer ¶¶ 11, 29. RS LLC places the syringe into a sterile bag and then transports it to14

the Clinic for injection into the patient from whom the bone marrow or synovial fluid was

obtained. Answer ¶¶ 11, 34; see also Ex. A (Kreuzer Dec.) ¶¶ 8-9 and Ex. 45 (SOP 119.3) at 1,

3. 15

According to Defendants’ standard operating procedures, when the cultured cell product is

sent to the Clinic, the bag is labeled only with the patient’s name, date of birth, laboratory

notebook number, cell passage number, day in culture, cell number, number of cells cryo-

preserved, and condition of cell suspension. Answer ¶ 34; see also Ex. A (Kreuzer Dec.) Ex. 6

(photograph of product label) and Ex. 45 (SOP 119.3) at 3.

This drug is identified in the copy of Exhibit A filed under seal, but not in this brief14

because Defendants consider it to be confidential commercial information. See Ex. A (KreuzerDec.) ¶ 8 and Ex. 45 (SOP 119.3) at 2.

Defendants’ cultured cell product is thus intended solely for “autologous” use. See15

Answer ¶ 12. Autologous use refers to the implantation, transplantation, infusion, or transfer ofhuman cells or tissue back into the individual from whom the cells or tissue were recovered. 21 C.F.R. § 1271.3(a). Allogeneic use refers to the implantation, transplantation, infusion, ortransfer of human cells or tissue into an individual other than the individual from whom the cellsor tissue were recovered.

12


As noted, Defendants’ processing of the cultured cell product involves many steps,

including selective culture and expansion of a multitude of different types of blood-forming and

rare bone marrow stromal cells using plastic flasks, additives and nutrients, and environmental

conditions such as temperature and humidity, to determine the growth and biological

characteristics of the resulting cell population. Answer ¶ 29. This process of tissue culture,

expansion, and passaging alters the relevant biological characteristics of the cells that come from

the donor/recipient’s bone marrow or synovial fluid. See Ex. B (Bauer Dec.) ¶¶ 35-41.

As Defendants admit, FDA has not approved the cultured cell product for any use. Answer

¶¶ 20-21, 25. Indeed, there is no valid scientific evidence to show that Defendants’ cultured cell

product is safe or effective for any of the indications for which Defendants are promoting it. See

Ex. C (Shannon Dec.) ¶¶ 24, 29-32, 40; Ex. E (Muschler Dec.) ¶¶ 25-36, 46, 54.

III. PRIOR WARNINGS

On July 25, 2008, FDA sent a letter to RS LLC. FDA’s letter explained that the agency had

reviewed RS LLC’s website, www.regenexx.com, and advised that RS LLC was promoting its cell

product for use under conditions that caused it to be a drug under the FDCA and a biological

product under the PHSA. Answer ¶ 41; Ex. A (Kreuzer Dec.) ¶ 10 & Ex. 1. RS LLC responded to

FDA on August 25, 2008, stating that its activities fall within the “practice of medicine” and are

“both lawful and unregulated by the FDA.” Ex. A (Kreuzer Dec.) ¶ 11.

The FDA conducted its first inspection of RS LLC between February 23 and April 15,

2009. Answer ¶ 31; Ex. A (Kreuzer Dec.) ¶ 12. Defendants concede, as they must, that the

inspection showed that their manufacture of the cultured cell product did not comply with CGMP.

See 21 U.S.C. § 351(a)(2)(B) and 21 C.F.R. Parts 210-211; see also 21 C.F.R. Parts 600-680

13


(setting forth additional standards applicable to biological products). Answer ¶ 31; Ex. A (Kreuzer

Dec.) ¶ 12. The CGMP violations observed during the 2009 inspection included, but were not

limited to, the following:

a. Failure to establish and follow appropriate written procedures designed to

prevent microbiological contamination of drug products purporting to be sterile, as required by 21

C.F.R. § 211.113(b); see also 21 C.F.R. § 610.12. Answer ¶ 31.a.

b. Failure to perform appropriate laboratory testing of each batch of drug

product required to be free of objectionable microorganisms, as required by 21 C.F.R.

§ 211.165(b). Id. ¶ 31.b.

c. Failure to establish scientifically sound and appropriate specifications,

standards, sampling plans, and test procedures designed to assure that drug products conform to

appropriate standards of identity, strength, quality, and purity, as required by 21 C.F.R.

§ 211.160(b). Id. ¶ 31.c.

d. Failure to ensure, for each batch of drug product, appropriate laboratory

determination of satisfactory conformance to final specifications for the drug product prior to

release, as required by 21 C.F.R. § 211.165(a). Id. ¶ 31.d.

e. Failure to establish an adequate system for monitoring environmental

conditions during product manufacturing, as required by 21 C.F.R. § 211.42(c)(10)(iv). Id. ¶ 31.e.

At the close of the 2009 inspection, FDA investigators issued a list of inspectional

observations (Form FDA 483) to RS LLC’s Acting CEO, Dr. Centeno, with Dr. Schultz and

Ms. Cheever present. Answer ¶ 31; Ex. A (Kreuzer Dec.) Ex. 2. In addition to listing CGMP

deficiencies, the list of inspectional observations notified Defendants that their cultured cell

14


product is a biological drug under the PHSA. Answer ¶ 41; Ex. A (Kreuzer Dec.) Ex. 2. The

investigators also informed Dr. Centeno, Dr. Schultz, and Ms. Cheever that if corrections were not

made, FDA’s regulatory options included sending the company a letter or pursuing a seizure,

injunction, or prosecution. Ex. A (Kreuzer Dec.) ¶ 13; see also Plaintiff’s Motion for Stay of

Administrative Action ¶ 10 (Dkt. No. 29) filed in Regenerative Sciences v. FDA, Civ. No.

1:09-cv-00411-WYD-BNB, 2010 WL 1258010 (D. Colo. Mar. 26, 2010) (statement by RS LLC

that “upon the issuance of the Form 483, the FDA advised Regenerative that the failure to comply

with FDA’s biological drug manufacturing protocols could lead to the issuance of a warning letter,

seizure, injunction, criminal prosecution . . . .”).16

FDA investigators inspected RS LLC again between June 2 and June 16, 2010. Answer

¶ 32. Defendants admit that this inspection once again documented numerous CGMP violations.

Id.; see also Ex. A (Kreuzer Dec.) ¶ 14. The CGMP violations observed during the June 2010

inspection included, but were not limited to, the following:

a. Failure to establish scientifically sound and appropriate specifications,

standards, sampling plans, and test procedures designed to assure that in-process materials and

drug products conform to appropriate standards of identity, strength, quality, and purity, as required

by 21 C.F.R. § 211.160(b). Answer ¶ 32.a.

RS LLC filed two lawsuits seeking to enjoin FDA from bringing an enforcement action16

against it. See Regenerative Sciences, Inc. v. FDA, Civ. No. 1:09-cv-00411-WYD (D. Colo.)(filed Feb. 26, 2009), and Regenerative Sciences, Inc. v. FDA, Civ. No. 1:10-cv-01055-RMC(D.D.C.) (filed June 22, 2010).

15


b. Failure to ensure, for each batch of drug product, appropriate laboratory

determination of satisfactory conformance to final specifications for the drug product, prior to

release, as required by 21 C.F.R. § 211.165(a). Id. ¶ 32.b.

c. Failure to establish and follow appropriate written procedures designed to


C.F.R. § 211.113(b); see also 21 C.F.R. § 610.12. Id. ¶ 32.c.

d. Failure to perform appropriate laboratory testing of each batch of drug


§ 211.165(b). Id. ¶ 32.d.



f. Failure to establish and follow an aseptic gowning qualification program to

assess the ability of aseptic processing technicians to maintain the quality of the gown after

performance of manufacturing operations, as required by 21 C.F.R. § 211.113(b). Id. ¶ 32.f.

g. Failure to perform cleaning validation on the biological safety cabinet

aseptic processing surfaces or on all other surfaces in the aseptic processing laboratories, as

required by 21 C.F.R. § 211.42(c)(10)(v). Id. ¶ 32.g.

h. Failure to maintain separate or defined areas or such other control systems

for the firm’s operations as are necessary to prevent contamination during aseptic processing, as

required by 21 C.F.R. § 211.42(c)(10)(iii). Id. ¶ 32.h.

16


At the close of the 2010 inspection, FDA investigators issued a list of inspectional

observations (Form FDA 483) to Dr. Schultz. Answer ¶ 32; Ex. A (Kreuzer Dec.) ¶ 15 and Ex. 3. 17

Ms. Cheever was present, and Dr. Centeno attended by telephone. Answer ¶ 32. As they had done

at the close of the 2009 inspection, the FDA investigators explained that failure to take appropriate

corrective actions could result in possible regulatory action, including an administrative letter,

seizure, injunction, and prosecution. Ex. A (Kreuzer Dec.) ¶ 15.

The government filed the instant action on August 6, 2010. When government counsel

notified Defendants of their intention to file this suit and to seek a preliminary injunction,

Defendants (while disputing that their cultured cell product violates the FDCA) agreed to refrain

from manufacturing any cultured cell product during the pendency of this suit. See Stipulated

Order ¶ 7 (Dkt. No. 10).

