United States v. California Stem Cell Treatment Center, Inc.United States v. California Stem Cell Treatment Center, Inc.
FOR PUBLICATION
OPINION
Argued and Submitted February 7, 2024 Pasadena, California
Judge Friedland delivered the opinion of the Court as to Parts I, II, III.A, and III.B, in which Judge Wardlaw and Judge Sung joined. Judge Sung delivered the opinion of the Court as to Part III.C, in which Judge Wardlaw joined. Judge Friedland filed a concurring opinion in the result as to Part III.C.
SUMMARY*
Food, Drug, and Cosmetic Act
The panel reversed the district court‘s judgment following a bench trial in favor of Defendants, doctors who create and administer a stem cell mixture called stromal vascular fraction (“SVF“), in the Food and Drug Administration‘s action alleging that Defendants were violating the Food, Drug, and Cosmetic Act (“FDCA“) by improperly manufacturing and labeling SVF.
Under the FDCA,
In Part III.B of the opinion, the panel held that Defendants’ SVF constitutes a “drug” under the FDCA based on the plain text of the statute.
In Part III.C of the opinion, the panel rejected Defendants’ argument that even if SVF is a “drug,” their same-day SVF treatment for patients is completely exempt from FDA regulation under the “same surgical procedure” exception (“SSP exception“), which applies to “an establishment that removes HCT/P‘s from an individual and implants such HCT/P‘s into the same individual during the same surgical procedure.”
Concurring in the result of Part III.C, Judge Friedland agreed with the majority‘s conclusion that Defendants’ same-day version of the SVF treatment did not fall under the SSP exception, but she would arrive at this conclusion for a different reason. After examining the HCT/P regulations’ text, structure, purpose, and history, she would hold that the SSP exception is genuinely ambiguous, and that the court owes Auer deference to the FDA‘s reasonable interpretation of the SSP exception such that Defendants’ treatments do not fall under the SSP exception.
COUNSEL
Adam C. Jed (argued) and Daniel Tenny, Appellate Staff Attorneys, Civil Division, United States Department of Justice, Washington, D.C.; E. Martin Estrada, United States Attorney, United States Department of Justice, Washington, D.C.; Brian M. Boynton, Principal Deputy Assistant Attorney General, United States Department of Justice, Washington, D.C.; Natalie Sanders, Senior Trial Attorney, Office of Consumer Litigation, United States Department of Justice, Washington, D.C.; Michael Shane, Associate Chief Counsel for Enforcement, Food and Drug Administration; Shannon Singleton, Acting Deputy Chief Counsel for Litigation, Food and Drug Administration; Perham Gorji, Deputy Chief Counsel for Litigation, Food and Drug Administration; Mark Raza, Chief Counsel, Food and Drug Administration; Samuel R. Bagenstos, General Counsel, Department of Health and Human Services; for Plaintiff-Appellant.
Nathaniel P. Garrett (argued) and Alyxandra N. Vernon, Jones Day, San Francisco, California; Celeste M. Brecht and Ramanda R. Luper, Jones Day, Los Angeles, California; Matthew M. Gurvitz, Willkie Farr & Gallagher LLP, Los Angeles, California; for Defendants-Appellees.
Christopher J. Cox, Hogan Lovells US LLP, Redwood City, California, for Amicus Curiae International Society for Stem Cell Research and the International Society for Cell and Gene Therapy.
Christina Sandefur and Timothy Sandefur, Scharf-Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix, Arizona, for Amicus Curiae Goldwater Institute.
Andrew L. Schlafly, Attorney at Law, Far Hills, New Jersey, for Amicus Curiae Association of American Physicians and Surgeons.
Christopher James, The James Law Group LLC, Portland, Oregon, for Amicus Curiae Race MD.
FRIEDLAND, Circuit Judge:
This case requires us to decide whether the Food and Drug Administration can regulate certain stem cell mixtures advertised as treatments for a host of medical conditions. Defendants are doctors who create such a mixture by removing fat tissue from a patient and breaking it down to concentrate the portion containing stem cells. The result is a mixture of stem cells, other types of cells, and cell debris called stromal vascular fraction (“SVF“), which they then administer to the patient. For example, Defendants inject SVF directly into a patient‘s knee to treat osteoarthritis. In recent years, clinics offering similar stem cell mixtures have proliferated despite concerns over whether such treatments are safe and effective.
