The term “stem cells” is commonly used in the colloquial sense to describe a multitude of cells that are not yet terminally differentiated. Such cells pose the ability to differentiate into a variety of cellular lineages including chondrocytes, osteoblasts, and adipocytes [2]. The mechanism of action of mesenchymal stem cell therapy is not yet fully elucidated. These cells have the potential to impact the biological healing response by reducing inflammation, promoting healing, providing cellular messengers, and potentially regenerating biological tissues [2].

Stem cells can be broadly classified as being either “pluripotent” or “multipotent” [5]. Adult stem cells are considered to be “multipotent.” These cells are associated with less concern regarding ethical and safety issues than their pluripotent counterparts [5]. Consequently, much of our research regarding stem cell therapy has focused on adult mesenchymal stem cell products [5]. Sources of such mesenchymal stem cells include bone marrow aspirate, adipose tissue, synovial tissue, periosteal tissue, peripheral blood, and perivascular cells [2, 5]. The concentration of stem cells in each of these sources is variable, as is the method of extraction.

Pluripotent cells are the holy grail of stem cell therapy. These cells have the ability to differentiate into any type of cell. These cells can come from embryonic sources, or be produced by way of somatic cell nuclear transfer (SCNT) or induction of adult stem cells into induced pluripotent stem cells (iPSCs) [5]. Embryonic stem cells bring up a host of ethical concerns, as these cells are derived from discarded embryos or in vitro fertilization [5]. These ethical concerns make this a controversial political issue as well. Regulation of embryonic stem cell research in the United States has been in flux since the Obama administration changed course on the existing federal funding restrictions [5]. The hot topic of iPSCs has also created an avenue to circumvent some of the ethical considerations regarding embryonic cells. However, there are theoretical concerns regarding oncogenicity of these cells and the safety of the viral vectors used for genetic reprogramming [6].

The culture of stem cells is somewhat controversial as well. It is possible to manipulate these cells and induce them to differentiate into a specific lineage. Additionally, stem cells can be grown and expanded in terms of numbers. Cellular culture is typically done in a serum-based media. The serum introduces additional theoretical risks of immunologic reaction and infection to the process [2].

The regulatory principles governing orthobiologics around the world are diverse and vary based on the individual country. The purpose of this chapter is to review the regulatory framework of the United States and several other nations around the globe. We will explore the expanding industry of stem cell tourism, as well as its potential benefits and perils. We will also discuss how Carticel^® autologous chondrocyte implantation (ACI) (Genzyme Corporation, Cambridge, MA) was the first orthobiologic cellular therapy to successfully navigate the US regulatory system. Finally, we will touch upon issues related to reimbursement of orthobiologics.

The agency that governs the use of orthobiologics in the United States is the Food and Drug Administration (FDA). The regulatory roots for orthobiologics date back to the Biologics Control Act of 1902, the Federal Food, Drug, and Cosmetic Act of 1938, and the Public Health Service Act of 1944. The FDA divisions most involved with regulation of these products include the Center for Devices and Radiologic Health (CDRH), the Center for Biologics Evaluation and Research (CBER), and the Center for Drug Evaluation and Research (CDER). CDRH is responsible for the regulation of medical devices and products that emit radiation. CBER is tasked with regulating biologics and devices related to these products. CDER is responsible for the regulation of drugs and some therapeutic biologics [1].

Broadly speaking, biologics can be classified as a medical device, drug, or biologic agent. There are aspects of each biologic product that would fit into each possible classification. As a result, there has been some confusion and “turf battles” regarding how these products are classified [4]. When there is debate as to which division has oversight over a given product, the FDA Office of Combination Products renders a decision based upon the product’s primary mode of action [1]. Being classified as a device allows for a much less heavily regulated pathway to the marketplace. Medical devices are described as classes I–III depending on the risk stratification of the product. Overall, the amount of regulation parallels the amount of potential risk of a given product [1]. Section 510(k) of the Medical Device Amendments to the Food, Drug, and Cosmetic Act of 1976 allows a new medical device to reach the marketplace if it can be shown to be “substantially equivalent” to a device already approved for marketing [1]. A 510(k) designation allows the device to reach the marketplace considerably sooner, with fewer requirements for clinical data. Such consideration is typically reserved for class I or II devices [1]. While there are no predicate devices for cartilage repair, this designation is more applicable to the instruments employed in the process of cartilage repair [1].

