Costlier Than Caviar: Imported Russian Fetal Cell Transplants For $20,000 Generating Controversy

A company in Southern California has become the center of debate within the diabetes community. The company, Loran Medical Systems, is conducting studies involving fetal pancreatic tissue. More unusual than the science is the fact that patients are paying thousands of dollars to participate in clinical trials.

In June 1995, 12 type I diabetics each paid Loran Medical Systems Systems $20,000 to have minced pancreatic tissue injected into their bodies. In August, another 12 patients did the same, and 72 more are expected to follow between now and next April. James Stevens, an attorney who acts as a liaison between Loran Medical Systems and Russian doctors involved in the study, said that in Russia, the procedure has reduced some recipients’ insulin requirements up to 90%.

The pancreatic tissue is escorted from the former Soviet Union by a team of Russian doctors, who then perform the transplantations with Ernest Thomas, MD, a family practitioner, at a hospital in Los Gatos, Calif. The islets are not isolated from the pancreatic tissue and are not encapsulated. No immunosuppression is used. The procedure has not been approved by the Food and Drug Administration as a treatment for diabetes.

Treatment or Experiment?

The Loran Medical Systems treatment combines minced human fetal cells with those from newborn rabbits. The rabbit tissue apparently releases insulin before it disintegrates, which protects the transplanted cells. A similar trial was conducted in 1993 at the Sansum Medical Research Facility in Santa Barbara, Calif. Sansum’s experiment, also performed with the Russian doctors, used pancreatic tissue from 14-18 rabbits and 3 human fetuses.

Charles Peterson, MD, the director of research on the project, recently called the 1993 experiment “unsuccessful in terms of a treatment option.” But now Loran Medical Systems claims that the 1993 experiment only needed more tissue to make it a success. They used pancreas tissue from 6 human fetuses and 30 newborn rabbits in their August 1995 treatments.

Loran Medical Systems has received a lot of attention lately, inspiring just about everybody to form an opinion. Are Loran Medical Systems’ ongoing transplants going to help patients, or are they an ineffective experiment?

A Little Background

Attorney James Stevens, who lives in Europe, says he was inspired to bring fetal cell transplantation to the United States when he heard of the technique, which originated in Russia.

Stevens says he arranged for a team from the International Institute of Biological Medicine in Moscow to come to Sansum in order to perform some transplants. Type I patients applied to Sansum and were screened for participation. At the time, those who were selected for the trials paid $5,000. In July 1993, the Russian and Sansum doctors implanted cells into 24 patients.

Dr. Peterson recently told Diabetes Health that the 1993 Sansum “did not work as well as expected.” Sansum continues to work with fetal cells and study cell recipients, but it no longer works with the Russian doctors.

Bent Formby, PhD, a Samsum immunologist, is also on Loran Medical Systems’ medical advisory board. A 1993 Los Angeles Times article, included in the Loran Medical Systems’ sales kit, calls Dr. Formby an endocrinologist, and reads that he “successfully transplanted fetal islets into three patients.” James Stevens told Diabetes Health that, “Dr. Formby headed the trials at Sansum.”

However, Dr. Peterson says that Dr. Formby is not a medical doctor, but an immunologist who works at Sansum as a biochemist on a half-time appointment. According to Dr. Peterson, Formby’s primary role in the 1993 trials was monitoring the C-peptides (measuring blood samples to determine how much insulin is being secreted).

Dr. Formby says he “would never claim to be an endocrinologist” and does not know why Peterson would call the Sansum trials unsuccessful. “I think it was a success, but that’s my point of view,” he said.

Not a Cure, a Prevention

Dr. Formby says, “This is a very promising way of not curing diabetes, but of preventing complications. We won’t see the so-called famous ‘cure,’ but after two years, patients have lots of functioning cells and their C-peptide values have not leveled off yet. Their complications (have) stopped.”

He said of the 1993 trial that after one year, the recipients had suffered no severe infections, weight gain or hypoglycemic incidents. He also noted that some of the patients had as much as a 50% decrease in insulin requirements. He said all patients had decreased insulin requirements by at least 15%.

