Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 1 of 19 Page ID #:4641

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA – EASTERN DIVISION

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8 UNITED STATES OF AMERICA, Case No. 9 EDCV 18-1005 JGB (KKx) 10 Plaintiff, v. 11

FINDINGS OF FACT AND

12 CALIFORNIA STEM CELL TREATMENT CONCLUSIONS OF LAW CENTER, INC., et al. 13 14 Defendants.

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1 This is a statutory injunction proceeding in which the United States, on 2 behalf of the U.S. Food and Drug Administration (“FDA”), seeks to permanently 3 enjoin Defendants California Stem Cell Treatment Center, Inc., Cell Surgical 4 Network Corporation, and Drs. Elliot B. Lander, M.D., and Mark Berman, M.D., 5 from performing various stem cell treatments on patients. The United States 6 alleges these treatments violate the Federal Food, Drug, and Cosmetic Act 7 (“FDCA”). Specifically, the United States alleges that three of Defendants’ 8 stromal vascular stem cell treatments violate: 21 U.S.C. § 331(k) by causing the 9 adulteration of drugs; 21 U.S.C. § 331(k) by causing the misbranding of drugs; and 10 21 U.S.C. § 331(c) by receiving drugs that are misbranded. 11 The case was tried to the Court on May 4, 5, 6, 7, 11, 12, and 13, 2021. Oral 12 closing arguments occurred on August 20, 2021. Because of the ongoing Covid-19 13 pandemic, the United States appeared via videoconference. At the August 20, 14 2021 closing arguments, the Court ordered supplemental briefing, which was 15 submitted by both sides on August 27, 2021, and September 1, 2021. (“Pl’s Supp 16 Br.,” Dkt. No. 179; “Defs Supp Br.,” Dkt. No. 178; “Pl’s Supp Opp.,” Dkt. No. 17 181; “Defs Supp Opp.,” Dkt. No. 180.) 18 The Court, having considered all the evidence presented by the parties, the 19 written submissions from both sides, and the argument of counsel, issues the 20 following Findings of Fact and Conclusions of Law. 21

22 23 I. FINDINGS OF FACT 24 A. General Facts 25 1. Defendant California Stem Cell Treatment Center (“CSCTC”) is a 26 California professional corporation founded in 2010, with its principal place 27 of business located at 72-780 Country Club Drive, Suite 301, Rancho Mirage, 28 California 92270 (“CSCTC Rancho Mirage”). California Stem Cell 2 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 3 of 19 Page ID #:4643

1 Treatment Center has a second location at 120 South Spalding Drive, Suite 2 300, Beverly Hills, California 90212 (“CSCTC Beverly Hills.”). (“Stip. 3 Facts,” Dkt. No. 113-1 ¶ 1.) 4 2. Defendant Elliot B. Lander, M.D., a surgeon and board-certified urologist, is 5 the co-owner and Co-Medical Director of CSCTC. He is the most 6 responsible individual at CSCTC Rancho Mirage and performs his duties 7 there, within the jurisdiction of this Court. He manages all firm employees 8 at CSCTC Rancho Mirage. (“Pl. SOF,” Dkt. No. 169-1 ¶ 3.) 9 3. Defendant Mark Berman, M.D., a board-certified cosmetic surgeon, is the 10 co-owner and Co-Medical Director of CSCTC.1 He performs his duties at 11 the CSCTC Beverly Hills facility, within the jurisdiction of this Court. He is 12 the most responsible individual at CSCTC Beverly Hills. (Id. ¶ 4.) 13 4. Defendant Cell Surgical Network Corporation (“CSN”) is a California 14 corporation founded and owned by Dr. Berman and Dr. Lander that is 15 registered to do business at 72-780 Country Club Drive, Suite 301, Rancho 16 Mirage, California 92270, the same address as CSCTC Rancho Mirage. 17 (Stip. Facts ¶ 2.) 18 5. CSN operates a one-employee warehouse in Palm Desert, California, from 19 which equipment and supplies are shipped to CSN affiliates. (Id. ¶ 3.) 20 6. Drs. Berman and Lander are the co-owners and Co-Medical Directors of 21 CSN. They are also the co-owners of Cells On Ice, Inc., which has assisted 22 in the recovery of adipose tissue sent outside of the State of California. (Pl. 23 SOF ¶ 6.) 24 B. The “SVF Surgical Procedure” 25 26