The process by which new products reach the bedside in the United States is somewhat convoluted. New products must first undergo review by both the local institutional review board (IRB) and FDA. Next, preclinical studies must be conducted using animal models to demonstrate safety and evaluate the pharmacology of the product [4]. The investigators must submit an investigational device exemption (IDE) application for device products, or an investigational new drug (IND) application for biologic and drug products [1]. Clinical trials may then ensue. Phase 1 trials involve administration to a small cohort of healthy volunteers to evaluate bioactivity and determine the optimal dose. Phase 2 trials involve controlled studies in a larger group of patients. This phase evaluates the short-term efficacy and tracks adverse reactions. Phase 3 trials are typically randomized, double-blinded, controlled, multicenter studies involving a large number of patients. This phase provides the data for product labeling and allows for an adequate risk-benefit assessment [4]. The next step in the process is the submission of marketing applications. For products classified as a device, a pre-market application (PMA) is required. For products classified as a drug, a new drug application (NDA) is required. For products classified as biologics, a biologic license application (BLA) is needed to document the “safety, purity, and potency” of a product [1]. Regardless of the type of application, the amount of regulation involved is similar. This process can be expensive and time-consuming, and marketing cannot ensue until the product is approved. Often private investors and industry partnership are required to navigate the clinical trial phase [7]. Even after approval of the marketing application, post-approval studies may be required by the FDA [1].

Title 21, Part 1271 of the Code of Federal Regulations outlines a risk-based, three-tiered approach to the regulation of human cells, tissues, and cellular- and tissue-based products (HCT/Ps) [8]. Category 1 products are those considered to be low risk and are thus not regulated as HCT/Ps. Examples of products in this category include whole blood, blood-derived products, bone marrow, human organs for transplantation, and extracted human products such as collagen. These biologic agents must be minimally manipulated, used in a homologous fashion, and not combined with any other agents [5]. Physicians who use Category 1 products need to follow current good tissue practices (cGTPs), but do not need to register with CBER [5].

Category 2 (Section 361 of the Public Health Service Act) products, or “361’s”, are those HCT/Ps that require only minimal oversight. The FDA’s primary goal is to ensure the safety of such products. Section 361 products include biologics that are minimally manipulated, used in a homologous fashion, not combined with other cells or chemicals, and have no systemic effect (unless for autologous use or use in a first- or second-degree relative). Classification as a 361 requires the physician to follow cGTPs, register their establishment with the FDA, and provide a list of HCT/Ps manufactured to CBER each year. These products are not required to go through the extensive pre-marketing approval process [5].

Category 3 (Section 351 of the Public Health Service Act) products, or “351’s”, are those HCT/Ps that require significant regulation and pre-marketing approval. This category includes biologic products that are more-than-minimally manipulated, used in a nonhomologous fashion, combined with other substances or cells, have systemic effects, or are used in an allogeneic manner [5]. Three hundred and fifty-one products are considered biological drugs, and the requirements are similar to those of traditional pharmaceuticals [9]. Producers of 351 products need to comply with cGTPs, register their establishment with the FDA, provide a list of HCT/Ps manufactured to CBER each year, obtain formal pre-marketing approval from the FDA, and label these products in accordance with FDA guidelines [5].

The FDA’s three-tiered approach brought about the concept of “minimal manipulation” of biologic products. Such manipulation is characterized as only slight modifications of cells or tissues, with preservation of the product’s inherent biological properties [9]. Examples of minimal manipulation include the extraction of cells from tissue, centrifugation, cutting, grinding, antibiotic treatment, gamma irradiation, ethylene oxide sterilization, lyophilization, and cryopreservation [10].