After inspecting Defendants’ two clinics, the FDA brought this lawsuit, claiming various violations of the Federal Food, Drug, and Cosmetic Act. Defendants argue that their SVF is not a “drug” within the meaning of the Act and that, even if it is, some of their uses of SVF fall under an exception from FDA regulation for certain surgical procedures. We reject both arguments. Accordingly, we reverse the district court‘s entry of judgment in favor of Defendants.
I.
A.
Defendants are two California-licensed physicians and the entities they co-founded: the California Stem Cell Treatment Center and the Cell Surgical Network. The California Stem Cell Treatment Center operates two clinics in Beverly Hills and Rancho Mirage. At those clinics, as part of what they call “patient-funded investigational research,” Defendants offer stem cell treatments to “[p]atients who are looking for non-surgical alternatives to their degenerative disorders.” Defendants advertise that they have “technology to produce a solution rich with your own stem cells” that they say can alleviate dozens of medical conditions, including Alzheimer‘s, arthritis, asthma, cancer, macular degeneration, multiple sclerosis, heart problems, pulmonary problems, Crohn‘s, Parkinson‘s, and erectile dysfunction. The treatments are not covered by insurance, so patients pay out of pocket. A single treatment typically costs $8,900, and a twelve-treatment option costs $41,500. Defendants have treated thousands of patients.
Through the Cell Surgical Network, Defendants also operate a network for “physicians who want[] to bring regenerative medicine into their own practices.” Affiliates agree to follow Defendants’ treatment protocol and pricing guidelines; share “research data“; and purchase Defendants’ equipment for isolating cells, called the “Time Machine,” for about $30,000.
The substance that Defendants produce is called “stromal vascular fraction,” or “SVF.” SVF is “a liquified mixture of cells and cell debris” derived from fat tissue. Fat tissue, which looks a bit like honeycomb when magnified, is a connective tissue primarily made up of fat cells. Fat tissue
also comprises many other types of cells, including mesenchymal stem cells. Most of the cells are embedded in an “extracellular matrix,” a structure made partly of collagen fibers that holds the cells in place. Fat tissue also contains interspersed blood vessels.
Defendants derive SVF from fat tissue using a multi-step process. First, after administering local anesthesia to a patient, Defendants use liposuction to remove fat tissue. The retrieved tissue is then centrifuged (spun at high speed) to separate and remove blood and anesthesia. The next step is called “enzymatic digestion.” An enzyme blend is added to the tissue, and during a thirty-minute incubation period,
That entire process is sometimes done on one day: The patient undergoes liposuction, waits for the tissue to be processed, and receives SVF all during one visit. But in the “expanded” version, the collected tissue is not processed onsite. Instead, the tissue is sent to a cell bank for processing and the cells are replicated (“expanded“) for later use in the same patient.
B.
In 2017, the FDA inspected the California Stem Cell Treatment Center clinics. The inspectors concluded that the clinics were manufacturing and administering unapproved drug products. They found violations of the FDA‘s manufacturing requirements and a lack of proper documentation of adverse health events related to the clinics’ SVF treatments.
In 2018, the FDA filed this lawsuit and sought injunctive relief, alleging that Defendants were violating the Food, Drug, and Cosmetic Act by improperly manufacturing and labeling SVF. After a seven-day bench trial, the district court entered judgment in favor of Defendants, holding that Defendants’ treatments were not subject to FDA regulation. The district court held that Defendants’ SVF is not a “drug” under federal law, reasoning that “Defendants are engaged in the practice of medicine, not the manufacture of pharmaceuticals.” The court also alternatively held, as to the same-day procedure, that Defendants’ use of SVF falls within an exception to regulation for certain surgical procedures. That holding was based on the court‘s factual finding that the cells in the same-day SVF “are not altered, chemically or biologically” and that the procedure “does not create any new material or introduce any foreign article” into the body. The FDA timely appealed.
II.
We review a district court‘s conclusions of law de novo and its findings of fact for clear error. Yu v. Idaho State Univ., 15 F.4th 1236, 1241-42 (9th Cir. 2021).
