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Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 1 of 22 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

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Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 1 of 22 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Civil Action No (RMC)
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Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 1 of 22 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Civil Action No (RMC) ) REGENERATIVE SCIENCES, LLC, ) CHRISTOPHER J. CENTENO, M.D., ) JOHN R. SCHULTZ, M.D., and ) MICHELLE R. CHEEVER, ) ) Defendants. ) ) ) MEMORANDUM OPINION Drs. Christopher J. Centeno and John R. Schultz developed the Regenexx Procedure, by which they use stem cell therapies to aid healing for their orthopedic patients. They formed Regenerative Sciences LLC ( Regenerative ) for this endeavor, at which Michelle R. Cheever is the Laboratory Director. They are all now facing an enforcement action by the Food and Drug Administration ( FDA ), which charges them with causing articles of drug to become adulterated and misbranded within the meaning of the Federal Food, Drug, and Cosmetic Act ( FFDCA ), 21 U.S.C. 301 et seq. Compl. [Dkt. 1] 1. Defendants respond that they practice medicine wholly within the State of Colorado and under its oversight and that the Regenexx Procedure is not a drug subject to regulation by the federal government. Defs. Opp. to Pl. s Mot. for Summ. J. [Dkt. 26] ( Defs. Opp ) at 1. 1 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 2 of 22 It is a close question but ultimately the Court concludes that the Regenexx Procedure is subject to FDA enforcement because it constitutes a drug and because a drug that has been shipped in interstate commerce is used in the solution through which the cultured stem cells are administered to patients. This acknowledged connection to interstate commerce renders the Regenexx Procedure subject to the FFDCA even though the doctors themselves are practicing medicine under Colorado law. Summary judgment will be granted to the United States and an injunction will be issued precluding the continued use of the Regenexx Procedure without compliance with the FFDCA. I. FACTS Drs. Centeno and Schultz practice together and jointly own the Centeno-Schultz Clinic in Broomfield, Colorado. Drs. Centeno and Schultz are also the majority shareholders of Regenerative, which owns the Regenexx Procedure and exclusively licenses the Clinic to use it. Ms. Sheever serves as Regenerative s Laboratory Director. Regenerative and the Clinic are related companies and operate as one business. The Regenexx Procedure is a non-surgical procedure for patients suffering from moderate to severe joint, muscle, tendon or bone pain due to injury or other conditions. Am. Answer Countercls. [Dkt. 16] ( Countercls. ) 3. The Regenexx Procedure begins with a licensed physician taking a small bone marrow sample from the back of a patient s hip through a needle. Blood samples are also taken from a vein in the patient s arm. These samples are then sent to the Regenerative laboratory which is also in Broomfield, Colorado, just a few miles from the Clinic where the mesenchymal stem cells (MSCs) are isolated from the bone marrow and then grown to greater numbers. This process uses the natural growth factors found in the patient s blood to grow the MSCs. After approximately 2 weeks, the expanded stem cells are sent to the University of Colorado affiliated Colorado Genetics Laboratory for testing.... 2 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 3 of 22 Once the cells pass quality assurance testing, they are placed back into the patient s injured area (i.e. knee, hip, rotator cuff), typically 4-6 weeks after they were removed. The stem cells then begin to repair the patient s degenerated or injured area. The repair process usually takes between 3-6 months but many patients demonstrate marked improvement within 1-3 months. Countercls In August 2010, when this matter began, the Regenexx Procedure constituted about one-third of the procedures performed by the Clinic. Defs. Opp. at 15. Of critical importance here is the process by which Regenerative expands the mesenchymal cells taken from a patient s bone marrow and delivers a syringe with the cells in solution to the Clinic. 1. A doctor at the Clinic obtains a tissue sample from the patient s bone marrow by inserting a needle into the hip bone and drawing a thick blood like liquid into a syringe; the sample is then sent to the laboratory. 