ARGUMENT

I. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate where the record shows that there is “no genuine issue as

to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R.

Civ. P. 56(c)). The Supreme Court has explained that, “the mere existence of some alleged factual

dispute between the parties will not defeat an otherwise properly supported motion for summary

judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

Moreover, “there is no issue for trial unless there is sufficient evidence favoring the non-moving

The FDA 483 was subsequently amended and reissued on June 22, 2010 to correct17

several minor errors (changing two dates, correcting spelling errors, and adding the name of amember of the FDA inspection team, whose name had been inadvertently omitted). Ex. A(Kreuzer Dec.) ¶ 14.

17


party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not

significantly probative, summary judgment may be granted.” Id. at 249-50 (internal citations

omitted); Cason v. District of Columbia, 580 F. Supp. 2d 76, 78 (D.D.C. 2008) (Collyer, J.).

II. DEFENDANTS ARE VIOLATING THE FDCA BY CAUSING THE ADULTERATION OF THE CULTURED CELL PRODUCT

To establish that Defendants are violating 21 U.S.C. § 331(k) by adulterating the cultured

cell product, the government must establish: (1) the cultured cell product is a drug within the

meaning of 21 U.S.C. § 321(g)(1)(B) or (C)); (2) the cultured cell product is held for sale after one

or more of its components have been shipped in interstate commerce; and (3) Defendants cause

their cultured cell product to become adulterated by failing to comply with CGMP. All of the facts

relevant to these three issues have either been admitted by Defendants or are beyond dispute, and

therefore this Court should grant summary judgment for the government.

A. Defendants’ Cultured Cell Product is a Drug Subject to the FDCA

As we show below, the cultured cell product is a drug under the FDCA because it is

intended to treat a variety of orthopedic conditions and injuries. In addition, Defendants’ cultured

cell product does not qualify for regulation solely under 21 C.F.R. Part 1271 because their

manufacturing process constitutes more than “minimal manipulation” under 21 C.F.R.

§§ 1271.3(f)(2), 1271.10(a)(1). As a result, their cultured cell product remains subject to the

FDCA’s adulteration and misbranding provisions.

18


1. The Cultured Cell Product is Intended to Treat Disease and to Affect the Structure and Function of the Body

Defendants have admitted all of the facts necessary to establish that the cultured cell

product is a drug within the meaning of the FDCA. As discussed in greater detail supra at 3-4,

whether an “article” is a drug depends on its intended use, which, in turn, may be shown, inter alia,

by how the product is promoted in its labeling and other promotional materials. 21 U.S.C.

§ 321(g)(1)(B)&(C); 21 C.F.R. § 201.128; Action on Smoking and Health, 655 F.2d at 239.

Defendants’ cultured cell product is a drug because they promote it to the public to treat a

variety of orthopedic conditions. For example, Defendants admit that the RS LLC website,

www.regenexx.com, describes the Regenexx™ procedure (which involves administration of the

cultured cell product, see supra at 10 n.11) as “an Alternative to Traditional Surgery” and that the

FAQs on the website state that the procedure can be used to treat “Fractures that have failed to

heal, joint cartilage problems, partial tears of tendons, muscles, or ligaments, chronic bursitis,

avascular necrosis of the bone, and lumbar disc bulges.” See Answer ¶ 16.b. Defendants likewise

concede that an RS LLC pamphlet regarding the Regenexx™ procedure claims, “The Regenexx

procedure is safe and can often prevent the need for surgery” and that it lists the following

conditions and diseases as “candidates” for the procedure: “Patients with non-healing bone

fractures”; “Osteoarthritis of the knee, hip, ankle, shoulder, hands”; “Chronic bulging lumbar

disc”; “Injuries to the meniscus, rotator cuff”; “Avascular Necrosis of the shoulder, hip”; and

“Chronic Bursitis.” Id. ¶ 16.a. Defendants also have confirmed that the Regenexx Procedure is

intended to treat diseases and injuries in pleadings they have filed in this suit and in their suits

against FDA. Counterclaims ¶¶ 3, 10 (explaining how the “stem cells . . . begin to repair the

19


http://www.regenexx.com/the-regenexx-procedures/

http://www.regenexx.com/common-questions/.


http://www.regenexx.com/the-regenexx-procedure-explained/

patient’s degenerated or injured area”); RS DC Complaint ¶¶ 14 (the Procedure is “for the

treatment of orthopedic injuries and arthritis”); Complaint filed in Regenerative Sciences, Inc. v.

FDA, Civ. No. 1:09-cv-00411-WYD (D. Colo.) (Dkt No. 1) ¶ 16 (“The Procedure is for the

treatment of musculoskeletal and spinal injury.”).

Because Defendants admit that the “intended use” of the cultured cell product is to treat a

variety of diseases and to affect the structure and function of the body, there is no genuine dispute

that it is a drug under the FDCA.18

2. The Cultured Cell Product Cannot Qualify for Regulation Solely Under 21 C.F.R. Part 1271

As discussed above, FDA has established a tiered, risked-based approach for regulating

HCT/Ps under which an HCT/P that meets all of the criteria in 21 C.F.R. § 1271.10(a) is regulated

solely under 21 C.F.R. Part 1271, even if it otherwise meets the FDCA’s definition of a “drug” or

the PHSA’s definition of a “biological product.” All HCT/Ps that do not meet the criteria for

regulation solely under 21 C.F.R. Part 1271 are regulated as drugs, devices, and/or biological

drugs. 21 C.F.R. § 1271.20; Final Registration Rule, 66 Fed. Reg. 5456. Because the cultured cell

product clearly meets the definition of a drug, if Defendants contend that it should be regulated

solely under 21 C.F.R. Part 1271, they bear the burden of proving that their cultured cell product

meets all of the criteria in 21 C.F.R. § 1271.10(a). See, e.g., FTC v. Morton Salt Co., 334 U.S. 37,

44-45 (1948) (providing that “the general rule of statutory construction that the burden of proving

Given Defendants’ admissions that their cell product is derived from a patient’s bone18

marrow (Counterclaims ¶ 5) and that it is intended to treat orthopedic conditions, there likewisecan be no dispute that Defendants’ cultured cell product is also a “biological product” under thePHSA because it is a “blood, blood component or derivative, . . . or analogous product . . .applicable to the prevention, treatment, or cure of a disease or condition of human beings.” 42 U.S.C. § 262(i) (emphasis added). Ex. C (Shannon Dec.) ¶ 9.

20


justification or exemption under a special exception to the prohibitions of a statute generally rests

on one who claims its benefits”); United States v. Endotec, Inc., 563 F.3d 1187, 1195 (11th Cir.

2009) (manufacturer bears burden of proving that its device fits within custom device exception to

premarket approval requirement); Harry C. Crooker & Sons, Inc. v. Occupational Safety and

Health Review Comm’n, 537 F.3d 79, 85 (1st Cir. 2008) (“party seeking to find shelter under [an]

exception” to an OSHA regulation bore “burden of both production and persuasion”). Defendants

cannot meet this burden.

To qualify for regulation solely under 21 C.F.R. Part 1271, among other things, an HCT/P

can be only “minimally manipulated,” 21 C.F.R. § 1271.10(a)(1). For a product like the one at

issue here, minimal manipulation means “processing that does not alter the relevant biological

characteristics of cells or tissues.” 21 C.F.R. § 1271.3(f)(2). Yet, Defendants’ manufacturing

process does just that.

Defendants admit that the processing of the cultured cell product “involves many steps,

including selective culture and expansion of a multitude of different types of blood-forming and

rare bone marrow stromal cells using plastic flasks, additives and nutrients, and environmental

conditions such as temperature and humidity, to determine the growth and biological

characteristics of the resulting cell population.” Answer ¶ 29 (emphasis added). As discussed19

in detail in the attached declaration of Steven R. Bauer, Ph.D., Chief of FDA’s Cellular and Tissue

Therapies Branch, culturing results in the selection and alteration of the original bone marrow (or

By comparison, examples of processing that FDA considers to be minimal manipulation19

include centrifugation; selective removal of B-cells, T-cells, malignant cells, red blood cells, orplatelets; cell separation; cryopreservation; or freezing. Final Registration Rule, 66 Fed. Reg.5457.

21


synovial) cells, whether or not such changes are intended, because cells grow and respond to the

tissue culture flasks and the composition of the media and other conditions under which they are

grown. See Ex. B (Bauer Dec.) ¶ 37. Under culture conditions, most of the cells from the original

bone marrow aspirate would fail to adapt and die. Id. ¶¶ 37, 39-40. The remaining cells would

expand in number and change so they are different from the original cells in the bone marrow.