27 1 There have been news accounts of Mr. Berman’s death in May 2022. The parties have not filed a judicially noticeable document verifying the accounts. The 28 Court’s Findings of Fact are written in light of the lack of verification. 3 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 4 of 19 Page ID #:4644

1 7. Defendants offer patients a treatment called the “SVF Surgical Procedure.” 2 In this procedure, a licensed physician targets stromal vascular fraction cells 3 (“SVF Cells”) for extraction and then implants those same cells that were 4 removed back into the same patient during the same procedure. (“Defs. 5 SOF,” Dkt. No. 168-1 ¶ 1.) 6 8. SVF Cells are comprised of multiple cell types found within adipose tissue; 7 these include mesenchymal stem cells (“MSC Cells”), hematopoietic cells, 8 early (progenitors) and mature lineage stages of endothelia, pericyte 9 progenitor cells (also called perivascular cells), red blood cells, white blood 10 cells, lymphocytes, and fibroblasts among other cells. SVF Cells are the 11 naturally occurring part of the adipose tissue that does not contain the 12 adipocytes (fat cells). (Id. ¶ 2.) 13 9. Surgeons routinely work on both tissues and cells that make up tissues. 14 Surgery universally involves dissection (cutting and separation) of tissues 15 through mechanical or chemical means, and has evolved to where surgeons 16 can isolate cells following removal from a patient’s body. Dissected tissues 17 and cells that have been isolated can be surgically relocated and re-purposed 18 to other parts of a patient’s body. (Id. ¶ 4.) 19 10. Surgery is intended for the treatment and prevention of disease in the human 20 body. It can treat chronic and systemic conditions, and it is intended to 21 affect the structure or function of the human body. There are no FDA- 22 approved or disapproved surgical procedures. (Id. ¶¶ 5-8.) 23 11. Accordingly, the surgical treatments at issue here have not been licensed or 24 approved by the United States Food and Drug Administration. There are 25 not now, nor have there ever been, any approved new drug applications for 26 the surgical treatments (“NDAs”) filed with FDA pursuant to 21 U.S.C. § 27 355(b) or (j). And there are not now, nor have there ever been any approved 28 4 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 5 of 19 Page ID #:4645

1 biologics license applications (“BLAs”) filed with FDA pursuant to 42 2 U.S.C. § 262 for the treatments. (Stip. Facts ¶¶ 7-9.) 3 12. The SVF Surgical Procedure targets for removal mesenchymal stem cells 4 and the hemopoietic or angiogenic stem cells located within the adipose 5 tissue, not the adipose tissue itself. (Defs. SOF ¶ 10.) 6 13. The SVF Surgical Procedure involves collecting the patient’s SVF Cells 7 naturally contained in the patient’s adipose tissue and relocating those SVF 8 Cells back into the same patient. The SVF Cells are already in circulation 9 within the body. The SVF Surgical Procedure increases the number of 10 available SVF Cells in circulation or around an injured area. (Id. ¶ 11.) 11 14. The entire SVF Surgical Procedure, including the extraction, isolation, and 12 reimplantation of SVF Cells occurs in California during a single, outpatient 13 procedure at a surgical clinic. (Id. ¶ 12.) 14 15. During the SVF Surgical Procedure, a licensed physician collects the 15 patient’s SVF Cells using a technique called “mini-liposuction via 16 subdermal local anesthesia,” which permits the liposuction of the SVF Cells, 17 along with the adipose and connective tissue that contains the SVF Cells, 18 under local anesthesia. Many cells are mechanically separated (“mechanical 19 cutting”) from the adipose tissue during the liposuction procedure, as is 20 common in all surgeries. Next, the removed adipose tissue is centrifuged to 21 remove the anesthesia and to further mechanically dissociate the SVF Cells 22 from the adipose tissue. The physician then uses surgical tools—namely, 23 Liberase enzymes and a centrifuge device—to isolate the SVF Cells from 24 adipocytes (fat cells). Finally, the SVF Cells are filtered through a hundred 25 micron filter and viewed through a special micrograph to ensure that the 26 SVF Cells are free-floating, round, and do not contain clumps of particles or 27 debris. The SVF Cells are then suspended in a sterile saline solution, after 28 which they are relocated back into the patient’s body. Saline is a benign 5 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 6 of 19 Page ID #:4646

