Stem cell clinic to pay out class action settlement

StemGenex, a now-closed stem cell clinic in San Diego, California, has agreed to pay out US$3.65 million as a class action settlement to its former patients for ineffective stem cell treatments they received (see BioNews 1137). The complaint, filed in US District Court for the Southern District of California, alleged that the clinic offered stem cell therapies it claimed could cure diseases and disabilities and used misleading marketing to do so.

A federal judge, Anthony Battaglia in San Diego, California, formally approved the deal with the two insurance companies on 25 February 2022, five years after the lawsuit was initially brought in 2017. The insurer for the clinic will shell out US$1.15 million and the insurer for Andre Lalalande, an osteopath and the clinic's former chief medical officer, will pay US$2.5 million.

StemGenex's website made claims that by performing a 'stem cell treatment' that it could treat many illnesses including Alzheimer's disease, Parkinson's disease, chronic lung disease, autoimmune conditions, and other debilitating conditions. The treatment they offered involved using liposuction to obtain an individual's fat cells, processing them, and injecting them back into a person as stem cells.

Using these fat stem cells in this way means they are a drug that needs premarket approval from the US Food and Drug Administration (FDA), which means clinics offering this treatment need to work with the FDA before selling it.

The FDA has previously taken action against clinics for marketing these 'stem cell treatments' without FDA approval, including issuing warning letters and seeking injunctions against them in the federal court. In 2018, the FDA issued a warning letter to the company accusing it of 'illegally marketing' the fat stem cells as a treatment and putting patients 'at risk'. StemGenex filed for bankruptcy in the following year as reported in the Los Angeles Times.

Plantiffs complained about misleading statements made by StemGenex about consumer satisfaction with the stem cell treatments on its website. The plaintiffs alleged that the company misrepresented customer satisfaction rates in promotional material and quoted a 100 percent patient satisfaction rate based on interviews conducted shortly after fat cell harvesting, and not after treatment, or its effects, could be felt. The lawsuit also claimed the company had omitted information regarding dissatisfaction and complaints of ineffectiveness from some patients.

Each patient paid US$14,900 for their stem cell treatment, exclusive of 'add-ons'. Often they depended on their families to assist them in paying these hefty bills as they were already ill and disabled and facing financial difficulties for paying for treatments for their conditions. Patients were also told that the deposit they had paid was non-refundable at pre-surgical meetings. The costs were not covered by health insurance or government programmes such as Medicare or Medicaid. The legal case outlined how the patients were encouraged by StemGenex to crowdsource fundraising activities, eg, 'Go Fund Me'. StemGenex also suggested patients could have more than one stem cell treatment.

StemGenex put the patients up in hotels and provided a car service to travel to and from the clinic in San Diego. The lawsuit outlined how pictures of a lovely hotel and contented people getting into a limo graced the website and stated, 'StemGenex Medical Group has made great strides in the advancement of stem cell therapy and is dedicated to providing patients access to safe and effective stem cell treatments.'

Also, on the website, there was the Accreditation Association for Ambulatory Health Care (AAAHC) logo suggesting they were accredited by the organisation which provides seals of approval for outpatient surgical centres. Later, AAAHC issued a cease-and-desist letter to StemGenex and the company removed the logo from its website on August 2016, also following a confrontation from a reporter from the Los Angeles Times over this.

A significant advantage of a class action is that it saves time and money, both for the claimants and the courts. Justice delayed is justice denied. Moreover, it avoids the need for a judge to decide common issues of fact and law more than once, enabling civil disputes involving vast numbers of plaintiffs to be resolved in just one case, which is a vital feature of case management of civil cases.

Will this vast class action settlement be a deterrent to other unscrupulous clinics trying to sell unproven stem cell treatments? There are more than 2000 stem cell clinics in the USA at present (see BioNews 1122). A study in March 2021 published in Cell Stem Cell showed the number of clinics had multiplied four times in five years. The emergence of new clinics happened during the period of discretion when the FDA was selective in enforcing the law during a grace period that was originally due to end in November 2020, but that period was extended to May 2021 due to the COVID-19 pandemic. During this time, the FDA acted primarily against selected businesses posing very serious risks.

Professor Paul Knoepfler from the University of California Davis in Sacramento said, 'It's notable that the insurer of StemGenex is paying more than a million dollars. I've often wondered more generally how certain types of adipose or perinatal stem cell clinics can maintain malpractice or other insurance. This kind of settlement seems like it would make it tougher.'

Thus, it remains to be seen whether the settlement will discourage other clinics from proferring such stem cell treatments.