Some of the changes caused by culturing include changes in the proteins and the genes expressed

by the cells, as well as changes in the shape of the cells. Id. ¶ 37. Defendants’ cultured cell

product is more than minimally manipulated because the process of tissue culture, expansion, and

passaging alters the relevant biological characteristics of the cells that come from the

donor/recipient's bone marrow or synovial fluid. See id. ¶¶ 35-41.20

Because it is beyond dispute that Defendants’ cultured cell product is more than minimally

manipulated, it is regulated as a drug and biological product under the FDCA and PHSA and

remains subject to, among other provisions, the FDCA’s adulteration and misbranding

requirements. 21 C.F.R. § 1271.20.21

When a court is evaluating an agency’s interpretation of its own regulations, the agency20

is entitled to “substantial deference.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512(1994); United States Air Tour Ass’n v. FAA, 298 F.3d 997, 1005 (D.C. Cir. 2002); see alsoUnited States v. Genendo Pharm., N.V., 485 F.3d 958, 946-65 (7th Cir. 2007); Novartis Pharms.Corp. v. Leavitt, 435 F.3d 344, 349 (D.C. Cir. 2006) (“We have held on a number of occasionsthat FDA interpretations of the [FDCA] receive deference, as do its interpretations of its ownregulations unless plainly erroneous or inconsistent with the regulations.”).

In some cases, as part of the manufacturing process, Defendants use a drug during21

culturing, the addition of which would also be more than minimal manipulation. (We have notidentified the drug here because Defendants consider it to be confidential commercialinformation. The addition is shown in Ex. A. (Kreuzer Dec.) Ex. 52 at 2 and Ex. 62 at 56, 59, &65; and discussed in Ex. B (Bauer Dec.) ¶ 41.c). The use of this drug in manufacturing thecultured cell product means that the cultured cell product cannot qualify for regulation under21 C.F.R. Part 1271 for an additional reason: To qualify for regulation under 21 C.F.R. Part

22


B. Defendants’ Cultured Cell Product is Held for Sale After Shipment of One or More of its Components In Interstate Commerce

Section 331(k) prohibits doing any act “with respect to, a . . . drug . . ., if such act is done

while such article is held for sale (whether or not the first sale) after shipment in interstate

commerce and results in such article being adulterated or misbranded.” 21 U.S.C. § 331(k). A

product is “held for sale” under section 331(k) if it is used for any purpose other than personal

consumption. United States v. Torigian Labs., Inc., 577 F. Supp. 1514, 1521 (E.D.N.Y. 1984),

aff’d without op., 751 F.2d 373 (2d Cir. N.Y. 1984); United States v. Articles of Drug . . .

Hydralazine HCL, 568 F. Supp. 29, 31 (D.N.J. 1983); see United States v. Diapulse Corp. of Am.,

514 F.2d 1097, 1098 (2d. Cir.), cert. denied, 423 U.S. 838 (1975); see also United States v.

Sullivan, 332 U.S. 689, 697 (1948) (section 331(k) intended to “extend [FDCA’s] coverage to

every article that had gone through interstate commerce until it finally reached the ultimate

consumer”); United States v. Evers, 643 F.2d 1043, 1050 (5th Cir. 1981) (“A practicing physician

may also fall within the bounds of this section. A serious gap would be left in the statute if doctors

who had received drugs in an intrastate transaction from a party who had in turn received them

from interstate commerce were allowed to misbrand the drugs and then distribute them to their

patients. Doctors holding drugs for use in their practice are clearly one part of the distribution

process, and doctors may therefore hold drugs for sale within the meaning of [21 U.S.C.

§ 331(k)].”). Defendants’ cultured cell product is held for sale because when manufacturing is

1271, the manufacture of the HCT/P cannot "involve the combination of the cells or tissues withanother article, except for water, crystalloids, or a sterilizing, preserving, or storage agent . . . ."21 C.F.R. § 1271.10(a)(3). The drug at issue is not water, a crystalloid, or a sterilizing,preserving, or storage agent, Ex. B (Bauer Dec.) ¶ 41.c, and thus the cells to which Defendantsadd this drug do not meet the criteria under 21 C.F.R. § 1271.10(a).

23


complete, Defendants transport it to the Clinic to be injected into patients. Ex. A (Kreuzer Dec.)

¶ 8 & Ex. 45 (SOP 119.3 at 3); see also Counterclaims ¶¶ 3, 10.22

Defendants’ cultured cell product also satisfies section 331(k)’s “after shipment in

interstate commerce” requirement. The FDCA defines “drug” to include components of a drug,

21 U.S.C. § 321(g)(1)(D). Courts have consistently interpreted section 331(k) and section

321(g)(1)(D) to mean that the final drug product (here, the cultured cell product) need not have

been shipped in interstate commerce in completed form to satisfy the requirement of prior

shipment in interstate commerce and establish a predicate for a 21 U.S.C. § 331(k) violation. See,

e.g., Baker v. United States, 932 F.2d 813, 814-15 (9th Cir. 1991) (“the ‘shipment in interstate

commerce’ requirement is satisfied even when only an ingredient is transported interstate”); United

States v. Dianovin Pharms., Inc., 475 F.2d 100, 103 (1st Cir. 1973) (“appellants’ use of

components shipped in interstate commerce to make vitamin K for injection brought their activities

within section 331(k), and conferred jurisdiction to restrain violations thereof upon the district

court”). When one of a drug’s components has been shipped in interstate commerce,

manufacturing an article of drug from that component in a manner that renders the drug adulterated

or misbranded violates 21 U.S.C. § 331(k). Dianovin Pharms., 475 F.2d at 103.

There is no dispute that the interstate commerce requirement of section 331(k) is satisfied

here. Defendants admit that they include doxycycline in the cultured cell product that they

distribute for patient injection, and that the doxycycline has been shipped in interstate commerce

RS LLC’s website previously stated, “The cash price for most Regenexx procedures is22

$7,000-$8,500 depending on what is being treated.” www.regenexx.com/common-questions/index.html. (accessed July 21, 2010); see also RS DC Complaint at 10 (noting that, atthe time of the filed suit against FDA, patients whose cells were in cryostorage had “paidRegenerative $5-8000 each for stem cell treatments”).

24


http://www.regenexx.com/common-questions/index.html.

http://www.regenexx.com/common-questions/index.html.

from Illinois to Colorado. Answer ¶ 13. Defendants likewise admit that when the processing of

the cells is complete, the syringe that they ship to the Clinic for patient injection includes a drug

product that has been shipped in interstate commerce. Answer ¶ 11; see also 21 U.S.C. § 379a (“In

any action to enforce the requirements of [the FDCA] respecting a . . . drug . . . the connection

with interstate commerce required for jurisdiction in such action shall be presumed to exist.”). As

a result, based on the undisputed facts, Defendants’ cultured cell product is held for sale after

shipment of one or more of its components in interstate commerce.

C. Defendants Adulterate Their Cultured Cell Product

In their Answer, Defendants admitted that FDA’s inspections have shown that Defendants

do not comply with CGMP when they make the cultured cell product. Answer ¶¶ 31-32. Under

the FDCA, a drug is adulterated if “the methods used in, or the facilities or controls used for, its

manufacture, processing, packing, or holding do not conform to or are not operated or administered

in conformity with [CGMP] to assure that such drug meets the requirements of [the FDCA] as to

safety and has the identity and strength, and meets the quality and purity characteristics, which it

purports or is represented to possess.” 21 U.S.C. § 351(a)(2)(B).

CGMP refers to procedures and practices intended to ensure that drugs have the identity,

strength, quality, purity, and other attributes necessary for their safe and effective use. FDA has

promulgated regulations establishing minimum CGMP requirements applicable to drugs, including

biological drugs. See 21 C.F.R. Parts 210-211 (drugs); 21 C.F.R. 600-680 (additional standards for

biological products). The CGMP regulations have the force and effect of law. Nat’l Ass’n of

Pharm. Mfrs. v. FDA, 637 F.2d 877, 889 (2d Cir. 1981). Violation of a single CGMP regulation

25


renders a drug adulterated. United States v. 789 Cases, More or Less, of Latex Surgeons’ Gloves,

799 F. Supp. 1275, 1287 (D.P.R. 1992).

When drugs are not manufactured or held in conformance with CGMP, they are “deemed”

adulterated as a matter of law, regardless of whether the products are actually deficient in any way.

21 U.S.C. § 351(a)(2)(B); John D. Copanos and Sons, Inc. v. FDA, 854 F.2d 510, 514 (D.C. Cir.

1988) (“Drugs produced in violation of these CGMP regulations are deemed to be adulterated

without the agency having to show that they are actually contaminated.”); see also United States v.

Radix Labs., Inc., 963 F.2d 1034, 1038 n.4 (7th Cir. 1992) (“If a drug is not manufactured in

conformity with CGMP it is adulterated.”); United States v. W. Serum Co., 498 F. Supp. 863 (D.

Ariz. 1980) (government need not prove the drug is deficient to be adulterated for failure to comply

with CGMP; the FDCA “is concerned with the manner in which a drug is produced as well as its

composition and content”), aff’d, 666 F.2d 335 (9th Cir. 1982).