1 crystalloid, widely used in the practice of medicine. No new product is 2 created by the use of saline as a delivery mechanism. (Id. ¶¶ 13-15, 21-22.) 3 16. All of the materials used to isolate SVF Cells during the SVF Surgical 4 Procedure are FDA-approved drugs or FDA-cleared devices. (Id. ¶ 17.) 5 17. The SVF Cells are not altered, chemically or biologically, at any point during 6 the SVF Surgical Procedure. There are no genes added to or removed from 7 the SVF Cells during the SVF Surgical Procedure. The SVF Surgical 8 Procedure does not change the size or genetic makeup of the SVF Cells. 9 The procedure does not alter the biological characteristics of the SVF cells, 10 nor does it affect their ability to proliferate. (Id. ¶¶ 23-24.) 11 18. The SVF Surgical Procedure does not create any new material or introduce 12 any foreign article into the body. Unlike manufactured drugs, the SVF 13 Surgical Procedure does not create any cellular or tissue-based product that 14 did not previously exist within the patient. (Id. ¶¶ 44.) 15 19. Drs. Berman and Lander are board certified surgeons. Drs. Berman and 16 Lander and their practices are regulated by the State of California Medical 17 Board. Dr. Berman’s facility in Beverly Hills is accredited by the 18 Accreditation Association for Ambulatory Health Care (“AAAHC”) per 19 California law. The operating rooms in which Drs. Berman and Lander 20 perform the SVF Surgical Procedure comply with all health and safety 21 standards established by the California State Medical Board for outpatient 22 procedures. (Id. ¶¶ 51-52.) 23 C. The “Expanded MSC Surgical Procedure” 24 20. In addition to the SVF Surgical Procedure, Drs. Berman and Lander 25 perform a procedure whereby a patient’s adipose tissue is removed and sent 26 to a GMP-compliant tissue bank to isolate MSC Cells. The MSC Cells are 27 then replicated and stored until the same patients request that they be 28 6 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 7 of 19 Page ID #:4647

1 returned for implantation into her body (the “Expanded MSC Surgical 2 Procedure”). (Id. ¶ 61.) 3 21. During the Expanded MSC Surgical Procedure, a qualified candidate 4 undergoes liposuction at either Dr. Berman or Dr. Lander’s medical 5 facilities. Drs. Berman and Lander do not perform the remainder of the SVF 6 Surgical Procedure on the harvested adipose tissue but send the tissue to a 7 GMP-compliant third party. (Id. ¶ 62.) 8 22. A patient is eligible for the Expanded MSC Surgical Procedure where the 9 individual has a medical condition that will require multiple treatments, but 10 the individual is unable or unwilling to undergo multiple liposuctions. (Id. ¶ 11 63.) 12 23. Drs. Berman and Lander do not adulterate, manufacture, process or store 13 the patient’s adipose tissue during the Expanded MSC Surgical Procedure. 14 The third party isolates the MSC Cells from the adipose tissue using a 15 technique that is similar to the SVF Surgical Procedure. The third party 16 then places the MSC Cells in a culture, in which the MSC Cells naturally 17 begin to replicate (i.e., expand in number), thereby creating a sufficient 18 number of cells under GMP conditions for multiple treatments (the 19 “Expanded MSC Cells”). Replication or propagation is a natural state for 20 stem cells and the Expanded MSC Cells retain all of the biological 21 characteristics of the MSC Cells. The Expanded MSC Cells retain their cell 22 markers, and do not differentiate while in the culture or during storage. The 23 third-party tissue bank places the Expanded MSC Cells into a sterile vial 24 labeled with the patient’s name, date, and description pursuant to well- 25 defined patient identifier protocols. The third-party tissue bank places the 26 Expanded MSC Cells into a sterile vial labeled with the patient’s name, date, 27 and description pursuant to well-defined patient identifier protocols. (Id. ¶¶ 28 64-69.) 7 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 8 of 19 Page ID #:4648

