Column: How a stem cell clinic lured patients with unsupported claims of treatment 'success'

By Michael HiltzikBusiness Columnist

Sept. 14, 2018 12:40 PM PT

Callers seeking treatment from StemGenex, a La Jolla medical clinic offering stem cell therapies for Parkinson’s, multiple sclerosis and other serious ailments, were hoping to hear encouraging news. For many, that’s what they got.

Plaintiffs allege in depositions filed in a federal court lawsuit that they were told the clinic had a 90% “success rate” in treating its patients. Indeed, as they could tell from the StemGenex website or from promotional material sent them, the clinic had a 100% patient satisfaction rating. Hundreds of customers were treated from December 2013 through February 2017, according to a list the clinic provided to the plaintiffs. The clinic’s standard fee was $14,900 per treatment, not including travel.

As it turned out, however, the success rate they cited was inaccurate, according to former executives. The “patient satisfaction rating” had nothing to do with whether the treatments worked medically, the clinic’s co-founder and chief administrative officer, Rita Alexander, said in a deposition, but referred only to features such as the hotel accommodations the patients received. The “rating” was the product of a questionnaire filled out by patients the day after their procedures, typically while they were still recovering from surgery and while a clinic employee stood by.

This stem cell clinic was being driven primarily by the goal of getting more customers by painting an overly rosy picture of how their past customers fared.

— Paul Knoepfler, UC Davis

The plaintiffs, who are seeking class certification, allege that all that was part of an effort by StemGenex and its officers to use “false and misleading advertisements” to induce disease sufferers into paying for treatments that have no basis in scientific fact.

The documents were filed last month in federal court in San Diego by lawyers for five StemGenex patients who say they failed to receive “any significant benefit” from their procedures at the La Jolla facility. The lawsuit initially was filed in state court but moved to federal court in 2016.

The filings include excerpted depositions of Alexander and former executives and medical staff at the clinic. Also included are statements from 49 dissatisfied former patients. Most sought treatment for multiple sclerosis, an incurable, disabling disease of the central nervous system; others sought treatment for diabetes, Parkinson’s, joint problems or arthritis. They say they would join the class action if it’s approved by a judge.

StemGenex has denied that it made any misrepresentations to customers or that it offers patients “any promises or guarantees of results.”

A response to the filings isn’t due from StemGenex until mid-November. A hearing on the motion for class certification has been scheduled for Jan. 31. StemGenex didn’t respond to a request for comment on the documents or the lawsuit.

The filings open a window into how people can be enticed into undertaking an expensive treatment unapproved by medical regulators or insurance underwriters and lacking conclusive scientific support. Put simply: They’re desperate. StemGenex, the plaintiffs allege, targets “vulnerable individuals mostly suffering from terminal, incurable, and often painful diseases such as multiple sclerosis, rheumatoid arthritis, and Parkinson’s disease.”

We’ve reported before on clinics offering unproven stem cell treatments and specifically on StemGenex. Typically, the clinics extract fat cells from a patient by liposuction, purportedly extract stem cells from the fat, and inject them back into the patient, sometimes at the site of an injury. The procedure takes less than a day. StemGenex includes in its fee the cost of a nearby hotel stay spanning the day before and the day after the operation, plus meals and transport between the hotel and its clinic. Most of its patients come from outside California and have to pay for their own travel.

Many of these clinics capitalize on the public’s impression that stem cells have become some sort of medical miracle. The Food and Drug Administration hasn’t approved any stem-cell therapies except treatment of blood conditions with cells derived from umbilical cord blood, which isn’t offered by StemGenex. “Don’t believe the hype,” the agency said in November in a consumer warning against hawkers of “unapproved and unproven” stem cell treatments. StemGenex acknowledges on its website that “stem cell therapy is not FDA approved and is not a cure for any medical condition.”

“In my opinion, the new court documents suggest that this stem cell clinic was being driven primarily by the goal of getting more customers by painting an overly rosy picture of how their past customers fared,” says Paul Knoepfler, a stem cell biologist at UC Davis who has been bird-dogging this noisome corner of the healthcare world. Knoepfler unearthed the filings from the court docket and reported about them on his laboratory blog this month.