As noted, Defendants admit that FDA’s 2009 and 2010 inspections showed that they do not

make their cultured cell product in compliance with CGMP. See Answer ¶¶ 31-32; see also Ex. A

(Kreuzer Dec.) ¶¶ 12, 14. In particular, Defendants admit that both FDA inspections documented

that Defendants fail to perform finished product testing on the cultured cell product before it is

released for distribution and have not established product release specifications. See Answer

¶¶ 31a, 32b; see also Ex. A (Kreuzer Dec.) ¶¶ 12.a, 14.a-b. For example, Defendants do not test

the cultured cell product for sterility, the presence of mycoplasma, or endotoxin before release. 23

Mycoplasma is a genus of bacteria that lacks a cell wall, and some mycoplasma species23

can be pathogenic in humans and can cause pneumonia, sometimes leading to death. Cells thatare cultured for more than a few days are at risk for mycoplasma infection. Accordingly, cellularproducts like Defendants’ cultured cell product should be tested for the presence of mycoplasmabefore administration to patients. See Ex. B (Bauer Dec.) ¶ 50. Endotoxins are toxic structural

26


This failure is particularly remarkable because Defendants’ standard operating procedures

acknowledge that “[c]ontamination by microorganisms is a major problem in tissue culture.

Bacteria, mycoplasma, yeast and fungal spores may be introduced via the operator, the

atmosphere, work surfaces, solutions, and many other sources.” Ex. A (Kreuzer Dec.) Ex. 38

at 1 (emphasis added). Defendants’ admitted failure to test each batch of the cultured cell product

to ensure it is free of microorganisms is a gross CGMP deficiency. See, e.g., Ex. B (Bauer Dec.)

¶¶ 44-52; Ex. D (Guilfoyle Dec.) ¶¶ 45-52.

Defendants have admitted other significant CGMP violations. Both FDA inspections

documented Defendants’ failure to establish an adequate system for monitoring environmental

conditions during product manufacturing, and their failure to use proper aseptic technique, among

other violations. See Answer ¶¶ 31-32; Ex. A (Kreuzer Dec.) ¶¶ 12, 14; see, e.g., Ex. D (Guilfoyle

Dec.) ¶¶ 20-23, 25-27, 29-39. Thus, there is no genuine dispute that Defendants’ manufacture of24

components of bacteria, which are released mainly when bacteria are lysed (cell walls brokenopen). Endotoxin can be present in cultured cell products even in the absence of live bacterialcontamination, and even small amounts of endotoxin can cause illness in humans. Id. ¶ 54. Endotoxin testing is a critical assay for assuring purity for biological drug products administeredto human beings. Id.

Despite ample opportunity to do so, Defendants have failed to remedy many of these24

violations. At the close of the 2010 and 2009 inspections, FDA investigators providedDefendants with a list of inspectional observations (known as a Form FDA 483). See Answer¶¶ 31-32; Ex. A (Kreuzer Dec.) ¶¶ 14, 16 & Exs. 2-3. Defendants chose not to correct theobservations identified in the 2009 inspection. See RS DC Complaint ¶ 27 (“Regenerative didnot institute any proposed remedial measures to address FDA’s concerns regarding the purportedmanufacturing of a drug, because the FDA had no jurisdiction to regulate Regenerative’s medicalpractice, the proposed remedial measures did not impact patient safety, and FDA’s inspectionalobservations were wholly unsuitable for a medical practice . . . .”). In their response to the 2010inspection, Defendants stated that they would correct some of the violations, but they refused tocorrect or did not address many others, including their failure to perform sterility, mycoplasma,and endotoxin testing on their product. Ex. A. (Kreuzer Dec.) ¶ 17 and Ex. 4.

27


the cultured cell product does not conform to CGMP, and, as a result, it is adulterated within the

meaning of the FDCA.

In sum, the government has established that the cultured cell product is a drug subject to the

FDCA, that it is held for sale after shipment of one or more of its components in interstate

commerce, and that Defendants cause the cultured cell product to become adulterated through their

admitted failure to comply with CGMP. Consequently, there is no genuine dispute regarding

Defendants’ violation of 21 U.S.C. § 331(k), and the government is entitled to summary judgment

as a matter of law.

III. DEFENDANTS’ CULTURED CELL PRODUCT IS MISBRANDED

To establish that Defendants are violating 21 U.S.C. § 331(k) by misbranding the cultured

cell product, the government must establish two things it has already shown above – namely,

(1) the cultured cell product is a drug within the meaning of 21 U.S.C. § 321(g)(1)(B) or (C)) and

(2) the cultured cell product is held for sale after one or more of its components have been shipped

in interstate commerce – and (3) the absence of certain information that is required to be included

in the label and labeling of the drug pursuant to 21 U.S.C. § 353(b)(4) and § 352(f)(1). Here again,

the facts are beyond dispute.

A. The Cultured Cell Product Is Misbranded Because It Is a Prescription Drug and Its Label Fails to Bear the Symbol “Rx only”

The FDCA specifies that a drug is a “prescription drug” if due to “its toxicity or other

potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its

use, [the drug] is not safe for use except under the supervision of a practitioner licensed by law to

administer such drug . . . .” 21 U.S.C. § 353(b)(1)(A). Defendants’ cultured cell product is a

28


prescription drug because it is intended to be injected into the patient’s joint or spine, with the aid

of an x-ray device (e.g., fluoroscope). Thus, the method of using the cultured cell product and25

the collateral measures necessary for its use make it a prescription drug. See Ex. E (Muschler

Dec.) ¶ 24 (“because the mode of administration is injection into a specific anatomic site (i.e., a

joint space, tendon sheath, facial plane or muscle compartment), and the safe administration of the

RS cultured cell product requires the avoidance of trauma or inadvertent injection into nerves or

major blood vessels, the RS cultured cell product can only be administered by a skilled clinician,

who is knowledgeable in accurate diagnosis of musculoskeletal medical conditions, human

anatomy, and experienced in the safe and sterile administration of injection agents into the

appropriate musculoskeletal sites”); Ex. C (Shannon Dec.) ¶¶ 34-35.

A prescription drug is misbranded “if at any time prior to dispensing the label of the drug

fails to bear, at a minimum, the symbol ‘Rx only’.” 21 U.S.C. § 353(b)(4)(A). The label for

Defendants’ cultured cell product does not contain the statement “Rx only.” See Ex. A (Kreuzer

Dec.) ¶ 18 and Ex. 6 (photograph of product label); id. Ex. 26 at 3 (copy of product label); see

also Answer ¶ 34. Thus, Defendants’ cultured cell product is misbranded under 21 U.S.C.

§ 353(b)(4) as a matter of law.

See Ex. A (Kreuzer Dec.) Ex. 59 at 2 (consent form for “Autologous Transplantation of25

Synovial Fluid Derived Mesenchymal Stem Cells” states “X-ray guidance will be used to placethe sterile needle to the site in need of repair.”); Id. Ex. 30 at 83 (Centeno article stating “underfluoroscopic guidance, MSCs were inserted percutaneously into either a peripheral joint or anintervertebral disc.”); see, e.g., id. Ex. 61 (description of patient procedure noting use of “lateralfluoroscope” to place the needle and x-ray to confirm accurate placement).

29


http://www.regenexx.com/common-questions/

B. The Cultured Cell Product is Misbranded Because Its Labeling Fails to Bear Adequate Directions for Use

The FDCA also deems a drug misbranded if its labeling fails to bear “adequate directions

for use” and the drug does not fall within a regulatory exemption from that requirement. 21 U.S.C.

§ 352(f)(1). The cultured cell product’s labeling is inadequate both as a matter of fact and as a

matter of law, for several reasons.

First, FDA has defined “adequate directions for use” as “directions under which the layman

can use a drug safely and for the purposes for which it is intended.” 21 C.F.R. § 201.5; see also

United States v. Algon Chem., Inc., 879 F.2d 1154, 1156 (3d Cir. 1989) (“Courts have consistently

upheld the FDA’s interpretation of this provision as requiring adequate directions for use of the

drug by a layman.”) (emphasis in original); United States v. Articles of Drug (Rucker Pharmacal),

625 F.2d 665, 673 (5th Cir. 1980) (a “drug’s labeling must contain adequate directions for a

consumer to engage in self-medication.”); United States v. Two Units, More or Less, of an Article

or Device, Consisting of a Power Unit and a Chair, 49 F.3d 479, 482 (9th Cir. 1995) (medical

device is “misbranded if it does not bear adequate directions to enable a layperson to use it

safely.”).

Directions for use are inadequate unless the drug’s labeling contains, among other things:

quantity of dose, including, among others, the usual quantities for each of the uses for which it is

intended and usual quantities for persons of different physical conditions; frequency and duration

of administration; time of administration in relation to time of meals, onset of symptoms, and other

factors; and route or method of administration. See 21 C.F.R. § 201.5; see also Nature Food

Centres, Inc. v. United States, 310 F.2d 67, 69-71 (1st Cir. 1962) (drug misbranded if labeling fails

30


to state all intended uses for which it is marketed); Alberty Food Prods. Co. v. United States, 194

F.2d 463, 464 (9th Cir. 1952) (adequate directions for use must include statement of “the purposes

and conditions for which the drug was intended and sufficient information to enable a layman to

intelligently and safely attempt self medication.”); see also United States v. An Article of Device

. . . “Hubbard Electrometer,” 333 F. Supp. 357, 362 (D.D.C. 1971) (“Accompanying labeling

must specify the conditions for which the device is intended and sufficient information under

which the device can be used safely and effectively for the purposes for which it is intended to be

used.”).