III.
A.
Under the Food, Drug, and Cosmetic Act (“FDCA“),
The FDCA requires all new drugs to receive premarket approval from the FDA, which in turn requires drug manufacturers to demonstrate each drug‘s safety and efficacy through clinical trials. See Wyeth, 555 U.S. at 566; Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 196 (2005) (citing
Under the FDCA and the Public Health Service Act (“PHSA“),
“human cells, tissues, and cellular and tissue-based products,” abbreviated as “HCT/Ps.”
The FDA has a “tiered, risk-based approach” to regulating HCT/Ps. 66 Fed. Reg. at 5448. That approach employs a hierarchy of oversight—full, limited, or no oversight—based on the FDA‘s assessment of the types of health risks posed by different categories of HCT/Ps. HCT/Ps at the top of the hierarchy are fully regulated as “drugs” under the FDCA, and/or as “biological products” under the PHSA, and are thus subject to premarket approval.
the same patient during the same surgical procedure.
B.
The parties first dispute whether Defendants’ SVF constitutes a “drug” under the FDCA. Based on the plain text of the statute, we agree with the FDA that Defendants’ SVF is a drug.
“[T]he word ‘drug’ is a term of art for the purposes of the [FDCA].” United States v. Article of Drug, Bacto-Unidisk, 394 U.S. 784, 793 (1969). “Drug[s]” are defined in the Act as “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease,” or “intended to affect the structure or any function of the body.” Id. at 789 (quoting
Considering a similar stem cell treatment in United States v. Regenerative Sciences, LLC, 741 F.3d 1314 (D.C. Cir. 2014), the D.C. Circuit likewise held that the “plain language” of the FDCA compelled the conclusion that the stem cell mixture in that case was a “drug” under the FDCA. Id. at 1319. There, doctors extracted bone marrow or fluid from joints, isolated and cultured stem cells, combined the cells with an antibiotic to prevent bacterial contamination, and reinjected the mixture to treat orthopedic conditions. Id. at 1318. Although Defendants’ treatment here does not
involve an antibiotic and does not always involve culturing, the D.C. Circuit‘s holding that the mixture in its case was a “drug” did not hinge on those aspects of the treatment. See id. at 1319. The court simply reasoned that the FDCA‘s “wide-ranging definition[] clearly appl[ied] to the Mixture, an article derived mainly from human tissue and intended to treat orthopedic diseases and to affect musculoskeletal function.”3
Defendants do not seem to dispute that the “admittedly capacious” language of the FDCA, read literally, encompasses their treatments. Instead, they assert that the definition should not be read literally because its breadth is intolerable. But the Supreme Court has instructed that it is error to “refuse[] to apply the [FDCA‘s] language as written,” holding that “Congress fully intended that the Act‘s coverage be as broad as its literal language indicates—and equally clearly, broader than any strict medical definition might otherwise allow.” Bacto-Unidisk, 394 U.S. at 798. The Court explained that “remedial legislation such as the [FDCA] is to be given a liberal construction consistent with the Act‘s overriding purpose to protect the public health.” Id.
Defendants conjure purportedly “absurd” results of a broad interpretation of “drugs,” painting a picture of doctors having to pause during a vein graft to measure the vein‘s
active ingredients or adhere a drug label. But “[t]he scope of the offense which Congress defined [in the FDCA] is not to be judicially narrowed as applied to drugs by envisioning extreme possible applications.” United States v. Sullivan, 332 U.S. 689, 694 (1948). And the FDA has flexibility to tailor its specific requirements upon approval of a new drug.4 Id. at 695; see also, e.g.,
intended to regulate the practice of medicine, it was obviously intended to control the availability of drugs for prescribing by physicians.“).
