Recent Federal Court Decisions Re: FDA

Two Federal Courts have released decisions that affect the extent of authority of the FDA. The first case deals with FDA's capability to debar corporate executives of companies that engage in illegal conduct. The second case deals with the agency's authority to regulate stem cell treatments. In the first case, called Friedman v. Sebelius, No. 11 5028, July 27, 2012, the United States Court of Appeals for the DC Circuit upheld a lower court's ruling allowing the FDA to personally bar executives of the Purdue Frederick Company ("Purdue") from participating in Federal programs such as Medicare and Medicaid. The CORPORATION had pleaded guilty to felony charges for misbranding and the fradulent promotion of the painkiller OxyContin. The INDIVIDUAL EXECUTIVES of Purdue had pleaded guilty to misdeamor violations in which the Purdue exectutives did not admit, and the government did not allege, any fraudulent conduct on the part of the executives. Soon after the plea, the United States Department of Health and Human Services Office of Inspector General ("OIG") determined that the executives should be individually debarred from participating in the federal health programs for 20 years. After several administrative rulings, the case came up before the Court of Appeals. The federal statute at play says that individuals can be excludied from participating in federal health care plans if they have been convicted "of a criminal offense consisting of a misdemeanor relating to fraud." 42 U.S.C.Sec.1320a-7(b)(1)(A). The executives had pleaded guilty to a misdeamenor which did not include fraud. The Court held that the government can exclude an individual under this provision based on a conviction which was for conduct factually related to fraud, even thought the offense to which the person pleaded guilty did not require a showing of fraud. The significance of the above case is that pleading guilty to a non-fraudulent misdemeanor may not longer save the defendent from disbarment. In the second case, a US District Court, which is the lowest court level in the federal system, held that the harvesting of a patient's own mesencymal stem cells from his/her own bone marrow and then re-injecting the stem cells into the same patient for treatment of bone and joint pain constitutes the manufacture of a drug or biological product rather than the practice of medicine. If the procedure was the practice of medicine, it would be regulated by state, i.e., in this case, Colorado. If the procedure was manufacturing, it would regulated by the FDA. If the stem cells are only “minimally manipulated”, they should only be regulated under FDA regulations for HCT/Ps, which would not require FDA approval. However, the court found that this particular procedure exceeded mere “processing” of cells in that the procedure changed their relevant biological and physiological characteristics. This is in part because the procedure added the antibiotic doxycycline into the removed stem cells to avoid infection. The Court went on to find the stem cells "adulterated" because they were not manufactured according to FDA regulations and "misbranded" because the syringe label did not have the required federal wording. United States v. Regenerative Sciences, LLC (Civil Action No. 10-1327 (RMC) (U.S.D.C. July 23, 2012).