2. The marrow sample is centrifuged to separate out fractions of the bone marrow and the middle layer ( buffy coat ) is taken off with a pipette. 3. The cells from the buffy coat are placed in a plastic flask and kept in a warm environment to incubate with the patient s own blood platelets that contain growth factors, as well as a nutrient solution. Over a few days, the mesenchymal stem cells adhere to the plastic flask while the rest of the cells do not adhere. 4. The non-adherent cells are discarded and the mesenchymal stem cells are collected using Trypsin, an enzyme, to detach the cells from the plastic flask. 5. The process is repeated to grow the cells. 6. The cells undergo a visual inspection by the Colorado Genetics Laboratory to make sure that there are no genetic mutations or other genetic problems. The treating doctor then approves the cells. 3 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 4 of 22 Defs. Opp., Ex. 7 [Dkt. 26] (Centeno Decl.) 13-24; see also Compl. 11. [T]he expanded cells, along with a drug product that has been shipped in interstate commerce 1 and other additives, are placed into syringes. Regenerative Sciences [sends] the filled syringes in sterile bags to the Clinic, where they are injected into patients. Compl. 11; see Answer 11 & 13 (admitting this fact). In a letter dated July 25, 2008, the FDA notified Regenerative that the FDA believed that the cell product used in the Regenexx Procedure constituted a drug under the FFDCA and a biological product under the Public Health Service Act, 42 U.S.C. 262 ( PHSA ). Further, the FDA stated that because Regenerative had not obtained the necessary approvals for the cell product, its actions in this regard were possibly unlawful. Countercls. 20 & 21; Pl. s Mot. for Summ. J. [Dkt. 19] ( Pl. s Mot. ) at 13. FDA investigators inspected Regenerative between February 23, 2009 and April 15, Compl. 31; Countercls. 24. That inspection showed that the laboratory did not operate in conformity with current good manufacturing practice ( CGMP ). 2 See 21 U.S.C. 351(a)(2)(B) and 21 C.F.R. Parts ; see also 21 C.F.R. Parts When the 2009 inspection concluded, the FDA investigators issued a list of observations that identified a series of alleged CGMP violations. Compl. 31. FDA investigators again inspected Regenerative between June 2, 2010 and June 16, Countercls. 26, 27. That inspection also revealed alleged CGMP violations, which the investigators catalogued in a list of observations. Compl The drug product is not identified except in sealed documents as Defendants claim it is confidential commercial information. See Pl. s Mot. at 12 n CGMP assure[s] that [a] drug meets the requirements of [the statute] 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). 4 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 5 of 22 While the initial FDA inspection was ongoing, Regenerative filed a complaint against the FDA in United States District Court for the District of Colorado, alleging that the FDA did not have the jurisdiction to regulate autologous 3 use of stem cells. Regenerative Sciences, Inc. v. FDA, Civ. No. 1:09-cv WYD-BNB [Dkt. 1] (D. Colo. Feb. 26, 2009) ( Regenerative I ). On March 26, 2010, the district court granted the FDA s motion to dismiss on ripeness grounds. Regenerative I, Civ. No. 1:09-cv WYD-BNB [Dkt. 42] (D. Colo. Mar. 26, 2010). Regenerative then filed a notice of appeal with the United States Court of Appeals for the Tenth Circuit on March 29, Regenerative I, Civ. No (10th Cir.). On June 22, 2010, Regenerative filed a complaint in this Court challenging FDA s determination that Regenerative is a drug manufacturer. Regenerative Sciences, Inc. v. FDA, Civ. No. 1:10-cv [Dkt. 1] (D.D.C. June 22, 2010) ( Regenerative II ). On July 6, 2010, Regenerative filed a motion for a temporary restraining order in this Court. Regenerative II, Civ. No. 1:10-cv [Dkt. 9] (D.D.C. July 6, 2010). Pursuant to a Stipulated Order, the parties agreed to litigate the entire dispute in this Court. Defs. Opp. at Accordingly, Regenerative agreed to dismiss the pending actions in the District of Colorado and the Tenth Circuit, as well as withdraw its motion for a temporary restraining order in this Court. Stip. Order [Dkt. 10] at 11. Regenerative also agreed to stop using the Regenexx Procedure during the pendency of this litigation. Id. at 6. FDA has filed a motion for summary judgment, as well as a motion to dismiss Defendants counterclaims. 3 Autologous use means the implantation, transplantation, infusion, or transfer of human cells or tissue back into the individual from whom the cells or tissue were recovered. 