Mining medical waste

When mothers donate blood from their newborns' umbilical cords, it is processed for lucrative stem cells, which an Altamonte Springs entrepreneur sells for thousands of dollars.

ALTAMONTE SPRINGS - Dwight Brunoehler has sold jewelry, Yellow Pages and offbeat energy-savings devices. He even invested in a failed effort to develop high-tech plastic guns.

Now Brunoehler, president and founder of Cryobanks International Inc. in Altamonte Springs, is turning medical waste into gold.

The magic ingredients in this modern-day alchemy are stem cells from newborns' umbilical cords, already being used to treat leukemia and potentially effective against dozens of other life-threatening diseases.

Brunoehler's business plan is simple: Get the stem cells for free after a baby's birth, then process, freeze and sell them for transplantation at more than $15,000 a bag. In one case, a doctor charged patients nearly $25,000 for the treatments, which used several bags of stem cells. Remarkably, it's a largely unregulated business.

Brunoehler said Cryobanks isn't yet profitable, but thinks it will make plenty thanks to a groundswell of research into new uses for cord blood stem cells.

"It almost feels like this is one of those territory rushes," Brunoehler said. "People are filing patents as if they're driving flags into the ground."

But being a pioneer isn't easy. Cryobanks' biggest customer ran afoul of federal regulators in March for using the company's stem cells in an unapproved treatment of patients with Lou Gehrig's disease, also known as Amyotrophic Lateral Sclerosis, or ALS.

And though Brunoehler (pronounced Brun-eller) said mothers-to-be agree to donate their newborn's stem cells well before they enter the hospital, others say the decision is often made when women are most vulnerable, during labor and on the delivery table.

Brunoehler, whose black Jaguar occupies a "Maternity Clients Only" parking space outside Cryobanks' office, isn't shy about promoting his company among key health professionals. Hospital residents have received Palm handhelds courtesy of Cryobanks and obstetrics units have received up to $50 per donation in return for keeping the company top of mind.

Brunoehler, whose father was a longtime Orlando gynecologist, boasts he's bringing entrepreneurial efficiencies to a world dominated by slow-moving nonprofit hospitals, universities and blood banks. Though he said Cryobanks once was labeled an outcast by this close-knit community, Brunoehler doesn't let cliquishness interfere with his goal of building the biggest stem cell bank in the world.

Bankrolled with $12-million from private investors, including a former KFC fry cook-turned-multimillionaire, Brunoehler envisions his current inventory of 8,000 stem cells multiplying tenfold. When legal demand for stem cells skyrockets, Brunoehler figures Cryobanks will hit the jackpot.

"If we can do this without taxpayer money and put out a high-quality product at a low price, what we have here is a business model for the future," he said, dismissing his company's for-profit status as irrelevant. "Profit, nonprofit. Those are just tax words."

Fran Verter, whose daughter died after an unsuccessful stem cell transplant six years ago, has a different view of Brunoehler's business.

"I would never donate my child's blood to someone who is going to make a profit from it," said Verter, who runs an independent Web site offering information on various stem cell banking options. "Supporting medical research is one thing, but helping a company post a profit with your child's stem cells is quite another."

Nor does Verter, an astrophysicist with the Goddard Space Flight Center in Greenbelt, Md., mince words about the FDA's unwillingness to impose standards on the stem cell industry. "It's shocking," she said. "But nobody else in the business seems to think so."

In the early 1980s, he left the corporate world to head a variety of startups, some more successful than others. Among investors in his ultimately failed plastic gun project, Brunoehler brags, was former Texas governor John Connelly.

It was late 1993 when his girlfriend, who worked for a fertilization clinic in Orlando, told him doctors were sending frozen sperm to out-of-state facilities. Never one to miss a market, Brunoehler and a partner launched Cryobanks as a sperm storage bank.

"I put a few hundred thousand dollars into the business," Brunoehler said. "I figured it would either be a great tax writeoff or it would be something we could take forward."

Though Cryobanks got a publicity windfall when it handled the first sperm collection taken from a dead man, Brunoehler was intrigued by the emerging business of umbilical cord stem cells.

In 1995, Cryobanks began soliciting customers who wanted to store their newborns' stem cells for their own families' use. The company currently has 1,500 private customers paying $95 annually. Brunoehler describes that part of the business as unnecessary and almost embarrassing, though he has not discontinued it.