“More-than-minimal manipulation” is defined as processing that alters the biological characteristics of cells or tissues [10]. This would include activation, encapsulation, genetic modification, or expansion of cells or tissues [10]. Other examples of more-than-minimal manipulation include enzymatic degradation or the addition of chemical or biological elements to a product [9]. This concept is important as products that do not fit the requirements for minimal manipulation are required to go through the extensive FDA pre-marketing approval process [11]. A prominent example of a product deemed to involve more-than-minimal manipulation was the Regenexx procedure [11]. This procedure involved the harvest of mesenchymal stem cells and transportation of these cells to a remote lab for culture expansion. After a period of time in culture, the cells were transported back to the facility for administration to the patient for the treatment of a variety of orthopedic ailments [5]. The FDA charged that this procedure involved more-than-minimal manipulation and should be treated as a 351 product. In 2014, a federal appellate court sided with the FDA on this matter. Subsequent actions by the FDA prohibited this clinic from performing this version of the Regenexx procedure in the United States [5].

While the 351 designation was created to ensure patient safety, it does make the process more complicated, costly, and time-consuming. Some have referred to the US regulatory system as “The Valley of Death” [9]. It is not uncommon for products to pass Phase I trials, but fade away due to insufficient funding or inability to reach clinical efficacy endpoints [9]. The 361 designation offers more flexibility in circumventing this challenging regulatory landscape. As a result, most commercial products have targeted the 361 designation [2].

Several mechanisms exist in the United States to speed up the FDA approval process and allow biologic products to reach the bedside sooner. Such mechanisms include the “Fast-Track” program, “Accelerated Approval” program, “Priority Approval” program, “breakthrough therapy” designation, and “compassionate use” exemption. Several states have also been experimenting with “right-to-try” (RTT) laws for biological therapies [9].

The “Fast-Track” program is an experimental regulatory measure that allows for an expedited review process. Products can be considered for this program if they “treat serious conditions and fill an unmet medical need” [9]. The FDA’s “Accelerated Approval” program focuses on making the actual approval process quicker. This program works by redefining the typical clinical endpoint to a more easily achievable surrogate endpoint [9]. “Priority Review” is yet another mechanism for hastening the regulatory process. This program mandates that the FDA takes action within 6 months of an application, as opposed to the standard 10-month time frame [9].

In 2012, the FDA introduced the concept of “breakthrough therapy” to speed up the approval process for innovative products. In order to be considered for this status, the product must have preliminary data in place that indicates it is a “substantial improvement” over existing alternatives [9]. Despite the added flexibility afforded by this designation, it has yet to be applied to stem cell therapies [9]. The vast majority of products under this designation are monoclonal antibodies and traditional pharmaceuticals [9].

“Compassionate use” provides an avenue of increasing access to biologic treatments in terminally ill patients. In order to meet compassionate use criteria, the patient’s physician and product manufacturer must agree on the proposed usage. Authorization must then be obtained from the FDA in order to move forward. Compassionate usage allows products to go directly from Phase 1 safety trials into clinical practice, thus bypassing Phase 2 and 3 trials [9]. The FDA reportedly grants up to 99% of compassionate use requests [9].

An interesting trend in the United States is the passage of state-specific “right-to-try” (RTT) laws. Such legislation is passed at the state level and in many instances seems to be in direct opposition to existing federal regulations [9]. In order for RTT laws to apply, a patient must be “gravely ill,” and the product must demonstrate safety in Phase 1 trials [9]. One state that currently has RTT laws in place is Colorado [9]. As a result, Colorado has become a destination for patients with a myriad of diseases who seek access to experimental treatments. RTT laws present an interesting ethical question for the healthcare industry and regulators alike.