Kaplan also invoked the D.C. Circuit‘s decision in Regenerative Sciences, which rejected an argument that “the FDA was improperly attempting to regulate the practice of medicine by regulating the stem cell procedure.” Kaplan, 836 F.3d at 1210 (describing Regenerative Scis., 741 F.3d at 1319). The D.C. Circuit reasoned that the FDA‘s focus was the stem cell mixture, not the doctor‘s performance of any procedure. Regenerative Scis., 741 F.3d at 1319. The court noted that the FDCA‘s regulatory scheme clearly applies to doctors—evidenced by the fact that the Act has specific carve-outs for doctors that “would be unnecessary if the FDCA did not otherwise regulate the distribution of drugs by licensed physicians.” Id. at 1319-20. And the court observed that narrowing the scope of the FDCA “by classifying the distribution of drugs by doctors as the practice of medicine” would “create an enormous gap in the FDCA‘s coverage.” Id. at 1320. Adopting the reasoning of Regenerative Sciences, we explained in Kaplan that the defendant doctor‘s practice-of-medicine arguments were “wide of the mark.” 836 F.3d at 1210 (quoting Regenerative Scis., 741 F.3d at 1319). Kaplan forecloses Defendants’ similar argument here.
As a final effort to resist the FDA‘s interpretation, Defendants invoke the major questions doctrine, which, when it applies, requires an agency to “point to ‘clear congressional authorization’ for the power [the agency] claims.” West Virginia v. EPA, 597 U.S. 697, 723 (2022) (quoting Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014)). But this is far from the sort of “extraordinary case[]” that would give us “reason to hesitate before
concluding that Congress’ meant to confer such authority.” Id. at 721 (quoting Brown & Williamson Tobacco Corp., 529 U.S. at 159). The FDA is not asserting authority over surgery as a general category. Rather, it is asserting authority over doctors’ creation or use of products that fall within Congress‘s definition of “drugs.” That is unlike the situations in which the major questions doctrine has been applied.
First, this case does not present a matter of extreme “economic and political significance.” Id. (quoting Brown & Williamson Tobacco Corp., 529 U.S. at 160); cf. id. at 724-25 (reasoning that carbon emission standards were meant to “substantially restructure the American energy market“); Biden v. Nebraska, 143 S. Ct. 2355, 2373 (2023) (noting that the significance of the student loan forgiveness program was “staggering by any measure,” with an economic impact
Second, the FDA‘s regulation of human cell and tissue products does not represent a sudden assertion or “transformative expansion” of authority. West Virginia, 597 U.S. at 724 (quoting Util. Air., 573 U.S. at 324). The FDA‘s assertion of power rests on key provisions of the FDCA, not a rarely used “gap filler.”
Human Somatic Cell Therapy Products and Gene Therapy Products, 58 Fed. Reg. 53248, 53249 (Oct. 14, 1993). In 1997, the FDA proposed its current “unified approach to the regulation of both traditional and new [human cellular and tissue-based] products.” FDA, Proposed Approach to Regulation of Cellular and Tissue-Based Products 6 (Feb. 28, 1997) (“Proposed Approach“); 66 Fed. Reg. at 5447-69 (finalizing the rule in 2001).
Third, unlike in the only Supreme Court case addressing the major questions doctrine in the context of the FDCA, there is no mismatch between Defendants’ SVF and the statutory scheme. In Brown & Williamson Tobacco Corp., the Court held that the FDA did not have authority over tobacco products. 529 U.S. at 161. The Court reasoned that faithful application of the FDCA—which requires that the FDA balance a product‘s therapeutic benefits against the risk of harm—would require an outright ban on tobacco products because they cannot safely be used for any therapeutic benefit. Id. at 141-43. But a ban would have contradicted Congress‘s clear intent in tobacco-specific legislation to permit the sale of tobacco products. Id. at 143. Thus, “there is no room for tobacco products within the FDCA‘s regulatory scheme.” Id. Here, by contrast, SVF fits comfortably within the FDCA because it is sold and administered to patients for therapeutic purposes, and there is no reason to think that Congress intended it to be outside the FDCA‘s scope. In fact, recent legislation suggests that Congress presupposes that the FDA regulates stem cell therapies. See 21st Century Cures Act, Pub. L. No. 114-255, § 3033, 130 Stat. 1033, 1101-03 (2016) (codified as amended at
“regenerative advanced therapies,” including “cell therapy” and “human cell and tissue products“).
Consistent with the Supreme Court‘s instruction that the FDCA‘s definition of “drug” is “as broad as its literal language indicates,” Bacto-Unidisk, 394 U.S. at 798, we hold that Defendants’ SVF is a “drug.”