"We have a medical and business board that would not have anything to do with us if we were aggressively pursuing personal storage," he said. "And the money we make from it couldn't support anything, probably not even a payroll period."

Instead, Brunoehler became convinced that the more public stem cell donations increased, the less need there would be for individuals to store their cells privately. He spent time with doctors at the New York Blood Center in New York City, which runs the oldest and biggest public stem cell bank. After studying their operation, Brunoehler said he bought identical freezers for a fraction of the cost and went into business.

One major difference: While the New York Blood Center uses only its own staff to collect cord blood at four hospitals, Cryobanks leaves the collection up to delivery-room staff at any hospital in the country.

That troubles people like Dr. Cladd Stevens, medical director of the New York Blood Center's national cord blood program.

"We think it's really important to have complete control over the quality of the collection," she said. "From our perspective, it's not that it works 95 percent of the time. We're fully accountable so the patient at the other end knows what they're getting."

Brunoehler bristles at the suggestion that his company's approach to collecting stem cells undermines quality.

"I've surrounded myself with people who would head for the hills if we cut corners," he said, noting that his advisers include the French doctor who performed the first cord stem cell transplant in 1988. "We far exceed all guidelines."

He then acknowledges that although the Food and Drug Administration has been discussing the need to monitor the cord blood industry since 1995, regulations have not been finalized.

Housed in a plain-vanilla office park off I-4, Cryobanks boasts that it will accept cord blood donations from anywhere in the nation, round-the-clock, seven days a week. With donations coming in at the rate of 20 to 25 a day, Brunoehler estimates the cost to process each unit, including overhead for equipment and a staff of 12, is about $800.

One morning last month, Cryobanks' lab techs were sorting through the first shipments of the day, ripping open express packages from Illinois, California, Montana and Connecticut.

Five of 21 donations were immediately rejected for incomplete paperwork. As the remaining bags hung in lab presses, the cord blood's red cells settled to the bottom, clear plasma rose to the top and stem cells clustered in a thick, cloudy yellowish layer in the middle. By lunchtime, the cells would be bagged, slid into stainless steel storage racks and nestled in liquid nitrogen vapor in stainless steel tanks, awaiting a buyer.

Cryobanks' payday comes when a tiny sample from a unit of stem cells proves viable and is a close match to a patient in need. His company receives $15,300 per unit, a price that's likely to increase in the near future. New York Blood Center recently raised its fee, with FDA approval, to nearly $22,500 a unit. Brunoehler said the expense is to be expected in a market with high overhead and limited demand.

"A unit of cord blood only becomes valuable if someone needs it and takes it," he said. "If they need it, they'd take it regardless of price."

To build inventory and burnish his company's reputation, Brunoehler has aggressively courted the top names in the tight-knit world of cord blood medicine. Dr. Sanford M. Lederman, co-director of maternal fetal medicine at Long Island College Hospital, said he wasn't quite sure why Brunoehler was so interested in becoming his friend about five years ago.

"He realized you have to go to the source, through obstetricians, to encourage the general population to donate," said Lederman, now chairman of Cryobanks' scientific advisory board.

Lederman and Brunoehler began promoting stem cell donations among doctors, residents and nurses at Long Island Hospital and three other facilities. Then they hit the road nationwide, talking to Lederman's colleagues and setting up similar programs in about a dozen hospitals across the country. Another three or four partnerships are in the works.

Dr. Jordan Perlow, a Phoenix obstetrician, said his doctors' group is close to finalizing an affiliation with Cryobanks for patients who want to donate cord blood. "It's the only place that accepts donations from anywhere in the country," Perlow said.

Since it is illegal to pay for stem cells, Cryobanks uses other incentives with busy health professionals. At Arnold Palmer Hospital for Children and Women in Orlando, Cryobanks donated Palm handheld computers to resident doctors. At University of Illinois Medical Center in Peoria, Cryobanks stepped in with money for a teen pregnancy and maternal health education program.

At Lederman's hospitals, which are now generating 50 to 60 stem cell donations a month for Cryobanks, the hospital is reimbursed up to $50 per unit. "It's an incentive for the work they do," Lederman said of the payment. "It's not to push the program. We don't want to twist arms."