The labeling for Defendants’ cultured cell product clearly does not meet these

requirements. Defendants admit that, per their standard operating procedures, when RS LLC

finishes processing the cells, the cells (and other ingredients) are placed in a syringe in a sterile bag

that is labeled only with the patient’s name and date of birth, and such manufacturing information

as laboratory notebook number, cell passage number, days in culture, and similar information.

Answer ¶ 34; Ex. A (Kreuzer Dec.) ¶ 18 and Ex. 45 at 3; id. Ex. 6 (product label); id. Ex. 26 at 3

(product label). This label contains none of the information required by 21 C.F.R. § 201.5, and

thus the cultured cell product is misbranded under 21 U.S.C. § 352(f)(1).

Second, the labeling for a prescription drug cannot, as a matter of law, satisfy the

requirement that it bear adequate directions for use by a layperson. A prescription drug like the

cultured cell product, by its nature, may be used safely only under the supervision of a physician.

See 21 U.S.C. § 353(b)(1); Articles of Drug (Rucker Pharmacal), 625 F.2d at 670. Because

prescription drugs can be used safely only at the direction, and under the supervision, of a

physician, directions under which the layperson could use a drug safely cannot be written for a

31


prescription drug. Id. at 673, 675 (it is not possible to provide a layperson with adequate directions

for use for a prescription drug); United States v. Baxter Healthcare Corp., 712 F. Supp. 1352, 1359

(N.D. Ill. 1989) (because the company “restricted distribution of these products to prescription use

only, perforce its labels are not ‘adequate’ for use” by a layperson), aff’d, 901 F.2d 1401 (7th Cir.

1990); United States v. An Article of Drug . . . Mykocert, 345 F. Supp. 571, 573 (N.D. Ill. 1972)

(drug manufacturer was foreclosed from arguing that its drug bore adequate directions for lay use

because the drug was a prescription drug); see also Ex. E (Muschler Dec.) ¶¶ 50-51.

Because the cultured cell product by definition cannot bear adequate directions for use by a

layperson, it is per se misbranded unless it qualifies for an exemption from section 352(f)(1).

Articles of Drug (Rucker Pharmacal), 625 F.2d at 673 (“Since a prescription drug by definition can

be used only under a physician’s supervision, and is unsuitable for self-medication, such a drug

must qualify for a regulatory exemption created by FDA” under section 352(f)); United States v.

Premo Pharm. Labs., Inc., 511 F. Supp. 958, 977 n.23 (D.N.J. 1981) (“A drug is misbranded if it is

a prescription drug that is an unapproved new drug, because a prescription drug cannot bear the

adequate directions for use required by statute, section 352(f)(1), and the lack of an approved [new

drug application] means that there is no FDA exemption from the adequate directions for use

requirement”) (citations omitted). However, Defendants cannot meet their burden of showing that

they qualify for any such exemption. 26

Should Defendants seek to avail themselves of one of the regulatory exemptions to26

section 352(f)(1), they bear the burden of showing that the cultured cell product meets all of thecriteria for the exemption. See United States v. 9/1 Kg. Containers, 854 F.2d 173, 176 (7th Cir.1988) (claimant bore burden of proof that drugs qualified for exemption to requirement that druglabeling bear adequate directions for use); see also United States v. Article of Device, 731 F.2d1253, 1261-62 (7th Cir. 1984) (same, in device context); United States v. Articles of Device, 527F.2d 1008, 1012 n.6 (6th Cir. 1976) (same). But Defendants cannot show that their product

32


Third, even if Defendants tried to draft adequate directions for use of their cultured cell

product, it would be impossible to do so based on currently available data. “Adequate directions

for use — including indications, contraindications, dosages, routes of administration, warnings,

side effects, and necessary collateral measures — are premised on a body of animal and clinical

data derived from extensive, scientifically controlled testing.” United States v. Miami

Serpentarium Labs., Inc., 1981-82 FDC L. Rptr. Dev. Trans. Binder ¶ 38,164 at 38,931 (S.D. Fla.

Mar. 30, 1982) (copy attached as Ex. F); see also United States v. Undetermined Quantities of

qualifies for any of the exemptions from 21 U.S.C. § 352(f)(1). Specifically, 21 C.F.R. § 201.115 permits a “new drug” (see supra at 4 n.2) to be exempt

from section 352(f)(1) “[t]o the extent . . . such exemption is claimed in an approved” new drugapplication. Defendants’ cultured cell product is a new drug under 21 U.S.C. § 321(p)(1)because it is not “generally recognized, among experts qualified by scientific training andexperience to evaluate the safety and effectiveness of drugs, as safe and effective for use underthe conditions prescribed, recommended, or suggested in the labeling thereof . . . .” SeeWeinberger v. Hynson, Westcott, & Dunning, Inc., 412 U.S. 609, 629-30 (1973) (in the absenceof “any evidence of adequate and well-controlled investigation supporting the efficacy of [adrug], a fortiori [the drug] would be a ‘new drug’ subject to the provisions of the [FDCA]”);Ex. E (Muschler Dec.) ¶¶ 25-36, 43, 46, 54 (there are no published adequate and well-controlledstudies establishing that the cultured cell product is safe or effective for any condition and it isnot generally recognized as safe and effective for any orthopedic indication); Ex. C (ShannonDec.) ¶ 32. Even if the cultured cell product were generally recognized as safe and effective forits conditions of use, which it is not, it would still be a “new drug” because it has not been “usedto a material extent or for a material time under such conditions.” See 21 U.S.C. § 321(p)(2);see, e.g., www.regenexx.com/common-questions/ (in a FAQ explaining why the procedure is notcovered by insurance, RS LLC explains “The procedure is too new to be covered yet byinsurance.” and answering “Why don’t other doctors do this yet?” RS LLC states, “Like any newtechnique, the medical community takes some time to adopt the procedure.”) (accessed Dec. 21,2010); Ex. A (Kreuzer Dec.) Ex. 30 (Centeno et al. reporting on groups of patients treated from2006-2009). Because the cultured cell product is a new drug and it is unapproved, Answer ¶¶ 20,25, it cannot qualify for the exemption in 21 C.F.R. § 201.115. See also Rucker Pharmacal, 625F.2d at 675 (unapproved new drug not exempt from 21 U.S.C. § 352(f)(1)).

The cultured cell product also fails to qualify for the exemption for prescription drugs forhuman use, 21 C.F.R. § 201.100. Among other things, its label does not bear informationrequired under 21 C.F.R. 201.100(b) & (c)(1). See Answer ¶ 34; Ex. A (Kreuzer Dec.) ¶ 18 andEx. 6 (photograph of product label showing the absence of information required under thoseregulations).

33



Articles of Drug, 145 F. Supp. 2d 692, 702 (D. Md. 2001) (“Essentially, in the absence of

investigations or clinical data demonstrating the safety and efficacy of the drugs, there can be no

adequate instruction for their safe use.”) (emphasis in original); Ex. E (Muschler Dec.) ¶ 54

(“directions for use that are not based on scientific evidence of safety and efficacy based on widely

accepted standards of study conduct and documentation are not ‘adequate.’”); Ex. C (Shannon

Dec.) ¶¶ 39-40. Because no well-controlled studies have been conducted on Defendants’ cultured

cell product, there is no scientifically valid evidence to show that it is safe or effective for any

indication, or on which to base the directions for use. See Ex. C (Shannon Dec.) ¶¶ 39-40; Ex. E

(Muschler Dec.) ¶¶ 25-36, 46, 54-55.

For any one and all of these reasons, there can be no dispute that Defendants’ cultured cell

product is misbranded under 21 U.S.C. § 352(f)(1) because its labeling does not - and cannot - bear

adequate directions for use.

IV. DEFENDANTS’ VIOLATIONS ARE NOT EXCUSED BY THEIR CLAIM THAT THEY ARE ENGAGED IN THE PRACTICE OF MEDICINE

Defendants’ principal defense is that their conduct is beyond FDA jurisdiction because they

are engaged in the “practice of medicine.” See Answer at 8. As an initial matter, Defendants’27

argument offers no explanation of how RS LLC, a corporation, and its Laboratory Director, Ms.

Cheever (a non-physician), could possibly engage in the practice of medicine.

In any event, there is no exemption in the FDCA for the conduct at issue here. Although

FDA generally does not interfere with a physician prescribing lawfully marketed products for uses

Although we respond briefly to Defendants’ practice of medicine argument here because27

it appears to be their principal defense to this suit (see Answer at 8-10), we will not respond toDefendants’ affirmative defenses unless and until they are briefed by Defendants.