In 1997, Genzyme Corporation (Cambridge, MA) became the first company to successfully navigate the complex US regulatory framework for cellular therapy products in cartilage repair [1]. At the time of this writing, Carticel^® (Vericel Corporation, Cambridge, MA) is the only cellular therapy product for orthopedics that has been approved by the FDA in the United States. The autologous chondrocyte implantation (ACI) procedure was first described by Peterson, Brittberg, and colleagues in 1987 and subsequently developed and manufactured by Genzyme Corporation [12]. This is another instance where science moved faster than the regulatory system. Carticel^® was actually marketed in the United States starting in 1995 as banked human tissue. This product was viewed as a skin graft, analogous to the established EPICEL (Genzyme Corporation, Cambridge, MA) autologous cultured keratinocyte product used for treatment of burns. This was prior to the formation of any applicable FDA guidance regarding cellular culture. The FDA had to adapt, and in May of 1996 CBER released the first guidance on manipulated autologous cultured structural (MAS) cells. This guidance was entitled “Guidance on Applications for Products Comprised of Living Autologous Cells Manipulated ex vivo and Intended for structural Repair or Reconstruction” [1]. These new guidelines created a pathway for Carticel^® to reach the US marketplace. A BLA was submitted in 1996, based on data from preclinical animal testing, the Swedish clinical experience of 153 patients, and a US registry study of 191 patients [13]. The BLA was approved in August of 1997, under 21CFR601.40 allowing accelerated approval of biologic products for serious or life-threatening illnesses. The conditional approval required post-approval studies to validate the long-term clinical benefits. A US registry study of 97 patients [14] and the study of treatment of articular repair (STAR) on 154 patients were performed to demonstrate the benefit and safety of the Carticel^® [15].

The FDA regulation of cell- and tissue-based products has continued to evolve over the years. In 2000, the FDA approval for Carticel^® was narrowed as a “second-line therapy.” In 2007, the FDA revised the Carticel^® label to include the STAR outcome results. Another draft guidance was released by the FDA in 2007, entitled “Guidance for Industry Preparation of Investigational Device Exemption (IDEs) and Investigational New Drugs (INDs) for Products Intended to Repair or Replace Knee Cartilage” [1]. This guidance expanded on the process for handling the development of biologic products and clarified how these products are able to reach the bedside. To date there have been more than 13,000 patients treated with Carticel^® in the United States. Over 500 articles including 10–20-year outcomes have been published on this topic [16–19]. However, since the approval of Carticel^®, there have been no new 351 cellular strategies for the treatment of cartilage defects in the United States. However, since the writing of this chapter MACI (Autologous Cultured Chondrocytes on a Porcine Collagen Mebrane), the next generation of Carticel has been approved by the FDA. Products like DeNovo NT Natural Tissue (Zimmer, Inc., Warsaw, IN) and BioCartilage (Arthrex, Inc., Naples, FL) have taken advantage of the 361 method of approval [20].

The regulatory foundation of European Union (EU) is well organized and in many ways resembles the US system. The central governing agency tasked with the regulation of orthobiologics is the European Medicines Agency (EMA). Several guidances provide the basis of the European policy including EC No. 1394/2007 and the Human Cells and Tissues Directive (2004/23/EC) [21, 22]. Coming into effect in 2008, EC No. 1394/2007 defined the concept of advanced therapy medicinal products (ATMPs) and how they are regulated. ATMPs include gene therapy products, somatic cell products, and tissue-engineered products that are more-than-minimally manipulated or used in a nonhomologous fashion [11]. Similar to the US system, processes such as centrifugation, irradiation, or antibiotic addition are not considered more-than-minimal manipulation [11].

The process by which a biologic product reaches the bedside is analogous to the US system. Preclinical trials are performed under International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) guidelines to determine the safety of the product [4]. In order to initiate a clinical trial, a clinical trial authorization (CTA) is required. This permission is granted at the national level, as opposed to the central level by the EMA [23]. Clinical trials in EU progress through Phase I–III studies, in a manner similar to the US system. Following completion of clinical trials, a marketing authorization application (MAA) is required to reach commercialization [4]. EC No. 1394/2007 created the Committee on Advanced Therapies (CAT). This organization monitors the quality of clinical trials in defining the safety and efficacy of ATMPs [23]. After scientifically reviewing a product, CAT makes a recommendation to the Committee for Medicinal Products for Human Use (CHMP) of the EMA for final approval [23].

Several pathways exist for circumventing the traditional regulatory system. EC No. 1394/2007 defined a “hospital exemption.” This clause allows for the nonroutine administration of ATMPs to an individual patient under the care of a physician within a member state hospital [23]. This is analogous to the US system where such off-label procedures are considered part of the “practice of medicine” and are outside of the purview of the FDA [21]. While the hospital exemption creates a loophole in the regulatory system, the exempt products are regulated on a national level and must be manufactured in accordance with good clinical practice guidelines [23]. Additionally, products may apply for conditional marketing authorization. This designation allows a product to reach the bedside in a more expedient fashion if it “fulfills an unmet medical need when the benefit to public health of immediate availability outweighs the risks inherent in the fact that additional data are still required” [24, 25].