* * *
Part III.C:
SUNG, Circuit Judge, with whom WARDLAW, Circuit Judge, joins:
C.
Defendants argue that even if their SVF is a “drug,” their same-day SVF treatment is completely exempt from FDA regulation under what is called the “same surgical procedure” exception (“SSP exception“).5
day version of the SVF treatment does not qualify for the SSP exception.
1.
“If [a] regulation is unambiguous and ‘there is only one reasonable construction of [the] regulation,’ then we” simply apply that meaning. Mountain Cmtys. for Fire Safety v. Elliott, 25 F.4th 667, 675 (9th Cir. 2022) (quoting Kisor v. Wilkie, 588 U.S. 558, 575 (2019)). If the text seems to have more than one plausible meaning, then we must try to resolve the ambiguity by “carefully consider[ing] the text, structure, history, and purpose of [the] regulation.” Kisor, 588 U.S. at 575 (internal quotation marks and citation omitted). If, after “exhaust[ing] all the ‘traditional tools’ of construction,” we determine that “the interpretive question still has no single right answer,” then we consider whether the agency‘s interpretation is reasonable, and if so, whether it is entitled to deference under Auer v. Robbins, 519 U.S. 452 (1997). Id. at 575-76. But, in many cases, our tools of construction will resolve the seeming ambiguity “out of the box, without resort to Auer deference.” Id. at 575.
2.
Again, the SSP exception applies to: “[A]n establishment that removes HCT/P‘s from an individual and implants such HCT/P‘s into the same individual during the same surgical procedure.”
The FDA and Defendants agree on several important points. First, they agree that the SSP exception applies to a
procedure only if the removed HCT/P and the implanted HCT/P are “the same.” Second, they agree that fat tissue is an HCT/P, and that the SVF procedure removes fat tissue, but implants SVF. Third, they agree that Defendants subject the removed fat tissue to significant processing to produce SVF. Fourth, they agree that fat tissue and SVF are not the same. In the FDA‘s view, all this adds up to an easy case: Because fat tissue and SVF are not the same, the SSP exception does not apply to the SVF procedure.
But, Defendants point out (and the FDA does not dispute) that the cells they extract from the fat tissue are also, by definition, HCT/Ps. Consequently, the SVF procedure can be characterized as removing two different kinds of HCT/Ps: the fat tissue and the cells within the fat tissue. When determining whether a procedure removes and implants the same HCT/Ps, Defendants argue that the SSP exception requires us to compare the implanted HCT/P with the HCT/P that was “the target of the removal, rather than the
The FDA maintains that the SSP exception requires us to view the removed HCT/P as a whole, before it has undergone any significant processing. Under that interpretation, the HCT/P removed by the SVF procedure is the fat tissue, not the cells.
Thus, the parties’ interpretive dispute boils down to the following question: When determining whether the removed and implanted HCT/Ps are the same, which removed HCT/P is the correct comparator? Do we consider the HCT/P that was removed as a whole, before any significant processing? Or only the portion of the removed HCT/P that will be implanted, even if extensive processing is needed to extract that portion from the whole?
Each party argues that its interpretation is compelled by the regulation‘s text. The FDA focuses on the word “such,” which is used to refer back to something already mentioned—an antecedent. Such, Black‘s Law Dictionary (12th ed. 2024) (defining “such” as “[t]hat or those; having just been mentioned“). Therefore, the phrase “removes HCT/P‘s from an individual and implants such HCT/P‘s into the same individual” means that, to fall under the SSP exception, the HCT/P implanted must be the same HCT/P removed. But, as discussed above, Defendants concede that the removed and implanted HCT/P must be the same, and instead argue that the implanted SVF should be compared to the cells within the removed tissue, not the tissue as a whole. The term “such” does not tell us which comparator to use.
For their part, Defendants focus on the regulatory definition of HCT/Ps. Recall that the FDA defines HCT/Ps as “articles containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion, or transfer into a human recipient.”