34


other than those for which they are approved, licensed, or cleared by FDA, the agency’s role in28

determining the availability of therapeutic products inevitably affects the options available to

practitioners seeking to use or prescribe those products. See, e.g., 9/1 Kg. Containers, 854 F.2d at

176 (“Congress gave the FDA comprehensive powers to license the manufacture of drugs and limit

their sales. To regulate drugs is to be ‘involved’ in the ‘practice of the healing arts.’”); Evers, 643

F.2d at 1048 (“[W]hile the [FDCA] was not intended to regulate the practice of medicine, it was

obviously intended to control the availability of drugs for prescribing by physicians.”); Loran

Medical Sys., 25 F. Supp. 2d at 1087 (“The court disposes quickly of defendants' argument that the

FDA’s exercise of authority over the Cell Product is an attempt to regulate the practice of medicine

-- an area traditionally left to the states. While the [FDCA] was not intended to regulate the

practice of medicine, it was obviously intended to control the availability of drugs for prescribing

by physicians. The court has already determined that the Cell Product is a drug. Accordingly, the

FDA has the authority to regulate its use.”) (internal citation and quotation omitted).

Accordingly, the “practice of medicine” provides no safe harbor for Defendants’

manufacture and distribution of an unapproved drug. See Algon Chem., 879 F.2d 1154 (holding

that “practice of medicine” policy did not permit veterinarians to compound drugs from

components they could not legally obtain); 9/1 Kg. Containers, 854 F.2d at 176-78 (the statements

in the legislative history of the FDCA that the statute would not interfere with the practice of the

healing arts “never meant more than that medical licensure and discipline would continue to be the

See Citizen Petition Regarding the Food and Drug Administration’s Policy on28

Promotion of Unapproved Uses of Approved Drugs and Devices; Request for Comments, 59Fed. Reg. 59820, 59821 (Nov. 18, 1994) (“[O]nce a [drug] product has been approved formarketing, a physician may prescribe it for uses or in treatment regimens of patient populationsthat are not included in approved labeling.”).

35


states’ business. . . . Nothing in the history or structure of the [FDCA] permits drugs deemed

ineffective or dangerous by the FDA to be available for use.”); Cowan v. United States, 5 F. Supp.

2d 1235 (N.D. Okla. 1998) (adopting magistrate judge’s report and recommendation rejecting

argument that “practice of medicine” exception permits physician to treat AIDS patient with an

experimental drug developed by the physician); see also 21 U.S.C. § 396 (FDCA does not “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 . . . .”); cf. United States v. Rutherford,

442 U.S. 544 (1979) (holding that FDA could prohibit sale and distribution of an unapproved drug

for the treatment of terminally ill cancer patients); Abigail Alliance for Better Access to

Developmental Drugs v. Eschenbach, 495 F.3d 695, 710-711, n.18 (D.C. Cir. 2007) (en banc)

(holding terminally ill patient had no fundamental right to access investigational drugs; explaining

that “there is no right to practice medicine which is not subordinate . . . to the power of Congress to

make laws necessary and proper”) (citing, inter alia, Lambert v. Yellowley, 272 U.S. 582, 588, 590,

596-597 (1926)).

Because, as Defendants admit (Answer ¶¶ 20-21, 25), the cultured cell product has not

been approved for any purpose, Defendants’ “practice of medicine” claim is unavailing.

V. THIS COURT SHOULD ISSUE A PERMANENT INJUNCTION RESTRAININGDEFENDANTS FROM FURTHER VIOLATIONS OF THE FDCA

A. Legal Standard

In this suit, the government seeks a statutory injunction to restrain violations of a remedial

public health statute. 21 U.S.C. § 332(a). Where, as here, a statute authorizes an injunction to

enforce Congressional policy, the court applies a different standard to consider the propriety of an

36


injunction than that applied to private litigants. The Supreme Court has held that the government

need not show that irreparable harm will result to obtain an injunction authorized by statute.

United States v. City and County of San Francisco, 310 U.S. 16, 31 (1940).

When seeking a statutory injunction, the government need only show that the defendants

have violated the statute and there is some “cognizable danger of recurrent violation.” United

States v. W.T. Grant Co., 345 U.S. 629, 633 (1953); accord United States v. Diapulse Corp. of

Am., 457 F.2d 25, 28-29 (2d Cir. 1972) (the court will consider the “likelihood of continuing

violation” when evaluating whether to grant an injunction under the Act); United States v. Odessa

Union Warehouse Co-Op, 833 F.2d 172, 175 (9th Cir. 1987) (in statutory injunctions, “the agency

to whom the enforcement of the right has been entrusted is not required to show irreparable injury”

and “[n]o specific or immediate showing of the precise way in which violation of the law will

result in public harm is required.”); United States v. Lane Labs-USA, Inc., 324 F. Supp. 2d 547,

571 (D.N.J. 2004); United States v. Rx Depot, Inc., 290 F. Supp. 2d 1238, 1246 (N.D. Okla. 2003).

This standard is particularly appropriate in cases where, as here, the government seeks to

enforce a statute enacted with the overriding purpose of protecting the public health and consumers

who are largely unable to protect themselves. United States v. Dotterweich, 320 U.S. 277 (1943);

Kordel v. United States, 335 U.S. 345, 349 (1948) (purpose of FDCA is to protect the public).

Under such circumstances, violation of the statute is presumed to cause public harm. W.T. Grant29

As one court recently explained: 29

[T]he Court is not aware of any decision requiring the Government to establishirreparable injury before issuing an injunction prohibiting further violations of[section 331 of the FDCA]. See, United States v. Nutri-Cology, Inc., 982 F.2d394, 398 (9th Cir. 1992); United States v. Spectro, 544 F.2d 1175, 1181 (3d Cir.1976); Diapulse, 457 F.2d at 28 (2d Cir. 1972) (citing cases); United States v.

37


Co., 345 U.S. at 633; accord Odessa, 833 F.2d at 175-76; Diapulse, 457 F.2d at 28; Rx Depot,

290 F. Supp. 2d at 1246. 30

The risks posed by Defendants’ violations underscore the need for injunctive relief here.

Defendants are manufacturing an injectable biological drug product in a manner that does not

comply with CGMP, thereby posing significant risks to the consumers who receive it. See, e.g.,

Ex. B (Bauer Dec.) ¶ 46 (the “absence of lot-release sterility testing is a significant CGMP

violation and unnecessarily places recipients of the Regenexx cultured cell products at risk of

exposure to bacteria and fungi and, as a consequence, possible severe illness”); id. ¶¶ 3, 49, 51-52,

54-55, 69; Ex. E (Guilfoyle Dec.) ¶¶ 21, 26, 31-39, 45-52, 54-55. Moreover, no adequate and

Livdahl, 356 F. Supp. 2d 1289, 1290-91 (S.D. Fla. 2005); United States v. RxDepot. Inc., 290 F. Supp. 2d 1238, 1246 (N.D. Okla. 2003); United States v. H.W.Andersen Prods., Inc., No. 2:95cv00315, 1997 U.S. Dist. LEXIS 3080, at *4(M.D. N.C. Jan, 24, 1997); United States v. Kasz Enters., Inc., No. 930455P, 1994U.S. Dist. LEXIS 8597, at *32 (D. R.I. May 6, 1994); United States v. RichlynLabs., Inc., 827 F. Supp. 1145, 1150 (E.D. Pa. 1992); United States v. Pro-Ag,Inc., 796 F. Supp. 1219, 1231 (D. Minn. 1991). This principle reflects theunderlying difference of purpose between an injunction sought by the sovereignpursuant to a statute and that sought by a private litigant. This difference is thepursuit of the public interest. Hecht Co. v. Bowles, 321 U.S. at 330 (explainingthat it is ‘the standards of the public interest, not the requirements of privatelitigation, [that] measure the propriety and need for injunctive relief’). Because‘the passage of the statute is itself an implied finding by Congress that violationswill harm the public.’ Nutri-Cology, Inc., 982 F.2d at 398, the Court sees noreason to deviate from this approach and will not do so.

United States v. Endotec, Inc., 2009 U.S. Dist. LEXIS 93985 *18-19 (M.D. Fla. Sept. 28, 2009).

The D.C. Circuit discussed in dicta what standard should apply when the government30

seeks a preliminary injunction action to enforce a statute in United States v. Microsoft Corp.,147 F.3d 935, 943-44 (D.C. Cir. 1998). That case, however, involved a preliminary injunctionissued in response to the government’s petition for contempt for violations of a consent decree,rather than a statutory injunction issued in response to violations of the underlying statute. Thatcase did not involve and did not establish the standard for issuance of an injunction under theFDCA.

38


well-controlled clinical trials have been performed on the cultured cell product, and it has not been

shown to be safe and effective, through valid scientific evidence, for the treatment of any of the

myriad orthopedic conditions for which Defendants are promoting its use. Ex. F (Muschler Dec.)

¶¶ 25-36, 43-45, 55; Ex. C (Shannon Dec.) ¶¶ 24, 29-32, 40.

B. Defendants Will Continue to Violate the FDCA Unless Enjoined

As shown above, Defendants have violated the FDCA by causing the adulteration and

misbranding of a drug while it is held for sale after shipment of one or more of its components in

interstate commerce. An injunction is necessary to bring Defendants into compliance with the law

and to prevent future violations. RS LLC steadfastly maintains that FDA may not regulate the

cultured cell product and Defendants’ manufacturing practices even though the cultured cell

product falls squarely within the definition of a drug and a biological product. Indeed, the

company has sued FDA twice in a flawed attempt to prevent FDA from enforcing the FDCA

against its product. See supra at 15 n.16.