It’s rare to get as close a look inside a clinic’s operations as the documents filed in the San Diego lawsuit afford. The material covers the period from December 2013 through 2017, when more than 1,000 patients were seen, according to a roster produced by StemGenex in court.

Deposition testimony from former StemGenex employees indicates that the staff fielded complaints from patients who hadn’t experienced any improvement in their health even months after the treatment. Some were told not to expect improvement for months more. Some demanded their money back, only to be told the fee was nonrefundable. Some were encouraged to sign up for further treatments, sometimes at a cut rate.

At least one patient from Pennsylvania who threatened to post a negative internet review if his money wasn’t refunded got a stern letter from StemGenex lawyers denying his request and warning they would “pursue a claim for any damages unlawfully caused to StemGenex or its good reputation.”

StemGenex’s witnesses were unclear about how many patients complained. Andre Lallande, its former medical director, testified that the figure was as low as 10% after 12 months. But Joseph Perricone, a supervisor of patient advocates in 2014 and 2015, testified that his impression was that half the patients reported “very little” or no response at all to the treatments.

StemGenex staff told customers that its “success rate” was 90% or better — implying that 90% of patients experienced improved health. There were no empirical grounds for that figure. “It was something that … kind of snowballed, that number,” Perricone testified. “I think one rep started saying it … and then another one started saying it, and then everybody started saying it,” until it was used on “probably every call.”

Alexander was aware of the practice, Perricone said, and allowed it to continue. Asked by a plaintiff’s lawyer if there was any scientific basis to make the claim, he answered, “There is none.” Alexander, in her deposition, said that she was unaware of any instructions addressing how patient representatives should respond if they were asked for the clinic’s success rate. Perricone, who is now an executive at a Chicago-area stem cell treatment center, declined to comment on his deposition. According to information posted on the government website ClinicalTrials.gov, StemGenex studies of the “quality of life” of its customers with multiple sclerosis or Parkinson’s began in mid-2014 and won’t be completed until mid-2019.

The plaintiffs are more concerned in their lawsuit with the patient satisfaction statistics, which StemGenex promoted heavily — until the lawsuit was filed in 2016 questioning them and they were removed from the clinic’s website. The statistics were generally offered in pie charts indicating 100% patient satisfaction. The plaintiffs — and many of the other patients who filed declarations with the court — say they interpreted the charts as indications of treatment success.

In fact, the statistics referred only to the patients’ “personal experience with car service, staff, hotel,” Alexander testified. “It has to do with their experience in being picked up at the airport and having service at a hotel and being treated kindly … but it has nothing to do with their treatment outcome.”

At least one staff member questioned the propriety of asking patients to complete the forms while still in recovery on StemGenex premises. Franca Gardner, a former nurse, testified that she raised the issue with Lallande. “I just said, ‘You know, it’s kind of intimidating to hand these out. They just had surgery. They don’t feel well. And we are standing there while they are filling it out.’”

StemGenex also pondered a strong response to negative publicity it began to receive in 2016. The clinic sought advice from reputation management firms on how to suppress online criticism. According to an email exchange filed with the court, a California firm called the Reputation Group asked for $19,500 to try to force the removal from search indexes of at least three troubling online posts — two linking to a critical investigative news clip from San Diego Channel 10, and another posted by the state’s stem cell program, the California Institute for Regenerative Medicine (CIRM) based on the Channel 10 report — or at least to make them show up less prominently in searches.

Whether StemGenex ever hired a reputation firm isn’t known. The CIRM posting remains live; although the clip is no longer accessible via the Channel 10 website, that may be the result of its age. A CIRM spokesman says StemGenex “never reached out to us or threatened us.”

The bigger issue is how to prevent businesses from offering unproven, expensive nostrums to the public. “This fits a disturbing larger pattern with the more than one hundred stem cell clinics in California and hundreds more across the U.S.,” Knoepfler told me. “The clinics regularly make unproven medical claims, use stem cells that have neither a solid scientific foundation nor proper FDA approvals, and push back against critics, all it seems to me in an effort to generate more profits by taking advantage of vulnerable patients.”

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