How the FDA Stymies Progress -- and How to Get Around It

By Bill Frezza  

August 13, 2012 | The Skeptical Outsider GUEST COMMENTARY|   

Are cells taken from your body and then returned to it “drugs”? They are, according to a recent U.S. District Court ruling that granted the U.S. Food and Drug Administration’s (FDA) request for an injunction against Regennex, developers of an orthopedic treatment that uses patients’ own stem cells. The ruling puts the kibosh on a number of novel therapies that use adult stem cells to treat a range of aliments, from heart disease to orthopedic injuries to autoimmune diseases like multiple sclerosis.   

Practitioners who wish to continue treating patients in the United States will have to withdraw from the market and begin the long march through clinical trials. In addition, they face fines and penalties for believing that they were legally practicing medicine rather than illegally selling drugs.   

As the FDA relentlessly expands its mandate and, I would argue, the Patient Protection and Affordable Care Act (“Obamacare”) paves the way to increased federal meddling into the way doctors practice medicine, entrepreneurs may find the path of least resistance is to take their business offshore, inviting patients to follow them. After all, airfare is cheaper than clinical trials and more attractive than death. More on that below.  

The FDA’s power, like that of many government agencies, has steadily increased throughout its history. Initially chartered to insure that drugs were accurately labeled, the agency’s scope has grown through a combination of legislative acts, executive fiat, and court rulings to include first safety and then efficacy. Although commissioners deny it, circumstantial evidence has led analysts to conclude that the FDA is now taking comparative cost effectiveness into consideration when rejecting new drug applications.                                        

Whether the power to block drugs deemed too expensive from being sold in the U.S. is vested in the FDA or in other agencies, cost control is certainly becoming part of the equation. This will also be the case for outcomes control, whereby all medical procedures, not only drugs, are either mandated or banned depending on the best practices recommended by a panel of government-appointed “experts.” Given the difficulty of assembling legislative majorities in today’s hyper-partisan environment, any such panel will most likely be created with limited powers. But you can count on these powers increasing over time.   

With Uncle Sam picking up more and more of the nation’s health care tab and special interest advocacy groups clamoring to get their share of the pie, allocating medical services to ensure “fairness” will be next up on the list. Finally, someone has to make sure that our increasingly byzantine health care system doesn’t bankrupt the country, and there is only one way to do that in a price-controlled, third-party-payer market. They won’t call it rationing, even though any honest economists would.  

As for a mandate to promote innovation? Not so much.  

Stem cell therapies represent one of the most exciting new frontiers in medicine. Yet, while protestors take to the streets whenever politicians threaten to restrict taxpayer support for using stem cells from aborted fetuses, nary a peep was heard when a judge cut off people’s access to their own cells. Funny how politics works.  

It’s too soon to say which of these therapies will become miracle cures, which will offer only marginal benefits, and which will turn out to be quackery. That’s the nature of innovation. There is no question that a two-armed, randomized, double-blind clinical trial is the gold standard for proving safety and efficacy. But forcing every new medical procedure to pass through the same expensive and time consuming gantlet that new drugs must clear can only retard medical innovation.  

Tropic Thunder  

Which brings is to door number two—geographic regulatory arbitrage. A case in point is the Okyonos Heart Institute, which harvests a patient’s own stem cells from body fat and uses them to treat coronary artery disease. Unlike the developers of Regennex, who tried and failed to convince a judge that its orthopedic treatment was not a drug, Okyonos set up shop in the Bahamas, outside the FDA’s reach. Patients come to them, and they pay cash.  

Okyonos’ focus is serving the 2.2 million no-option U.S. coronary artery disease patients. These people are at the end of the road, facing a 20% annual mortality rate and a deteriorating quality of life. Standard medical care has nothing to offer them, so they have nothing left to lose but their money. Okyonos licenses its technology from Cytori Therapeutics, currently conducting clinical trials. Certain elements of the procedures are approved in the European Union, but not in the U.S.  

I haven’t the slightest idea whether any of these stem cell therapies work. But if my choices were to wait around to die and have Uncle Sam take my money in inheritance taxes or give stem cells a shot, I’d sure like to make that decision myself -- not have some judge or regulator make it for me. Individual freedom aside, as a matter of policy we desperately need a safety valve for medical innovation. Otherwise, as the FDA’s swollen mandate becomes an end in itself and Obamacare increasingly regiments every element of medical care, innovation will become a thing of the past.   

The FDA vigilantly counts the number of people who die from the unintended side effects of treatments. But who counts the hundreds of thousands who die waiting for treatments that are delayed, denied, or never attempted at all? An offshore treatment option with cash-paying customers and a caveat emptor regulatory regime may not sound all that attractive, but it is better than no innovation outlet at all.  

Bill Frezza is a Fellow at the Competitive Enterprise Institute and a Boston-based venture capitalist. He can be reached at If you would like to subscribe to his weekly column drop a note to   

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