Defendants have likewise failed to correct significant CGMP violations observed at RS

LLC during two FDA inspections. See Ex. A (Kreuzer Dec.) ¶¶ 12, 14, 16. Many of the violations

were repeat observations. For example, although in the 2009 inspection FDA noted RS LLC’s

failure to establish product release specifications and to perform finished product testing on its

cultured cell product before it is released for distribution (and thus injected into patients), FDA

found these deficiencies were continuing in 2010. Answer ¶¶ 31-32; Ex. A (Kreuzer Dec.) ¶¶ 12.a

& 14.a. FDA also observed gross deficiencies related to environmental monitoring and aseptic

technique during both inspections. Ex. A (Kreuzer Dec.) ¶¶ 12.b-d, 14; see also Answer ¶¶ 31-32.

39


Thus, it is evident that Defendants will not bring their product into compliance with the law unless

compelled to do so by this Court.

CONCLUSION

Defendants’ admissions and the evidence submitted by the government show that there is

no genuine issue of material fact in dispute. It is equally clear that Defendants violate well-

established law. The government therefore respectfully requests that this Court grant its motion for

summary judgment and permanently enjoin Defendants from causing the adulteration and

misbranding of their cultured cell product. A proposed order is filed herewith.

DATED this 7 day of January, 2011.th


Of Counsel:

MARK B. CHILDRESSActing General Counsel

RALPH S. TYLERAssociate General CounselFood and Drug Division


PAIGE H. TAYLORSenior CounselFood and Drug Administration10903 New Hampshire Avenue Silver Spring, MD 20993-0002301-796-8720


ANN M. RAVELDeputy Assistant Attorney General

EUGENE M. THIROLFDirector

/s/ PERHAM GORJITrial AttorneyOffice of Consumer LitigationCivil DivisionU.S. Department of Justice450 Fifth Street, N.W.Washington, D.C. 20001Phone: 202-353-3881Fax: [email protected]

40





UNITED STATES OF AMERICA, ) Civil Action No. 1:10-cv-01327-RMC))

Plaintiff, ))

v. ))

REGENERATIVE SCIENCES, LLC, )a corporation, et al., )

)Defendants. )

PLAINTIFF’S STATEMENT OF MATERIAL FACTSAS TO WHICH THERE IS NO GENUINE ISSUE

The United States of America, plaintiff, by and through undersigned counsel, respectfully

represents as follows:

1. Regenerative Sciences, LLC (“RS LLC”) is incorporated under the laws of the

State of Colorado and its laboratory is located at 6850 West 116th Avenue, Unit D, Broomfield,

Colorado. See Defendants’ First Amended Answer, Affirmative Defenses, and Counterclaims

(“Answer” and “Counterclaims”) (Dkt No. 15-1) ¶ 4.1

2. Christopher J. Centeno, M.D. is the Medical Director and acting Chief Executive

Officer of RS LLC. Dr. Centeno is the person most responsible for the overall conduct of RS

LLC. Answer ¶ 5.

3. John R. Schultz, M.D. serves on RS LLC’s board of directors. Answer ¶ 6.

Defendants Answer and their Counterclaims appear in the same document (Dkt No. 15-1),1

both starting with paragraphs numbered 1. To avoid confusion, we cite the two portions of thedocument separately as “Answer ¶ __” and “Counterclaims ¶ __,” respectively.


4. Dr. Centeno and Dr. Schultz are the majority shareholders of RS LLC.

Counterclaims ¶ 4.

5. Michelle R. Cheever is RS LLC’s Laboratory Director. Answer ¶ 7. She is

responsible for the day-to-day operations of the RS LLC laboratory. Id. (admitting sentence but

objecting to any inference that Ms. Cheever is the most responsible person for the operations of

the laboratory); Motion for Summary Judgment Exhibit A (Declaration of Karen S. Kreuzer)

(hereafter, “Kreuzer Dec.”) Ex. 46 (RS LLC SOP 124.2, Standard Operating Procedure

Guidelines) at 2 (stating that the “Laboratory Director is responsible for all procedures and

administrative operations of the facility.”); Kreuzer Dec. Ex. 48 (RS LLC SOP 126.3,

Terminology) at 2 (“Laboratory Director is responsible for all procedures and administrative

operations of the facility, including compliance with these Standards.”). Ms. Cheever

participated in drafting RS LLC’s laboratory procedures. Answer ¶ 7.

6. Ms. Cheever holds equity ownership in RS LLC. Answer ¶ 7; see also Kreuzer

Dec. Ex. 30 (Centeno CJ, Schultz JR, Cheever M, Robinson B, Freeman M, Marasco W, Safety

and Complications Reporting on the Re-implantation of Culture-Expanded Mesenchymal Stem

Cells using Autologous Platelet Lysate Technique, Current Stem Cell Research & Therapy, 2010;

5:81-93) at 81.

7. RS LLC owns what it describes as a procedure, called the “Regenexx™

procedure.” Counterclaims ¶ 4.

8. The Regenexx procedure involves the removal of stem cells from a donor patient,

expansion of those stem cells in culture, and placement of the stem cells into the donor patient.

See Regenerative Sciences v. FDA, Civ. No. 1:10-cv-01055-RMC (D.D.C.), Complaint (Dkt. No.

2


1) ¶¶ 14-15 (hereafter, “RS DC Complaint”) (the Regenexx procedure “requires the removal of

stem cells and other tissue from a donor patient, the expansion of the stem cells, and the

placement of the stem cells in the same patient for the treatment of the patient’s degenerated or

injured area of the body.”); see also Counterclaims ¶¶ 5, 10.

9. RS LLC receives samples of a patient’s bone marrow or synovial fluid. Kreuzer

Dec. ¶ 8; see also Counterclaims ¶ 5. RS LLC then isolates what it describes as mesenchymal

stem cells (MSCs) from the bone marrow or synovial fluid, expands them using growth factors

from the patient’s blood (e.g., platelet lysate) and reagents (e.g., Dulbecco’s Modified Eagle’s

Medium), and combines them with other drug products (such as heparin and doxycycline).

Answer ¶ 11. The process of expanding the cells typically takes two to three weeks and involves

multiple steps in which the cells are centrifuged (with certain cell and plasma layers then

removed) and placed in culture media in an incubator, thereby causing the cells to divide and

expand in number. Id. When the cells expand to a certain point, they are exposed to an enzyme,

trypsin, which digests some of the proteins on the surface of the cells and causes the cells to

detach from the plastic flask in which they were contained. Id. RS LLC then harvests the

detached cells, treats them with media to stop the action of the trypsin, washes them with fresh

media, and either puts the cells into other flasks for further expansion, prepares them for cryo-

preservation, or prepares them for injection. Id. Ultimately, after one or more cell passages (and,

in some cases, following cryo-preservation), the expanded cells, along with a drug product that

has been shipped in interstate commerce and other additives, are placed into syringes. Id.

10. The processing of the cultured cell product involves many steps, including

selective culture and expansion of a multitude of different types of blood-forming and rare bone

3


marrow stromal cells using plastic flasks, additives and nutrients, and environmental conditions

such as temperature and humidity, to determine the growth and biological characteristics of the

resulting cell population. Answer ¶ 29.

11. RS LLC’s Regenexx™ pamphlet states that “The Regenexx procedure is safe and

can often prevent the need for surgery.” Answer ¶ 16.a. The pamphlet lists the following

conditions and diseases as “candidates” for the procedure: “Patients with non-healing bone

fractures”; “Osteoarthritis of the knee, hip, ankle, shoulder, hands”; “Chronic bulging lumbar

disc”; “Injuries to the meniscus, rotator cuff”; “Avascular Necrosis of the shoulder, hip”; and

“Chronic Bursitis.” Answer ¶ 16.a.; see also RS DC Complaint ¶¶ 14 (the Procedure is “for the

treatment of orthopedic injuries and arthritis”); Regenerative Sciences v. FDA, Civ. No.

1:09-cv-00411-WYD-BNB (D. Colo.), Complaint (Dkt. No. 1) ¶ 16 (“RS Colorado Complaint”)

(“The Procedure is for the treatment of musculoskeletal and spinal injury.”).

12. The Regenerative Sciences’ website, www.regenexx.com, describes the

Regenexx™ procedure as “an Alternative to Traditional Surgery.” See

http://www.regenexx.com/ the-regenexx-procedures/. Answer ¶ 16.b.

The frequently asked questions section of www.regenexx.com states, “What types of problems

can be treated? Fractures that have failed to heal, joint cartilage problems, partial tears of

tendons, muscles, or ligaments, chronic bursitis, avascular necrosis of the bone, and lumbar disc

bulges.” See http://www.regenexx.com/ common-questions/ (accessed July 20, 2010). Answer

¶ 16.b. The www.regenexx.com the website also states, “The Regenexx™ procedure has been

4


http://www.regenexx.com/the-regenexx-procedures/



shown to be safer than tradtional [sic] surgical techniques in published research and can often

prevent the need for surgery.” See http://www.regenexx.com/the-regenexx-procedure-explained/

(accessed July 20, 2010). Answer ¶ 16.b.