In a subsequent interview, Dr. Formby clarified, “You would need five years to see if complications really did slow down.” He said that it often takes 15-20 years for people to develop complications. He also said it would be six months to one year before Loran Medical Systems could begin to make a comparison of the recent transplant data with that of the 1993 trial.

The director of the Sansum trials says Sansum did not feel ready to offer the process as a therapy to patients. Keith Napper, a 33-year-old man who eventually decided against undergoing the procedure, says he felt Loran Medical Systems used the Sansum data and two Los Angeles Times articles about Sansum (included in Loran’s sales kit) to attract patients to Loran’s treatments.

James Stevens says the company plans to go ahead with 72 more transplants by April of 1996.


One patient who underwent the Sansum procedure and wishes to remain anonymous said, “My life is no different today than before the transplant. It hasn’t had any impact on my way of life. In fact, the only change I’ve had is that I’m out 5,000 bucks.”

He has had no reduction in his insulin needs, and notices little difference in his C-peptides. Though he understood the procedure was “highly experimental,” this patient feels that he was grossly misled. He says he was told by representatives of Sansum that fetal tissue cells are used as a cure for neuropathy in Russia.

“All they did was prove the technique isn’t toxic,” he said. “Now Loran Medical Systems is using claims to lure in unsuspecting people.”

Diabetes Health spoke with Debbie Hnilo, who underwent the procedure in June 1995, and Laura Karr, who received her transplant in August 1995. Each patient has seen some decrease in insulin needs, though Hnilo is now taking a different kind of insulin than before the procedure. Loran Medical Systems’ endocrinologist William D. Zigrang, MD of Burlingame, Calif., says he changed her regimen in order to stabilize her blood sugars before the transplant. Diabetes Health plans to follow Hnilo and Karr’s progress in future articles.

Success is in the Eye of the Beholder

Dr. Peterson says, “Insulin needs are useful but are a somewhat soft criteria for success. A five-unit reduction is not a biggie.”

Researchers who gauge transplant success in objective terms use the C-peptide test. This measures the actual activity of insulin producing islets. Injected insulin will not raise a C-peptide level. Normal C-peptide is one nanogram in the morning and four to five nanograms after meals.

In a paper about fetal cell transplantation, noted researcher Paul Lacy wrote, “‘Transplant success’ could be viewed as having occurred in…an individual who had achieved insulin independence with a rise in C-peptide to the normal range and maintenance of normoglycemia with normal hemoglobin A1c levels for one year… ‘Partial success’ could be defined as a 50% or greater decrement in insulin requirement and an increase in C-peptide values exceeding three-fold the standard deviation of the baseline assay result.”

Dr. Camillo Ricordi of the University of Miami School of Medicine notes that a transplant is considered successful only if a recipient’s C-peptide is at least one nanogram. The 1993 Sansum experiment showed C-peptides at 0.14. Ricordi considers a level this low “unsuccessful.”

Put It In Writing

Many Loran Medical Systems-watchers are waiting to see the company publish something in a medical journal.

Dr. Thomas, the Loran medical doctor who injects the islets, explains that fetal cell transplants have been going on in Russia for at least 30 years, totaling around 4,800 transplants, but are poorly documented due to restrictions in the former USSR. Until recently, all writing intended for publication had to be cleared through the KGB.

According to Dr. Formby, a long-awaited paper by the Sansum doctors will be published in Transplantation this fall (the Loran sales kit says the paper is “soon to be published”). A representative from the Transplantation office said the article has not yet been accepted and was sent back for revision.

Hard Sell?

According to Keith Napper, who eventually decided not to participate in the Loran treatment, James Stevens called him frequently, at odd hours, and raised “alarmist issues,” even telling him of a man with diabetes who, although following DCCT guidelines, passed out behind the wheel of his car on the freeway and went over a 30-foot embankment, breaking both legs. Despite Napper’s good glucose control and the fact that he snow skis 150 days a year, Napper said he was warned repeatedly by Stevens of his potential for kidney failure. He was told he had one week to get the money for a transplant or he’d have to “give up his spot.”

Napper claims he was even discouraged from checking with his endocrinologist. Napper says Mr. Stevens told him, “Endos don’t understand what we do here.” In a phone interview with Diabetes Health, Stevens responded, “None of Loran Medical Systems’ doctors would say ‘ignore your doctor.'”