21 C.F.R On June 30, 2010, Regenerative filed a motion to stay the Colorado case pending its appeal. Regenerative I, Civ. No. 1:09-cv WYD-BNB [Dkt. 53] (D. Colo. June 30, 2010). 5 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 6 of 22 II. LEGAL STANDARDS A. Summary Judgment Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment shall be granted if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Talavera v. Shah, 638 F.3d 303, 308 (D.C. Cir. 2011). Moreover, summary judgment is properly granted against a party who after adequate time for discovery and upon motion... fails to make a showing sufficient to establish the existence of an element essential to that party s case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party s favor and accept the nonmoving party s evidence as true. Anderson, 477 U.S. at 255; Talavera, 638 F.3d at 308. A nonmoving party, however, must establish more than [t]he mere existence of a scintilla of evidence in support of its position. Anderson, 477 U.S. at 252. In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Id. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson, 477 U.S. at (citations omitted). B. Motion to Dismiss A motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the adequacy of a complaint on its face. Fed. R. Civ. P. 12(b)(6). A complaint must be sufficient to give the defendant fair notice of what the... claim is and the 6 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 7 of 22 grounds upon which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks and citation omitted). Although a complaint does not need detailed factual allegations, a plaintiff s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Id. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Twombly, 550 U.S. at 570. A court must treat the complaint s factual allegations as true, even if doubtful in fact. Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in a complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In deciding a motion under Rule 12(b)(6), a court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits or incorporated by reference, and matters about which the court may take judicial notice. Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007). III. ANALYSIS The question presented here is whether the Regenexx Procedure constitutes a drug (or biologic product) subject to FDA regulation or whether it is merely an intrastate method of medical practice subject only to the laws of the State of Colorado. FDA asserts that the Regenexx Procedure constitutes the manufacturing, holding for sale, and distribution of an unapproved biological drug product. Moreover, FDA claims that Defendants have violated the FFDCA s prohibition on adulteration and misbranding a drug with their Regenexx Procedure. On the other hand, Defendants argue that the Regenexx Procedure constitutes the practice of medicine as defined by Colorado law and that the FDA lacks jurisdiction to regulate it. 7 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 8 of 22 Defendants also assert that the Regenexx Procedure occurs entirely intrastate and is not covered by the Commerce Clause or the FFDCA, which limit federal power to interstate commerce. A. Federalism and the Commerce Clause Defendants insist that the FDA s complaint must be understood within the constitutional principles of federalism and the limits of the Commerce Clause. They urge the Court to apply the assumption that the historic police powers of the States were not to be superseded by [a] Federal Act unless that was the clear and manifest purpose of Congress. Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (internal quotation marks and citations omitted). By long tradition, the health and safety of the people is left to the States as matters of local concern. Id. at 475. Accordingly, Defendants state that Congress has left the practice of medicine to the States to regulate. FDA does not disagree with these principles but asserts that their exercise of jurisdiction over Defendants Regenexx Procedure is a permissible exercise of federal power under the Commerce Clause. Congress may regulate the practice of medicine or rather, certain aspects of it, when it does so pursuant to its Commerce Clause powers. Congress has the power [t]o regulate Commerce... among the several states.... U.S. Const. art. I, 8, cl. 3. The United States Supreme Court has defined three categories of activity that may be regulated by Congress pursuant to its Commerce Clause power: (1) channels of interstate commerce, (2) instrumentalities of interstate commerce, or persons or things in interstate commerce, (3) those