1 24. The Expanded MSC Cells are intended for autologous use, which refers to 2 the “implantation, transplantation, infusion, or transfer of human cells or 3 tissue back into the individual from whom the cells or tissue were 4 recovered.” See 21 C.F.R. § 1271.3(a). 5 25. Defendants can (and do) administer the Expanded MSC Cells weeks, 6 months, and even years after the patient’s adipose tissue is removed. (“US 7 SOF,” Dkt. No. 169-1 ¶ 22.) 8 26. At the time of the inspection in 2017, Drs. Berman and Lander were sending 9 the adipose tissue to American Cryostem (“ACS”) for isolation of the MSC 10 Cells and storage of the same. (Defs. SOF ¶ 71.) 11 27. Drs. Berman and Lander believed that ACS was a GMP facility based on 12 ACS’s representations. Drs. Berman and Lander ceased utilizing ACS in 13 connection with the Expanded MSC Surgical Procedure following notice 14 from the FDA that ACS was not complying with GMP regulations. (Id. ¶ 15 72.) 16 28. The third party that Drs. Berman and Lander currently use is registered 17 with the FDA and has been inspected by the FDA, with no resulting 18 deficiency letters. (Id. ¶ 73.) 19 29. The Government did not present any evidence that Defendants are 20 adulterating any material in connection with the Expanded MSC Surgical 21 Procedure. (Id. ¶ 79.) 22 30. Only licensed practitioners can perform the Expanded MSC Surgical 23 Procedure. (Id. ¶ 80.) 24 31. At all times, the vials containing the Expanded MSC Cells are labeled with 25 the patient’s name, date, and description pursuant to patient identifier 26 protocols. (Id. ¶ 82.) 27 32. The Government did not present any evidence that Defendants label or 28 mislabel any material regulated by the FDA in connection with the Expanded 8 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 9 of 19 Page ID #:4649

1 MSC Surgical Procedure. Nor did it present any evidence regarding the 2 labeling Defendants receive from any GMP facility in connection with the 3 Expanded MSC Surgical Procedure, or that any such labeling is deficient. 4 (Id. ¶¶ 83-84.) 5 33. Drs. Berman and Lander do not charge for the Expanded MSC Cells; they 6 only charge a surgical fee for the liposuction procedure. Patients paid a 7 separate facility fee to the third party for the banking or storage of the 8 Expanded MSC Cells. (Id. ¶¶ 85-86.) 9 D. The “SVF/ACAM2000 Treatment” 10 34. Drs. Berman and Lander partnered with StemImmune to study the safety of 11 utilizing SVF Cells as a mechanism to deliver ACAM2000, an oncolytic 12 virus, to cancer cells (“SVF/ACAM2000 Treatment”). (Id. ¶ 87.) 13 35. The SVF/ACAM2000 Treatment was a limited experimental treatment 14 only available to individuals with terminal cancer for whom traditional 15 treatment had failed. Drs. Berman and Lander would prepare the SVF Cells 16 using their standard method, then add the ACAM2000 to the SVF Cells 17 ACAM2000 (“SVF/ACAM2000 Cells”), before deploying into the same 18 patient’s body. (Id. ¶ 88.) 19 36. The combination of SVF and ACAM2000 Cells is a manufactured product. 20 (Pls. SOF ¶ 160.) 21 37. ACAM2000 is an FDA-approved vaccine. (Defs. SOF ¶ 89.) 22 38. The federal government maintains exclusive control over ACAM2000 as 23 part of the country’s Strategic National Stockpile and it may only be 24 distributed by specific government agencies. It is not publicly available, but 25 researchers may request vials for studies. (Id. ¶ 91.) 26 39. Drs. Berman and Lander cannot perform the SVF/ACAM2000 Treatment 27 without access to ACAM2000. (Id. ¶ 92.) 28 9 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 10 of 19 Page ID #:4650