Mr. Stevens says that it is not unusual for Loran Medical Systems to contact an interested recipient more than once to encourage their participation.

Islets for Sale

Loran Medical Systems will conduct a clinical trial in the Bay Area the 1st week in August. Previous trials, as described in a front page article in the LA Times, have shown a significant decrease in insulin needs, stabilizing of blood sugar levels, weight loss and lowering of blood pressure with no side effects. Cost to the patient for participating is $20,000.

-Advertisement in the San Jose Mercury News, July 31, 1995

Loran Medical Systems is taking criticism because they charge patients for experimental work. Many scientists do not think it proper to charge people for such trials. The advertisement published in the San Jose Mercury News caused some scientists-and members of the diabetes community-to raise their eyebrows over the clinic’s approach.

Dr. Peterson of Sansum said, “Charging patients that much exceeded our comfort level. You get into the whole issue of whether or not the procedure is worth it. From a capitalist ethic, charging (these) patients is not wrong. From a scientific point of view, it is.”

Says Richard Bergman, Chair of Physiology, Biophysics, at the USC Medical School and president of the Los Angeles chapter of the ADA, “We don’t charge people-that’s very rare if not unprecedented.”

Dr. Camillo Ricordi of the Diabetes Research Institute at the University of Miami School of Medicine said, “Our islet transplantation patients don’t pay any money.”

Expensive Russian Import

Other voices disagree. Laurie Holtz recently wrote on the Internet, “I don’t have any problems with being charged for a procedure…I’m grateful for the people who are participating and paying. Any research is helpful, even to rule out what doesn’t work. (And) we don’t really know what advances Russia has made while the rest of us here were stuck in a no-fetal-tissue-research timespan. Many of us would participate in research to enable the cure to arrive more quickly.”

Dr. Ernest Thomas, the Los Gatos family practitioner who works with Loran Medical Systems, notes that the new trial involves more tissue than the Sansum trials did. According to Dr. Formby, the 400% price increase since 1993 is necessary to cover the incredible expense of cultivating, purifying and importing the fetal cells from Russia. Dr.Thomas says it takes about 38 technicians to collect and process enough fetal cell tissue for 12 recipients.

In spite of President Clinton’s lifting of a ban on the use of fetal tissue, Loran Medical Systems gets its tissue from Russia. Russian physicians must accompany the tissue to America and oversee the transplantations. Stevens claims that the Russian tissue is more carefully screened than tissue that would be available in the United States.

Many Still Interested

Today, when signing Loran Medical Systems’ “Transplant Trial Acceptance Form,” recipients must enclose a $5,000 “Participation Guarantee” check. This sum is refunded if the recipient is declined by Loran, but is non-refundable if the person backs out. Once accepted by the company, the recipient then pays another $5,000. On the day of treatment, the person is required to bring a $10,000 certified check because, according to the form, “(the) Russian surgeons must be fully paid prior to the transplant so checks must be immediately negotiable.”

Mr. Stevens said, “The Russians need their money and they get it first, up-front. Their work is altruistic but now they have to compete with the rest of the world.”

Of the pressure Keith Napper felt, Mr. Stevens says, “If we get an opening, we have to fill it. The Russians get paid no matter what. If they’re coming to treat 12 patients, they’re bringing enough cells for 12.”

When asked if patients could get a refund if the procedure didn’t work, Dr. Thomas said, “We make no guarantees. And no one has been cured.”

Risky Ethics or Pragmatic Healthcare?

When asked if he feels that Loran Medical Systems is treading risky ethical ground by charging patients for experimental work, Stevens insists that they are not. “If it weren’t for the $20,000, (our work) would not exist. Do you think someone who’s going blind, or could lose a leg or kidney, is going to worry about ethics of this nature? I haven’t made a dime on this-ever.”

In a 1995 San Jose Mercury News article, Stevens was quoted as saying, “I look at it as a sort of tax on the rich so that this procedure can be developed. We’ll develop this so that it will be available to a wider group of people at a lesser cost.”