activities having a substantial relation to interstate commerce, or those activities that substantially affect interstate commerce. United States v. Lopez, 514 U.S. 549, (1995). The [FFDCA] rests upon the constitutional power resident in Congress to regulate interstate commerce. To the end that the 8 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 9 of 22 public health and safety might be advanced, it seeks to keep interstate channels free from deleterious, adulterated and misbranded articles of the specified types. It is in that interstate setting that the various sections of the Act must be viewed. United States v. Walsh, 331 U.S. 432, 434 (1947) (internal citations omitted). The FFDCA provisions at issue in this case require an interstate commerce nexus, ensuring that regulation under the FFDCA is consistent with the Commerce Clause. 21 U.S.C. 331(k) (applying only if the drug is held for sale after shipment in interstate commerce ). Thus, the question here is one of statutory interpretation whether Defendants cell product is subject to the terms of the FFDCA. B. The Regenexx Procedure is a Drug Under the FFDCA 1. Definition of a Drug The best place to start when interpreting a statute is the language of the law itself. Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002) ( As in all statutory construction cases, we begin with the language of the statute. ). The FFDCA defines drug to mean articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease or articles (other than food) 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). Based on this definition, whether an article is a drug depends on its intended use. Whitaker v. Thompson, 353 F.3d 947, 953 (D.C. Cir. 2004) is binding precedent on this point: 5 under the FFDCA, classification of a substance as a drug turns on the nature of the claims advanced on its behalf. 6 Further, it is well established 5 The Court asked the parties why the Court should not read the definition of device at 21 U.S.C. 321(h) as informing and restricting the definition of drug at 21 U.S.C. 321(g)(1)(B)&(C) and is now persuaded to adopt the direct language of the statute without interpretation. Order to Show Cause [Dkt. 42]. 6 See also 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, 9 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 10 of 22 that the intended use of a product, within the meaning of the [FFDCA], is determined from its label, accompanying labeling, promotional claims, advertising, and any other relevant source. Action on Smoking & Health v. Harris, 655 F.2d 236, 239 (D.C. Cir. 1980) (internal quotation marks and citations omitted); see 21 C.F.R ( The words intended uses or words of similar import in 201.5, , , , , and refer to the objective intent of the persons legally responsible for the labeling of drugs. The intent is determined by such persons expressions or may be shown by the circumstances surrounding the distribution of the article.... (emphasis added)); Estee Lauder, Inc. v. FDA, 727 F. Supp. 1, 2 (D.D.C. 1989) ( Courts have 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. ). FDA also regulates biological products under the PHSA, 42 U.S.C A biologic product is defined by the PHSA as any virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, protein (except any chemically 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)(1). 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). 7 Except for some licensing distinctions, the FFDCA applies in full to a biologic product licensed under the PHSA. 42 U.S.C. 262(j); see 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) ( The vendors intent in selling the product to the public is the key element in this statutory definition. ). 7 See also United States v. Loran Med. Sys., Inc., 25 F. Supp. 2d 1082, (C.D. Cal. 1997) (holding that a cell product made from neonatal rabbit and human fetal cells was both a drug and a biological product). 10 Case 1:10-cv RMC Document 47 Filed 07/23/12 Page 11 of 22 CareToLive, 525 F. Supp. 2d at 957 ( Biological products... are generally subject to the same statutory and regulatory requirements that apply to drugs. ). Defendants website and pleadings describe their intended use for the Regenexx Procedure. Defendants promote the Regenexx Procedure to treat a variety of orthopedic conditions and injuries. On the Regenerative Sciences website, Defendants describe the Regenexx Procedure as an Alternative to Traditional Surgery that can treat [f]ractures that have failed to heal, joint cartilage problems, partial tears of tendons, muscles, or
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