1 40. The FDA confiscated vials of ACAM2000 from StemImmune’s 2 laboratories at the University of California, San Diego in August 2017. Dr. 3 Berman last performed the SVF/ACAM2000 Treatment before the FDA’s 4 2017 confiscation. Dr. Lander last performed the SVF/ACAM2000 5 Treatment in June 2016. Drs. Berman and Lander have no desire or 6 intention to perform the SVF/ACAM2000 Treatment outside of proper 7 FDA regulatory approval or a determination that that SVF/ACAM2000 8 Cells are not a drug and do not fall under FDCA regulations. (Id. ¶ 94-97.) 9 41. The ACAM2000 that Defendants used for the SVF/ACAM2000 Surgical 10 Procedure was shipped in interstate commerce from the Centers for Disease 11 Control (“CDC”) in Georgia. (Pls. SOF ¶ 173.) 12 42. The SVF/ACAM2000 Cells were not placed in any container for 13 preservation, storage, or later use. (Defs. SOF ¶ 102.) 14 43. The SVF/ACAM2000 Treatment was performed at all times by Drs. 15 Berman and Lander, who are licensed physicians. Drs. Berman and Lander 16 performed the SVF/ACAM2000 Treatment pursuant to the IRB-approved 17 study protocols, which included detailed step-by-step instructions on how to 18 extract and isolate the SVF Cells, reconstitute the ACAM2000 vaccine, and 19 implant the SVF/ACAM2000 Cells. (Id. ¶ 103.) 20 21 II. CONCLUSIONS OF LAW 22 A. General 23 1. The Federal Food, Drug, and Cosmetic Act (“FDCA”) defines a drug as 24 any “article,” or component thereof, that is “intended for use in the 25 diagnosis, cure, mitigation, treatment, or prevention of disease” or is 26 “intended to affect the structure or any function of the body of man or other 27 animals.” See 21 U.S.C. § 321(g)(1)(B), (C), and (D). However, surgical 28 procedures—standard in the practice of medicine—are also intended for the 10 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 11 of 19 Page ID #:4651

1 diagnosis, cure, mitigation, treatment, or prevention of disease. When 2 passing the FDCA, Congress explicitly rejected any attempt to “limit or 3 interfere with the authority of a health care practitioner to prescribe or 4 administer any legally marketed device to a patient for any condition or 5 disease within a legitimate health care practitioner-patient relationship.” 21 6 U.S.C. § 396. Indeed, Congress recognized the limitations of the FDA and 7 rejected “any intent to directly regulate the practice of medicine.” Buckman 8 Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 351 n.5 (2001). 9 2. The line between “drug” and “procedure” is especially muddy when 10 licensed medical doctors enter a patient’s body, extract that patient’s cells, 11 and reintroduce those cells to that patient after some amount of cellular 12 processing. The United States argues that this scenario constitutes the 13 production of FDCA drugs. Defendants argue that this is mere surgery, the 14 exclusive province of the medical practitioners, and not something which the 15 FDCA may regulate. 16 3. The Court concludes that neither Defendants’ SVF Surgical Procedure nor 17 its Expanded MSC Procedure are “drugs” within the meaning of the FDCA. 18 In contrast, Defendants’ SVF/ACAM2000 Treatment involves the creation 19 of a drug under the FDCA. 20 4. Accordingly, the SVF Procedure and Expanded MSC Procedure are not 21 subject to the FDCA’s adulteration and misbranding provisions. See 21 22 U.S.C. §§ 351, 352; 21 C.F.R. § 1271.20; Final Rule Concerning Human 23 Cells, Tissues, and Cellular and Tissue-Based Products; Establishment 24 Registration and Listing, 66 Fed. Reg. 5447, 5449 and 5456 (Jan. 19, 2001) 25 (to be codified at 21 C.F.R. Part 1270). 26 5. Neither the SVF Procedure nor the Expanded MSC Procedure involves 27 creating “prescription drugs” within the meaning of 21 U.S.C. § 28 11 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 12 of 19 Page ID #:4652

1 353(b)(1)(A), nor does it involve creating “new drugs” within the meaning 2 of 21 U.S.C. § 321(p). 3 6. Additionally, Defendants’ SVF Procedure—but not the Expanded MSC 4 Procedure—also qualifies for the Same Surgical Procedure Exception. The 5 SSP Exception exempts from FDA oversight any “establishment that 6 removes HCT/Ps from an individual and implants such HCT/Ps into the 7 same individual during the same surgical procedure.” 21 C.F.R. § 1271.15. 8 7. “HCT/Ps” is an acronym for “[h]uman cells, tissues, or cellular or tissue- 9 based products,” and HCT/Ps are defined in Section 1271.3(d) as “articles 10 containing or consisting of human cells or tissues that are intended for 11 implantation, transplantation, infusion, or transfer into a human recipient.” 12 21 C.F.R. § 1271.3(d). 13 8. “Construction which gives effect to all of the words of a statute or regulation 14 is preferred over an interpretation which renders some of the statute or 15 regulation ineffective.” First Charter Financial Corp. v. United States, 669 16 F.2d 1342, 1350 (9th Cir. 1982) (internal citation omitted). The definition of 17 HCT/Ps specifies that HCT/Ps are “articles containing or consisting of 18 human cells or tissues,” in the disjunctive, indicating that articles containing 19 and articles consisting of human cells or tissues may be two different things. 20 21 C.F.R. § 1271.3(d) (emphasis added). The adipose tissue Defendants 21 remove from patients clearly consists of human cells. And whatever is 22 injected back into patients as part of Defendants’ SVF Surgical Procedure 23 and Expanded MSC Surgical Procedure certainly contains such cells. 24 9. Most critically, the definition of HCT/Ps states that HCT/Ps are “articles . . 25 . intended for implantation, transplantation, infusion, or transfer into a 26 human recipient.” 21 C.F.R. § 1271.3(d) (emphasis added). The cellular 27 products Defendants create in the course of all procedures at issue here are 28 clearly intended for transfer back into human recipients. 12 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 13 of 19 Page ID #:4653