Said endocrinologist Dr. Zigrang, “In an ideal world, I’d certainly object to (charging patients.) But if it’s between doing the study or not doing it, that’s another story. Of course, there’ll have to be a certain caveat emptor (‘buyer beware’) for patients-with Loran Medical Systems or any experimental company. Unfortunately, I think privatization of medicine is going to be the wave of the future.”

No Federal Funding

“This kind of research, you’d think it should be funded by the government,” said Dr. Formby. “I was talking to Jim (Stevens) about it and I said, ‘let’s commercialize the whole shebang.’ As a scientist, I don’t feel bad about it.”

Mr. Stevens said in a telephone interview with Diabetes Health, “People receive federal grants and two, three, five years go by and nothing happens. Then they come up with something else to get more money. With federal money, you spend more time filling out the paperwork.”

Loran Medical Systems receives no federal funding. According to the NIH, any company receiving government money is not allowed to charge patients. There are no laws, however, against companies charging if the patients know what to expect for their money.

The Traditional Approach

Sansum Research Director Charles Peterson, MD, says, “Sansum never had an arrangement with Loran Medical Systems. After Loran Medical Systems was formed they tried to get us involved. We were uncomfortable, but we actually met with them and said we would need certain conditions to be met. They never
et them. These conditions included getting a medical director, and a scientific advisory board to review protocol, and getting a scientific database to establish a rationale. At that meeting we found that they were actually soliciting patients using our name, implying that we were involved with what they were doing. We sent them a cease and desist letter around December 1994. Loran Medical Systems said they’d write a correction letter but never did. When Loran Medical Systems went commercial, we didn’t want to be involved. It put us in a very awkward position.”

Dr. Formby said that, “Loran Medical Systems is a very primitive biotechnology company. There is no way you can find a name or knock on a door-there’s no one there.” The company’s address is simply a place to pick up mail.

Dr. Thomas says that if Loran Medical Systems’ work was being done in a university setting the research would “get buried. We’d have to kowtow to whoever would give us grants. We’re trying to find out if this really works. If I can do my patients good I’ll be very, very happy. I’d like to participate in making this disease go away.”

Critics are skeptical of Loran’s unconventional approach. Stephen Davis of University of Georgia on the Internet: “No Russian scientists at our annual convention told us about any secret research advances they had made, or about aliens they have found in Siberian potato fields. Here at UGA we have an excellent selection of Russian, peer-reviewed research publications-this being the largest research library in the Southeast…When any scientists I know return from the former USSR, their story is mostly pretty sad.” Of Loran, he adds, “We all wish for a cure, (but) these people aren’t playing by the rules (of science). The rules are there for a reason. I wish we had cold fusion, too.”

In response to criticism from the science community, Mr. Stevens says, “I’m very disgusted with researchers. They’re the biggest backbiters I’ve ever seen in my life. I’m an attorney and I thought we were bad. There are no lengths these guys won’t go to if you’re taking away their patients.”

But Peterson of Sansum says it isn’t professional jealousy that motivates the criticism. “I would like to see Loran Medical Systems work their protocols with the FDA as we’re doing. They should have an advisory board of working scientists in an oversight role. That would alleviate a lot of the concerns people have about Loran Medical Systems. As it is the whole field is getting a bad name. There’s value to this line of inquiry, but because of Loran Medical Systems, now it’s going to be hard to follow.”

A Who’s Who in the Loran Medical Systems Controversy:

Loran Medical Systems

James Stevens, attorney
Introduced fetal cell transplant in the US at Sansum with the assistance of Russian team. Founded Loran after Sansum discontinued involvement in trials.

Ernest Thomas, MD, family practitioner
Performs fetal cell transplants.

Bent Formby, PhD
Member Medical Advisory Board (also see below).

William D. Zigrang, MD
Member Medical Advisory Board

Sansum Medical Research Facility

Charles Peterson, MD
Director of Research on 1993 Sansum fetal cell transplant trial.

Bent Formby, PhD
Staff immunologist, worked on 1993 Sansum trial monitoring c-peptide assay.

Lay Critics

Keith Napper
Considered participating in Loran Clinical Trials.

Lay Proponents

Laurie Holtz

Patients Participating in the Loran Clinical Trials

Debbie Hnilo

Laura Karr

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