13. Defendants’ cultured cell product is administered by injection into, for example,

the patient’s joint or intervertebral disc using a type of x-ray device. Kreuzer Dec. Ex. 59 at 2

(consent form states “X-ray guidance will be used to place the sterile needle to the site in need of

repair.”); see also Kreuzer Dec. Ex. 30 at 83 (Centeno CJ, Schultz JR, Cheever M, Robinson B,

Freeman M, Marasco W, Safety and Complications Reporting on the Re-implantation of

Culture-Expanded Mesenchymal Stem Cells using Autologous Platelet Lysate Technique,

Current Stem Cell Research & Therapy, 2010; 5:81-93) (stating, “With the patients’ written

consent, and under fluoroscopic guidance, MSCs were inserted percutaneously into either a

peripheral joint or an intervertebral disc.”) (emphasis added); Kreuzer Dec. Ex. 61 (2010 EIR Ex.

KDM 9) (describing use of “lateral fluoroscope” to place the needle and X-ray to confirm

accurate placement).

14. FDA investigators inspected RS LLC between February 23, 2009 and April 15,

2009. Answer ¶ 31. That inspection showed that the methods used in, and the facilities and

controls used for, the manufacture, processing, packing, or holding of the cultured cell product

do not conform to and are not operated or administered in conformity with CGMP. See

21 U.S.C. § 351(a)(2)(B) and 21 C.F.R. Parts 210-211; see also 21 C.F.R. Parts 600-680 (setting

forth additional standards applicable to biological products). Answer ¶ 31. At the close of the

2009 inspection, FDA investigators issued a list of inspectional observations (Form FDA 483) to

Regenerative Sciences’ Acting CEO, Dr. Centeno, with Dr. Schultz and Ms. Cheever present.

5


http://www.regenexx.com/the-regenexx-procedure-explained/


Answer ¶ 31; Kreuzer Dec. Ex. 2. The CGMP violations observed during the 2009 inspection

included, but were not limited to, the following:

a. Failure to establish and follow appropriate written procedures designed to

prevent microbiological contamination of drug products purporting to be sterile, as required by

21 C.F.R. § 211.113(b); see also 21 C.F.R. § 610.12. Answer ¶ 31.a.

b. Failure to perform appropriate laboratory testing of each batch of drug


§ 211.165(b). Answer ¶ 31.b.

c. Failure to establish scientifically sound and appropriate specifications,

standards, sampling plans, and test procedures designed to assure that drug products conform to

appropriate standards of identity, strength, quality, and purity, as required by 21 C.F.R.

§ 211.160(b). Answer ¶ 31.c.

d. Failure to ensure, for each batch of drug product, appropriate laboratory

determination of satisfactory conformance to final specifications for the drug product prior to

release, as required by 21 C.F.R. § 211.165(a). Answer ¶ 31.d.


conditions during product manufacturing, as required by 21 C.F.R. § 211.42(c)(10)(iv). Answer

¶ 31.e.

15. FDA investigators inspected RS LLC again between June 2, 2010 and June 16,

2010. Answer ¶ 32. That inspection also showed that the methods used in, or the facilities and

controls used for, the manufacture, processing, packing, or holding of Defendants’ cultured cell

product do not conform to and are not operated or administered in conformity with CGMP. Id.

6


(admitting but denying that CGMP is applicable to them). At the close of the 2010 inspection,

FDA investigators issued a list of inspectional observations (Form FDA 483) to Dr. Schultz. Id.;

Kreuzer Dec. Ex. 3. Ms. Cheever was present and Dr. Centeno attended by telephone. Answer

¶ 32. The CGMP violations observed during the June 2010 inspection included, but were not

limited to, the following:

a. Failure to establish scientifically sound and appropriate specifications,

standards, sampling plans, and test procedures designed to assure that in-process materials and

drug products conform to appropriate standards of identity, strength, quality, and purity, as

required by 21 C.F.R. § 211.160(b). Answer ¶ 32.a.

b. Failure to ensure, for each batch of drug product, appropriate laboratory

determination of satisfactory conformance to final specifications for the drug product, prior to

release, as required by 21 C.F.R. § 211.165(a). Id. ¶ 32.b.

c. Failure to establish and follow appropriate written procedures designed to


C.F.R. § 211.113(b); see also 21 C.F.R. § 610.12. Id. ¶ 32.c.

d. Failure to perform appropriate laboratory testing of each batch of drug


§ 211.165(b). Id. ¶ 32.d.



7


f. Failure to establish and follow an aseptic gowning qualification program to

assess the ability of aseptic processing technicians to maintain the quality of the gown after

performance of manufacturing operations, as required by 21 C.F.R. § 211.113(b). Id. ¶ 32.f.

g. Failure to perform cleaning validation on the biological safety cabinet

aseptic processing surfaces or on all other surfaces in the aseptic processing laboratories, as

required by 21 C.F.R. § 211.42(c)(10)(v). Id. ¶ 32.g.

h. Failure to maintain separate or defined areas or such other control systems

for the firm’s operations as are necessary to prevent contamination during aseptic processing, as

required by 21 C.F.R. § 211.42(c)(10)(iii). Id. ¶ 32.h.

16. When the manufacturing of the cultured cell product is complete, it is loaded into a

syringe and placed into a sterile bag. Answer ¶ 11; Kreuzer Dec. Ex. 45 (RS LLC SOP 119.3) at

3. According to Defendants’ standard operating procedures, the bag is labeled only with the

patient’s name, date of birth, laboratory notebook number, cell passage number, day in culture,

cell number, number of cells cryo-preserved, and condition of cell suspension. Answer ¶ 34;

Kreuzer Dec. Ex. 45 (RS LLC SOP 119.3) at 3. The bag is then placed into a cooler and sent to

the Clinic. Id. (admitting but denying this is a distribution activity); see also Kreuzer Dec. Ex. 45

(RS LLC SOP 119.3) at 3.

17. When RS LLC ships the cultured cell product to the Centeno Schultz Clinc, its

label does not bear the symbol “Rx only.” Kreuzer Dec. ¶ 18 & Ex. 6 (photograph of product

label); Kreuzer Dec. Ex. 26 at 3 (copy of product label); see also Kreuzer Dec. Ex. 45 (SOP

119.3) at 3.

8


18. When RS LLC ships the cultured cell product, its labeling does not specify

frequency of administration; duration of administration; time of administration; route of

administration; or preparation for use. Answer ¶ 34; Kreuzer Dec. ¶ 18 & Ex. 6 (photograph of

product label); Kreuzer Dec. Ex. 26 at 3 (copy of product label); see also Kreuzer Dec. Ex. 45

(SOP 119.3) at 3.

19. There is not now, nor has there ever been, an approved new drug application

(“NDA”) filed with FDA pursuant to 21 U.S.C. § 355(b) or (j) for Defendants’ cultured cell

product. Answer ¶ 20.

20. There is not now, nor has there ever been, an approved investigational new drug

application (“IND”) filed with FDA pursuant to 21 U.S.C. § 355(i) for Defendants’ cultured cell


21. There is not now, nor has there ever been, an approved biologics license

application (“BLA”) filed with FDA pursuant to 42 U.S.C. § 262 for Defendants’ cultured cell


22. Defendants use doxycycline at various points in the manufacture of the cultured

cell product. See Answer ¶¶ 11, 13.

23. The doxycycline that Defendants use in the manufacture of the cultured cell product

has been shipped in interstate commerce to Defendants from outside of Colorado. Answer ¶ 13;

Kreuzer Dec. ¶ 17 & Ex. 5.

24. FDA sent a letter to Dr. Centeno as a representative of RS LLC on July 25, 2008,

in which the agency advised the company that it was promoting cells used in the Regenexx™

9


procedure for uses that cause them to be drugs under the FDCA and biological products under the

PHSA. Answer ¶ 41; see Kreuzer Dec. Ex. 1; RS Colorado Complaint ¶¶ 43-44.

DATED this 7th day of January, 2011.



_________/s/_______________PERHAM GORJITrial AttorneysOffice of Consumer LitigationU.S. Department of JusticeP.O. Box 386Washington, D.C. 20044Telephone: (202) 353-3881

OF COUNSEL:

MARK B. CHILDRESS Acting General Counsel

RALPH S. TYLERChief Counsel, Food and Drug Division


PAIGE H. TAYLORSenior CounselFood and Drug Administration10903 New Hampshire Avenue Silver Spring, MD 20993-0002Telephone: (301) 796-8720

10


CERTIFICATE OF SERVICE

I certify that on the 7th day of January, 2011, the undersigned caused a true and correctcopy of the above-entitled Plaintiff’s Motion for Summary Judgment, and attached Memorandumof Law in Support of Plaintiff’s Motion for Summary Judgment, its supporting Declarations, andPlaintiff’s Statement of Material Facts, to be served via the District Court’s Electronic FilingSystem upon counsel of record for the defendant as follows:

William F. Coffield, Esq.Coffield Law Group, LLP 1330 Connecticut Avenue, NW Suite 220 Washington, DC 20036 (202) 429-4799 (o) (202) 429-3902 (f) [email protected]

s/ Perham Gorji Perham Gorji


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