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Compounding Pharmacy Responsible For Meningitis Outbreak Files for Bankruptcy

Monday, December 31, 2012
The New England Compounding Center (NECC) Dec. 21 announced that it has filed for Chapter 11 protection (In re New England Compounding Pharmacy Inc., d.b.a. New England Compounding Center, Bankr. D. Mass., No. 12-19882, petition filed 12/21/12).

In the filing, made in the U.S. Bankruptcy Court for the District of Massachusetts, the company said it seeks to establish a fund to compensate individuals and families affected by the nationwide fungal meningitis outbreak caused by contaminated drugs produced by NECC. In papers filed with the court, the company said its goal is to provide a greater, quicker, and fairer payout to its creditors than they could achieve through piecemeal litigation.

As of Dec. 17, the Centers for Disease Control and Prevention said 39 people had died in the fungal meningitis outbreak, with a total of 620 cases in 19 states. NECC, which is based in Framingham, Mass., also has been the target of litigation filed by patients.


Compensation Fund
NECC announced the appointment of Keith D. Lowey as independent director and chief restructuring officer. Lowey will be responsible for NECC's efforts to establish the compensation fund and begin payments to affected parties.

“This will be a cooperative effort,” Lowey said. “We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief.”

Lowey said that NECC seeks to forge a consensual, comprehensive resolution of claims, which will be funded by agreements reached among the claimants, the company, its insurers, and other parties with potential liability for the meningitis cases. All such claims will be addressed in U.S. bankruptcy court.

“We want to confirm the Chapter 11 plan establishing the compensation fund as soon as possible,” Lowey said. “Many families across the U.S. have been impacted by this great tragedy, and it is difficult to comprehend the sense of loss so many people have experienced. Everyone associated with New England Compounding Center shares that sense of loss.”


Policymakers Examine Compounding
On Dec. 19, the Food and Drug Administration met with state boards of pharmacy to discuss what role FDA and the states should play in overseeing compounding pharmacies in light of the fungal meningitis outbreak. Traditional compounding is overseen by state boards of pharmacy. During the meeting, FDA Commissioner Margaret A. Hamburg said additional legislation is needed to strengthen and clarify the existing laws, and she is “guardedly optimistic” that Congress will act. Specifically, she said a uniform set of standards for nontraditional pharmacies should be created at the federal level. Hamburg also suggested that working groups be held to come up with clear definitions of traditional compounding and manufacturing.

Two bills have been introduced on compounding. Reps. Rosa DeLauro (D-Conn.) and Nita Lowey (D-N.Y.) Dec. 5 introduced a bill (H.R. 6638) to improve the regulatory framework governing compounding pharmacies. The proposed Supporting Access to Formulated and Effective (SAFE) Compounded Drugs Act also would clarify FDA's ability to oversee such pharmacies, DeLauro and Lowey said in a statement.

That bill follows legislation introduced in November by Rep. Edward J. Markey (D-Mass.), which also aims to strengthen federal regulations for compounding pharmacies. Markey said in a statement that his proposal, the Verifying Authority and Legality in Drug (VALID) Compounding Act (H.R. 6584), would give FDA clear, new authority to oversee compounding pharmacy practices throughout the country.


Full text of the Chapter 11 petition is available at: /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/NECC-Petition(1).pdf

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