Though the EU system resembles the US system in many ways, there are several dissimilarities. The first relates to finance. In the United States, there is a clear distinction between federal (National Institutes of Health) and private funding. In the EU, there is no such distinction [23]. This concept is particularly important with regard to embryonic stem cell research. This has been a tumultuous political issue in the United States. The George W. Bush administration had placed federal funding restrictions on research involving human embryonic stem cells [23]. This political action put the United States at a distinct disadvantage in terms of the advancement of stem cell research. Other nations, including the EU, were able to continue with these studies. The Obama administration loosened the US policy on embryonic stem cell research, attempting to foster some growth in this sector [23].

While ATMPs are centrally regulated, the individual member states retain considerable autonomy regarding implementation of individual treatments [23]. As a result, there is still a fair bit of heterogeneity regarding the state level handling of ATMPs. The regulatory structure of the United Kingdom follows the same central structure as the EU. The Medicines and Healthcare Products Regulatory Agency (MHRA) oversees the manufacturing and importation of centrally approved ATMPs. Adult stem cells that are for autologous use, are minimally manipulated, or are used within the same surgical procedure are exempt from the Tissue Framework Directive. While a hospital exemption exists in the United Kingdom, it is under the purview of the British General Medical Council (GMC) under the Medical Act of 1983. The accountability afforded by this oversight has been touted as the reason why the United Kingdom has less stem cell therapy performed outside of the research sector than other countries [21]. Another example of heterogeneity at the state level is that of Italy. While the regulatory framework of Italy follows the central EU guidelines, there were significant changes at the national level over the past several years. In April 2013, the Italian Senate passed legislation to reclassify mesenchymal stem cell infusion as a transplant procedure. This decision allowed for increased access to therapies by circumventing the clinical trial requirements of the Italian Medicines Agency (IMA). However, this legislation also effectively eliminated the good manufacturing process requirements and made for a tenuous situation [11]. This decision was reversed in May 2013 by the Italian lower house, reinstating the need for good manufacturing process procedures and IMA oversight [11].

The regulatory framework in Australia is fairly similar to that of the United States. The Therapeutic Goods Administration (TGA) is the agency charged with regulating the cellular- and tissue-based product industry. The regulatory system in Australia is also three-tiered [21]. The first category of products is biologics that are regulated as therapeutic goods. These products include blood, plasma, vaccines, and cryopreserved hematopoietic progenitor cells. The TGA considers these to be medicinal products and requires safety and efficacy trials similar to those required by pharmaceuticals in the United States [21]. The second category of products is biologics regulated as biologic goods. These products include stem cells, combined cell and tissue products, and genetically modified and expanded cellular products. The Australian Regulatory Guidelines for Biologicals (ARGB) apply to these products and classify them from 1 to 4. The classification is based on risk stratification, with class 3 and 4 products involving more-than-minimal manipulation and nonhomologous usage. Class 3 and 4 products require additional oversight in the form of safety and efficacy monitoring. The last category of products includes those not regulated as biologic goods. These products include human organs, reproductive tissue for reproductive therapy, hematopoietic progenitor cells, and cellular and tissue products collected from a patient for a single treatment under the supervision of a medical practitioner. This class of products is excluded from regulation as biologics [21].

The regulatory system of Canada is also similar to the US system in many ways. The agency tasked with regulating orthobiologics is Health Canada under the Canadian Food and Drugs Act. Products must go through preclinical assessments, clinical trials, and marketing approval prior to reaching the bedside. Biologic products are subject to the Food and Drugs Acts requirements, particularly Divisions 1A, 2, 4, 5, and 8 [26]. After clinical trials demonstrate safety and efficacy, a Notice of Compliance (NOC) is issued, and marketing can ensue. Additionally, an establishment license is required for the manufacturing sites [26].