1 10. Accordingly, SVF Cells removed from patients as part of Defendants’ 2 procedures are HCT/Ps. The adipose tissue Defendants remove from 3 patients to produce their CSCTC products is an HCT/P. 21 C.F.R. § 4 1271.3(d). 5 11. Because the entire SVF Surgical Procedure, including the extraction, 6 isolation, and reimplantation of SVF Cells occurs during a single, outpatient 7 procedure at a surgical clinic, Defendants’ SVF Surgical Procedure involves 8 introducing HCT/Ps back into patients during the “same surgical 9 procedure,” as they were extracted, triggering the SSP exception. 21 C.F.R. 10 § 1271.15(b). The same is not true of the Expanded MSC Procedure. 11 Though the cells extracted for both the SVF Surgical Procedure and the 12 Expanded MSC Procedure are HCT/Ps, only the SVF Surgical Procedure 13 qualifies for the SSP Exception. 14 B. The SVF Surgical Procedure 15 12. For Claim One, the Government must prove: (1) that the SVF Surgical 16 Procedure involves a drug, (2) that the SVF Surgical Procedure involves a 17 drug that is held for sale in interstate commerce; and (3) that the methods 18 used in, or the facilities or controls used for, the manufacture of the drug are 19 not in conformity with current Good Manufacturing Practices (“cGMP”). 20 21 U.S.C. §§ 331(k), 352(a)(2)(B). 21 13. For Claim Two, the Government must prove: (1) that the SVF Surgical 22 Procedure involves a drug, (2) that the SVF Surgical Procedure involves a 23 drug that is held for sale in interstate commerce; and (3) that it does not 24 contain adequate directions for use or the symbol “Rx.” 21 U.S.C. §§ 352(f), 25 352(b)(2). 26 14. The Same Surgical Procedure Exception (“SSP Exception”) is a complete 27 defense to Claims One and Two, and Defendants have established that the 28 SSP Exception applies to the SVF Surgical Procedure. 13 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 14 of 19 Page ID #:4654

1 15. Additionally and alternatively, the Government failed to carry its burden 2 because the SVF Surgical Procedure is not a drug. 3 16. In evaluating whether the SVF Surgical Procedure satisfies the requirements 4 of the SSP Exception, the appropriate focus is on the SVF Cells. The SSP 5 Exception unambiguously states that the focus is on the target of the 6 removal—either the cell or the tissue—rather than the largest system 7 removed. This is the only permissible interpretation of the SSP Exception, 8 which explicitly includes both “tissues” and/or “cells,” through its use of 9 the term “HCT/Ps.” See 21 C.F.R. §§ 1271.3(d); 1271.15(b). Cells can only 10 be removed from a patient along with larger systems, such as the tissues or 11 organs that they comprise. Focusing on the “tissue” removed while 12 ignoring the target “cells” would eliminate the word “cells” from HCT/Ps 13 and violate the canons of statutory construction. 14 17. The SVF Surgical Procedure is autologous because it involves collecting a 15 patient’s cell population naturally occurring in the patient’s adipose tissue 16 and relocating that cell population back into the same patient. 17 18. The SSP Exception does not have any requirement that the HCT/Ps be 18 unaltered before reinsertion into the patient. See 21 C.F.R. § 1271.15(b). 19 Any reference to whether the HCT/Ps are manipulated and/or altered are 20 located in a different, inapplicable, regulation 21 C.F.R. § 1271.10 (discussing 21 “minimal manipulation”). 22 19. Regardless, the SVF Surgical Procedure does not alter the biological 23 characteristics of the SVF Cells and those cells remain “such HCT/P” that 24 were removed from the patient. There is no evidence that the cells are 25 anything other than autologous cells removed from, belonging to, and 26 returned back to the patient. 27 20. The GMP-grade Liberase enzyme used by Defendants does not affect ability 28 of the SVF Cells to differentiate. When Liberase is used on SVF Cells, their 14 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 15 of 19 Page ID #:4655

