January 2, 2013 — Approximately three months since a deadly outbreak of fungal meningitis began, the pharmacy that produced contaminated medicines has filed for Chapter 11 bankruptcy. The Massachusetts-based company, New England Compounding Center (NECC), also announced that they will establish a Compensation Fund for the victims of the outbreak. It is still unclear whether NECC has enough assets to adequately compensate the victims, including thousands of people who were exposed, 620 who fell ill, and 39 who died.
The company has reported assets between $1 million and $10 million, with between 200-999 creditors, and $2.34 million in debts at the time of filing. After filing for bankruptcy, they issued a statement saying that bankruptcy protection was necessary to achieve a “greater, quicker, fairer payout to its creditors than they could achieve through piecemeal litigation.”
NECC appointed Keith D. Lowey to create the compensation fund and begin making payments to the victims. Lowey stated, “We want to establish a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief.”
The bankruptcy filing comes as little surprise. Shortly after the outbreak began in October 2012, NECC recalled all lots of all medicines, shut down their facility, and voluntarily surrendered their pharmacy license.
Investigators from the FDA found numerous violations of good manufacturing practices at the facility dating back to at least 1999. There were also complaints of NECC mass-producing medicines and selling them across state lines without a proper license.
NECC is currently facing dozens of class action lawsuits and hundreds of individual lawsuits from people who were injured or killed. As the litigation has grown, many experts have raised concerns that NECC may not have enough assets to cover the claims. Lawsuits have also been filed against clinics that administered the contaminated medicines to patients who thought they were getting brand-name medications instead of compounded medications.
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