Assets Frozen for Pharmacy Linked to Fungal Meningitis Outbreak

A federal judge has frozen assets of the bankrupt compounding pharmacy at the center of the nationwide fungal meningitis outbreak, which has resulted in more than 700 confirmed illnesses and 45 deaths among individuals who received tainted medications mixed by the New England Compounding Center.

On Monday, U.S. Bankruptcy Judge Henry J. Boroff placed an emergency injunction on the New England Compounding Center’s (NECC) assets at the request of an unsecured creditors’ committee, which accused NECC’s owners of raiding the company’s assets of more than $21 million before filing bankruptcy in December.

Judge Boroff’s injunction prevents the company’s owners from selling their homes or from spending $21 million in salary and shareholder distributions they received last year. It also prevents three affiliated companies from paying money to the owners.

Fungal Meningitis Outbreak Killed 45, Sickened 700

State and federal health officials say NECC mass produced thousands of contaminated epidural steroid injections, which were recalled in early October. Some government estimates suggest that 14,000 patients in the U.S. were injected with the potentially contaminated vials.

An FDA inspection of the company’s Framingham, Massachusetts facility found sealed vials of the drugs with visible fungus floating in them.

The compounding pharmacy is accused of not only selling tainted drugs, but of also acting as a stealth drug manufacturer. While compounding pharmacies are designed to make drugs that are not commercially available on a per-patient prescription basis for local hospitals. NECC distributed 17,000 contaminated vials nationwide and employed sales representatives to pitch its wares to hospitals and pain clinics.

NECC Faces Lawsuits, Criminal Investigation

The pharmacy faces a growing number of fungal meningitis lawsuits brought by survivors of the outbreak and the relatives of those who died due to their illnesses. The company also faces state and federal criminal probes into its activities.

Product liability lawyers have raised concerns about the available insurance coverage and assets to cover claims against the compounding pharmacy. NECC officials have indicated that a compensation fund will be created for victims and that it would be “substantial.”

On January 31, the U.S. Judicial Panel on Multidistrict Litigation (JPML) will hear oral arguments on whether all federal lawsuits over the fungal meningitis outbreak should be consolidated before one judge for coordinated handling as part of an MDL, or multidistrict litigation.

NECC has indicated that they support the formation of an MDL for the litigation, stating that it expects hundreds of lawsuits to be filed in U.S. District Courts throughout the country in the coming months.

Centralization is designed to help reduce duplicative discovery, avoid conflicting rulings from different judges and to serve the convenience of the witnesses, the parties and the courts.