Defendants first argue that the definition signals that the focus in the SSP exception should be on the article that the doctor “intend[s] for implantation“—here, the cells. But the HCT/P definition includes an article that “contain[s]” the cells that are intended for implantation. And here, the removed fat tissue contains the cells that are intended for implantation. Thus, even if the doctor‘s intent is relevant, the fat tissue could still be the correct comparator.
Defendants next argue that the FDA‘s focus on the largest system removed would render part of the HCT/P definition superfluous. The definition refers to “cells or tissues,” and Defendants argue that cells can generally only be removed from the body within tissue or other larger systems. It is true that isolated cells would rarely fall under the SSP exception as interpreted by the FDA. But rarely does not mean never. As the FDA points out, at least one type of cell can be removed in isolation,7 and the regulation addresses an area of evolving science. Moreover, the HCT/P
In sum, neither party‘s textual arguments fully resolve the interpretive dispute. Although the FDA‘s reading is more straightforward and consistent with the SSP exception‘s plain text, Defendants’ reading is plausible. So, we consider the SSP exception‘s context and structure.
The SSP exception is part of a broader framework that regulates the “manufacture” of HCT/Ps. “Manufacture means, but is not limited to, any or all steps in the recovery, processing, storage, labeling, packaging, or distribution of any human cell or tissue . . . .”
The FDA points out that when an HCT/P is more than “minimally manipulated,” it is subject to full regulation. Thus, the FDA argues, the SSP exception should not be interpreted as completely exempting procedures that involve substantial manipulation of HCT/Ps. Defendants, however, point out that the limited exemption expressly incorporates the minimal manipulation requirement, see
All this means that we still need to figure out whether the correct comparator is the removed HCT/P as a whole or only the portion targeted for removal. Because neither the SSP exception nor the related regulations expressly answer that question, we turn to the regulations’ purpose and history.
When the FDA first proposed the HCT/P regulatory framework, it explained that, “[i]n the past, most human tissue used in medicine was comprised of such body components as skin, bone, corneas, and heart valves that were transplanted for replacement purposes, and semen and ova implanted for reproductive purposes.” Proposed Approach at 8. And, the “FDA‘s regulation of the conventional tissues used for replacement purposes ha[d] focused on preventing the transmission of communicable disease . . . .” Id. However, “[i]n recent years, scientists ha[d] developed innovative methods of manipulating and using human cells and tissues for therapeutic uses,” and the FDA identified several public health and regulatory concerns associated with the use of such products. Id. at 9. Thus, the FDA proposed regulating cells and tissues “with a tiered approach based on risk and the necessity for FDA review.” Id.
A chief purpose of the regulations would be “ensuring that clinical safety and effectiveness is demonstrated for tissues that are highly processed.” Id. at 6. The FDA stated its intent to “require that cells and tissues be handled according to procedures designed to prevent contamination and to preserve tissue function and integrity.” Id. at 6-7. The FDA explained, “Improper handling can alter or destroy the integrity or function of cells or tissues. Improper handling also can allow cells or tissues to become contaminated (e.g., bacterial contamination during collection, processing, storage, or transplantation, or cross contamination from other contaminated tissues).” Id. at 15.
In this context, the FDA also stated that it “would not assert any regulatory control over cells or tissues that are removed from a patient and transplanted back into that patient during a single surgical procedure,” because “[t]he communicable disease risks, as well as safety and effectiveness risks, would generally be no different
Consistent with the FDA‘s proposal, the final rule established “a tiered, risk-based regulatory scheme that . . . tailor[s] the degree of scrutiny afforded to different HCT/P‘s to the risks associated with each of them.” See 66 Fed. Reg. at 5464. The SSP exception is at the bottom tier: procedures covered by the SSP exception are completely exempt from regulation. This means that covered procedures should involve relatively low risk—risk no greater than that typically associated with conventional surgery. And, because processing HCT/Ps introduces risk, covered procedures should not involve significant processing.