But there's some disagreement about exactly when pregnant women are approached about donating their baby's cord blood to Cryobanks. Brunoehler insisted donors make their decision well before entering the delivery room.

"We're not taking consents from moms in labor," he said firmly.

But Lederman said patients often end up reading Cryobanks' literature while they're in the labor room.

"We don't give them the literature when they're uncomfortable, but if they're bored, it's there for them to browse," Lederman said. "And sure, we've had people agree to donate on the delivery table. Patients have been very responsive to this program."

Peggy Mankin, a health research specialist who works with the University of Illinois' Cryobanks partnership, also said it's not unusual for patients to consent to donate in the delivery room. And though a bill pending in Illinois would mandate all pregnant women be asked if they want to donate cord blood, the timing of such a question is unclear.

"It's a bit of a hot potato," Mankin said. "I can tell you that when consent is given in the delivery room, it's always patient-driven, not hospital-driven."

Marnie Renda of Tampa said she was thrilled when she stumbled onto Cryobanks' service on the Internet. The first-time mom didn't want to store her newborn's cord blood privately, but she'd read enough about stem cell research to convince her that throwing it away would be a waste.

She was frustrated to find no one wanted her donation until she discovered Cryobanks. (Florida Blood Services began accepting cord blood donations from births at St. Joseph's Hospital in Tampa in January.)

"I was afraid I was too far along to sign up, but Cryobanks made it very easy," said Renda, whose son Matthew was born in January.

She would have preferred her son's stem cells to be passed along free to needy patients, rather than sold. "But I'm glad someone who needed it got it or research is being done with it," Renda said.

The most widely accepted use for donated cord stem cells so far is as a substitute for bone marrow stem cells in transplants for people with leukemia and immune and metabolic diseases.

New York Blood Center, with 20,000 units collected and a decade of experience, has placed 1,352 units for use in such procedures. Cryobanks has placed just two.

Brunoehler knows it's a numbers game: The larger his inventory, the higher the likelihood there will be an appropriate biological match for a transplant patient. But he also knows Cryobanks' future lies in promoting research into additional uses of stem cells.

"We won't do cosmetic or controversial" treatments, he said. "Any research must have appropriate protocol and operate within the confines of the law."

But Brunoehler is not above pushing the envelope in pursuit of a market. Though he won't say where Cryobanks has sold stem cells, the majority of the nearly 900 units he said have been placed so far apparently went to one customer: Dr. Mitchell Ghen of Atlanta.

Starting in August, Ghen, an osteopath, began offering highly experimental and expensive stem cell transfusions to patients with ALS, a paralyzing disease that usually kills within two to five years. By March, when the FDA told Ghen he needed government approval and oversight for such human trials, the doctor had treated 43 patients from dozens of states and countries.

Each patient received up to 20 units of stem cells, for which they paid close to $25,000 out of pocket. Cryobanks provided the stem cells; Brunoehler said the units were given to Ghen at cost.

Cryobanks stopped shipping stem cells to Ghen after being contacted by the FDA in March. At the same time, it stopped supplying a California doctor who was performing similar infusions but had treated only 10 patients.

Brunoehler is unrepentant.

"We hope Dr. Ghen resolves the situation with the FDA and if he does, we're the only facility to supply those needs," he said. "If it advances the field and Cryobanks' shareholders can gain by a patent or drug, we want to be involved in it."

Ghen's attorney said it is unlikely his client could afford the expense of an FDA-approved clinical trial. But the California physician, Dr. Dan Cosgrove, said he is proceeding with the FDA application and is hopeful he can restart treatments within a couple of months.

"This is very promising therapy, but I don't think we're doing it right yet," Cosgrove said, noting that initial positive results were short-lived. "For patients to pay more than $20,000 for this is kind of a stretch. I'm not promising anything."

Cosgrove said it's likely he'll buy his stem cells from Cryobanks should the treatments resume, though he's happy to consider other suppliers.

"They (Cryobanks) are hoping their patented, secret way of processing the stem cells may make a difference but I'm just trying to find something that works," he said. "If they can get a patent out of this and make money, so be it."

- Times researcher Cathy Wos contributed to this report. Kris Hundley can be reached at hundley@sptimes.com or (727)892-2996.