1 cell surface marker expression remains similar, and their viability does not 2 significantly change. 3 21. The Court finds that Dr. Berman and Dr. Lander are well qualified to opine 4 and testify on the practice of medicine, development of surgical procedures, 5 the SVF Surgical Procedure, and the effect of Liberase on the SVF Cells. 6 The Court finds Defendants’ evidence and testimony more credible than Dr. 7 Yong given her failure to analyze the appropriate enzyme. Further, 8 Defendants have actually tested the product at issue (as published in a peer- 9 reviewed journal), while the Government has never collected a sample or 10 tested the SVF Cells or Liberase. 11 22. In conclusion, the SSP Exception applies to the SVF Surgical Procedure and 12 is a complete defense to Claims One and Two. Because the SSP Exception 13 applies to the SVF Surgical Procedure, Defendants do not fall under FDA 14 jurisdiction and are not governed by the FDCA or associated regulations; 15 therefore, the Government is not entitled to injunctive relief against 16 Defendants. 17 23. Further, the SSP Exception is unambiguous, thus there is no need for 18 deference to the FDA’s interpretation. See Kisor v. Wilkie, 139 S. Ct. 2400, 19 2414 (2019) (“[T]he possibility of deference can arise only if a regulation is 20 genuinely ambiguous.”); Christensen v. Harris Cnty., 529 US 576, 588 21 (2000) (“The regulation in this case, however, is not ambiguous . . . . To 22 defer to the agency’s position would be to permit the agency, under the guise 23 of interpreting a regulation, to create de facto a new regulation.”). 24 24. The SSP Exception does not require that the surgeon implant everything 25 that was removed—including the removed blood and excess artery—for it to 26 apply. The SSP Exception Guidance expressly recognizes that processing 27 steps such as “rinsing [and] cleansing” or “sizing and shaping,” including 28 “dilation,” “cutting,” “meshing,” of HCT/Ps do not take a procedure out 15 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 16 of 19 Page ID #:4656

1 of the SSP Exception. See Food & Drug Admin., Regulatory 2 Considerations. 3 25. Drs. Berman and Lander may lawfully use FDA-cleared medical devices and 4 FDA-approved pharmaceuticals in any manner that they determine is best to 5 care for and treat their patients. Each step of the SVF Surgical Procedure 6 uses FDA-cleared and/or approved medical devices and pharmaceuticals. 7 See 21 U.S.C. § 396. 8 C. The Expanded MSC Surgical Procedure 9 26. For Claim Three, the Government must prove: (1) that the Expanded MSC 10 Surgical Procedure involves a drug, (2) that the Expanded MSC Surgical 11 Procedure involves a drug that is held for sale in interstate commerce; and 12 (3) that the methods used in, or the facilities or controls used for, the 13 manufacture of the drug are not in conformity with current Good 14 Manufacturing Practices (“cGMP”). 21 U.S.C. §§ 331(k), 352(a)(2)(B). 15 27. For Claim Four, the Government must prove: (1) that the Expanded MSC 16 Surgical Procedure involves a drug, (2) that the Expanded MSC Surgical 17 Procedure involves a drug that is held for sale in interstate commerce; and 18 (3) that it does not contain adequate directions for use of the symbol “Rx.” 19 21 U.S.C. §§ 352(f), 352(b)(2). 20 28. For Claim Five, the Government must prove: (1) that the Expanded MSC 21 Surgical Procedure involves a drug, (2) that the Expanded MSC Surgical 22 Procedure involves a drug that is held for sale in interstate commerce; and 23 (3) Defendants received a misbranded drug for pay or otherwise. 24 29. As a threshold matter, the cells involved in the Expanded MSC Surgical 25 Procedure are not drugs. They are human cells removed from patients and 26 then reintroduced into those same patients. They are not fungible goods that 27 can be sold, mass produced, or patented. See Ass’n for Molecular Pathology 28 v. Myriad Genetics, Inc., 569 U.S. 576, 579 (2013) (holding that naturally- 16 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 17 of 19 Page ID #:4657