Defendants’ interpretation of the SSP exception conflicts with the HCT/P regulations’ structure and purposes. Under their interpretation, the SSP exception would exempt surgical procedures that subject HCT/Ps to substantial processing, even if such processing introduces risk far greater than that associated with conventional surgery. HCT/Ps could be subjected to any number of processing steps to isolate, extract, or potentially even recombine its subcomponents (perhaps in ways currently unimaginable) with no FDA oversight, so long as those subcomponents came from the same person and were removed and implanted on the same day.13
The FDA‘s interpretation is more consistent with the SSP exception‘s plain meaning. And it is the only interpretation that makes sense in light of the HCT/P regulations’ tiered, risk-based framework, and its purpose and history. The seeming textual ambiguity is resolved in the FDA‘s favor.14 When determining whether a surgical procedure “removes HCT/P‘s and implants such HCT/P‘s,” the removed HCT/P must be viewed as a whole, before any significant processing. For Defendants’ SVF procedure, the removed HCT/P is the fat tissue, not the cells targeted for implantation. Because the SVF procedure removes fat tissue but implants SVF, the procedure is not exempt from regulation under the SSP exception.
* * *
We REVERSE and REMAND for further proceedings.15
I agree with the majority‘s conclusion that Defendants’ same-day version of the SVF treatment does not fall under the SSP exception, but I would arrive at this conclusion for a different reason. I believe that the SSP exception provision is ambiguous, and that we owe deference to the FDA‘s interpretation of it.
1.
When the meaning of a regulation is in doubt, “we must ‘look to the administrative construction of the regulation.‘” Goffney v. Becerra, 995 F.3d 737, 744 (9th Cir. 2021) (quoting Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 413-14 (1945)). The practice of deferring to agency interpretations of ambiguous regulations is commonly known as Auer deference. Id. (citing Auer v. Robbins, 519 U.S. 452 (1997)).
An agency is entitled to Auer deference only when the regulation in question is “genuinely ambiguous,” meaning that it is “susceptible to more than one reasonable reading.” Kisor v. Wilkie, 588 U.S. 558, 566, 573 (2019). In cabining the scope of Auer deference, the Supreme Court has cautioned that we “cannot wave the ambiguity flag just because [we] found the regulation impenetrable on first read.” Id. at 575. Instead, we must first “exhaust all the traditional tools of construction” by examining the “text, structure, history, and purpose of a regulation.” Id. (quotation marks omitted). “[O]nly when that legal toolkit is empty and the interpretive question still has no single right answer” can we consider deferring to an agency‘s reasonable interpretation. Id. at 575-76. Before deferring, we must also confirm that “the interpretation is the agency‘s authoritative or official position, the interpretation in some way implicates the agency‘s substantive expertise, and the agency‘s reading of its rule reflects the agency‘s fair and considered judgment.” Nat‘l Parks Conservation Ass‘n v. FERC, 6 F.4th 1044, 1050-51 (9th Cir. 2021) (citing Kisor, 588 U.S. at 574-79).
2.
As to the text of the HCT/P regulations, I agree with the majority‘s thoughtful analysis, which concludes that the text does not provide a clear answer to the interpretive dispute. My analysis diverges from the majority‘s only when we turn to the purpose and history of the HCT/P regulations. Although the majority concludes that the regulations’ purpose and history support the FDA‘s interpretation, I believe that evidence cuts both ways, leaving the SSP exception genuinely ambiguous.