1 occurring human body parts that are a “product of nature and not patent 2 eligible merely because it has been isolated.”). 3 30. Defendants are engaged in the practice of medicine, not the manufacture of 4 pharmaceuticals. 5 D. The SVF/ACAM2000 Treatment 6 31. For Claim Six, the Government must prove: that (1) the SVF/ACAM2000 7 Treatment involves a drug, (2) the SVF/ACAM2000 Treatment involves a 8 drug that is held for sale in interstate commerce; and (3) the methods used 9 in, or the facilities or controls used for, the manufacture of the drug are not 10 in conformity with current Good Manufacturing Practices (“cGMP”). 21 11 U.S.C. §§ 331(k), 352(a)(2)(B). 12 32. For Claim Seven, the Government must prove: (1) that the 13 SVF/ACAM2000 Treatment involves a drug, (2) that the SVF/ACAM2000 14 Surgical Procedure involves a drug that is held for sale in interstate 15 commerce; and (3) that it does not contain adequate directions for use of the 16 symbol “Rx.” 21 U.S.C. §§ 352(f), 352(b)(2). 17 33. Unlike the SVF Surgical Procedure, the SVF/ACAM2000 Treatment 18 constitutes the manufacture of a drug. 19 34. Because the ACAM2000 was shipped in interstate commerce from Georgia, 20 the Court finds that the SVF/ACAM2000 Treatment satisfies section 21 331(k)’s “after shipment in interstate commerce” requirement. 22 35. However, the Government has not met its burden of establishing standing to 23 pursue injunctive relief regarding the SVF/ACAM2000 Treatment because 24 Drs. Berman and Lander stopped performing the treatment by June 2017, 25 before the initiation of this lawsuit and before the seizure of the ACAM2000. 26 Defendants cannot perform the SVF/ACAM2000 Treatment without the 27 ACAM2000, which is in the exclusive control of the Government and 28 otherwise inaccessible to Defendants. Drs. Berman and Lander have no 17 Case 5:18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page 18 of 19 Page ID #:4658

1 desire to or intention of performing the SVF/ACAM2000 Treatment absent 2 formal regulatory approval. 3 E. Attorneys’ Fees 4 36. The Court declines to award attorneys’ fees to Defendants. 5 37. Congress enacted the Equal Access to Justice Act under 28 U.S.C. § 2412 6 (“Section 2412”) to limit the United States government’s immunity to an 7 award for costs and fees. Section 2412 was designed as a gap-filler and 8 applies in the absence of another statute that addresses the issue of 9 attorneys’ fees in the case at issue. 28 U.S.C. § 2412(b), (d) (“except as 10 otherwise specifically provided by statute . . .”). Section 2412 is generally 11 applicable whenever the federal government is a party in a civil action. 28 12 U.S.C. § 2412(d). Given the Government’s vast resources and power, 13 Congress determined that parties should be entitled to attorneys’ fees where 14 the Government lacks substantial justification for bringing a civil action. 15 Accordingly, Section 2412(d) permits a court to award attorneys’ fees and 16 other expenses to a prevailing party unless the Court finds that the 17 Government was “substantially justified.” The Supreme Court has 18 concluded that the standard for substantial justification is no different than a 19 “reasonable basis” test. Pierce v. Underwood, 487 U.S. 552, 565 (1988). 20 The Court makes one determination regarding the action as a whole, not to 21 each cause of action. See Ibrahim v. U.S. Dept. of Homeland Sec., 835 F.3d 22 1048, 1054–57 (2016) (holding that court’s decision regarding substantial 23 justification requires a “single inquiry focused on the government’s conduct 24 in the case as a whole”). 25 38. Though the Court finds that the SVF Surgical Procedure and Expanded 26 MSC Procedure to not be drugs, and that the SSP Exception unambiguously 27 applies to the SVF Surgical Procedure, other courts have concluded 28 otherwise. See United States v. U.S. Stem Cell Clinic, LLC, 403 F. Supp. 3d 18 Case 5:[18-cv-01005-JGB-KK Document 190 Filed 08/30/22 Page19o0f19 Page ID #:4659

1 1279 (S.D. Fla. 2019). The Government had a reasonable basis to commence 2 this suit, and accordingly, an award of attorneys’ fees is not warranted. 5 | Dated: August 30, 2022 □□□ 6 = ( 4 THE NORABLE JESUS G. BERNAL United'States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19