The FDA‘s reading of the SSP exception, focusing on the tissue removed from the body rather than only the targeted cells within that tissue, appears to be consistent with the purpose of the HCT/P regulations. In its 1997 proposal for the current regulatory approach, the FDA stated it was concerned with the “clinical safety and effectiveness . . . [of] tissues that are highly processed” and the risk that processing and/or improper handling could result in contamination or damage to tissue or cell function and integrity. FDA, Proposed Approach to Regulation of Cellular and Tissue-Based Products 6, 7 (1997) (“Proposed Approach“); see also id. at 9 (listing overarching public health concerns). The FDA‘s concern with contamination and safety, particularly when an HCT/P is processed and manipulated, is consistent with requiring an HCT/P to be in its “original form” as it was in the body for it to be excepted from regulation. FDA, Same Surgical Procedure Exception Under
But other statements by the FDA in the leadup to the promulgation of the HCT/P regulations support Defendants’ argument that the SSP exception was always meant to capture targeted cells. For example, the FDA stated that “[a]utologous use of cells and tissues harvested and transplanted in a single surgical procedure would be subject to no FDA oversight.” Proposed Approach at 15 (emphasis added). Defendants point out that the FDA must have known that cells generally cannot be removed from the body in isolation, so some processing would be required.1
Additionally, the FDA‘s Proposed Approach indicated that certain amounts of cell and tissue processing could occur without there being a concerning amount of manipulation. Within the context of creating a regulatory framework to prevent “product contamination” and loss of “product integrity and function” in the processing of HCT/Ps, the FDA identified example procedures that it considered “minimal manipulation.” Id. at tbl. 1; id. at 16. These included “extraction or separation of cells from structural tissue, in which the remaining structural tissue‘s characteristics relating to carrying out reconstruction and/or repair were unaltered,” and “selection of stem cells from amongst lymphocytes and mature cells of other lineages.” Id. at 16, 18. Compared to Defendants’ same-day SVF procedure, these example procedures seem to present comparable levels of complexity and risk for contamination or damage to product function and integrity. In contrast, the FDA identified procedures such as cell “expansion, encapsulation, activation, or genetic modification,” as involving concerning amounts of manipulation. Id. at 17-18; Establishment Registration and Listing for Manufacturer of Human Cellular and Tissue-Based Products, 63 Fed. Reg. 26744, 26748 (May 14, 1998) (same). Particularly given the district court‘s factual finding that the targeted cells are not altered by Defendants’ same-day SVF procedure, the distinctions in levels of manipulation discussed in the Proposed Approach suggest that the procedure does not trigger the FDA‘s core regulatory concerns, supporting Defendants’ interpretation of the SSP exception.
Because the HCT/P regulations’ text, structure, purpose, and history do not determine whether we should view the relevant antecedent HCT/P as the targeted cells or the whole system removed from the body, I believe our “legal toolkit is empty and the interpretive question still has no single right answer.” Kisor, 588 U.S. at 575. I view the SSP exception as genuinely ambiguous because both the FDA‘s and Defendants’ interpretations are reasonable.2
3.
Because I conclude that the SSP is ambiguous, I now discuss the remaining criteria for deferring to an agency‘s interpretation of a regulation and explain why they
First, there is no doubt that the FDA‘s interpretation is the agency‘s “‘authoritative’ or ‘official position.‘” Id. at 577 (quoting United States v. Mead Corp., 533 U.S. 218, 257-59, 258 n.6 (2001) (Scalia, J., dissenting)). The Supreme Court in Kisor explained that an “authoritative” interpretation is one “actually made by the agency . . . rather than any more ad hoc statement not reflecting the agency‘s views.” Id. The FDA‘s interpretation of the SSP exception comes from an official guidance document, drafted and finalized “consistent with FDA‘s good guidance practices regulation.” Same Surgical Procedure Exception: Questions and Answers Regarding the Scope of the Exception; Guidance for Industry; Availability, 82 Fed. Reg. 54289, 54290 (Nov. 17, 2017) (citing
The FDA‘s interpretation also implicates its substantive expertise in protecting public health by assessing and addressing risks. See, e.g.,
Finally, the FDA‘s reading of the SSP exception reflects “fair and considered judgment” and does not present unfair surprise. Id. at 579 (quoting Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012)). The FDA has taken the position that fat-derived SVF does not fall within the SSP exception since at least 2014, when it first issued draft guidance in response to “numerous inquiries regarding HCT/Ps manufactured from [fat] tissues.” FDA, Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps) From Adipose Tissue: Regulatory Considerations 2, 7-8 (2014); Human Cells, Tissues, and Cellular and Tissue-Based Products From Adipose Tissue: Regulatory Considerations; Draft Guidance for Industry; Availability, 79 Fed. Reg. 77414 (Dec. 24, 2014) (announcing draft availability). Indeed, Defendants admitted that they were aware that one of their affiliates received a warning letter from the FDA in 2015 stating that their use of fat-derived SVF violated the FDCA. Based on that history, the FDA‘s current interpretation is not merely a “convenient litigating position.” Kisor, 588 U.S. at 579 (quoting Christopher, 567 U.S. at 155).
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Because I conclude that the SSP exception is ambiguous, the FDA‘s interpretation is reasonable, and all the remaining criteria for Auer deference are satisfied, I