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Compounder linked to meningitis outbreak files for bankruptcy

By Tom Watkins, CNN
December 22, 2012 -- Updated 0155 GMT (0955 HKT)
STORY HIGHLIGHTS
  • A compounding company linked to fungal meningitis outbreak files for bankruptcy
  • Thirty-nine people have died and 620 cases have been tallied in 19 states, the CDC says
  • The Massachusetts-based firm says it will establish a fund to compensate victims

Atlanta, Georgia (CNN) -- The company linked to a deadly, nationwide outbreak of fungal meningitis announced Friday it has filed for bankruptcy protection under Chapter 11.

"In papers filed with the court, the company said its goal is to provide a greater, quicker, fairer payout to its creditors than they could achieve through piecemeal litigation," New England Compounding Center spokesman Andy Paven said in a statement.

The statement added that the compounding center "seeks to establish a fund to compensate individuals and families affected" by the outbreak, which has been linked to 39 fatalities among the 620 cases tallied in 19 states as of Monday by the Centers for Disease Control and Prevention.

Patients contracted fungal meningitis -- which results in inflammation of the membranes covering the brain and spinal cord -- after their spines were injected with a contaminated, preservative-free steroid called methylprednisolone acetate, health officials have said. The steroid is used to treat pain and inflammation.

According to health agencies, the compounding center did not follow proper sterilization procedures and distributed its products without knowing whether they had passed sterility tests.

In addition, it distributed vials containing a steroid that was contaminated with "visible black particulate matter" later identified as fungus, according to a report from the Massachusetts Board of Registration in Pharmacy.

The company also announced the appointment of a chief restructuring officer, Keith D. Lowey, to establish the compensation fund.

"We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief," said Lowey, a financial consultant. Claims are to be addressed in federal bankruptcy court.

The contamination problem came to light in the fall, when the first fungal meningitis cases were reported. NECC voluntarily recalled three lots in September.

In October, the pharmacy board, which is part of the state's Department of Public Health, said it had "identified serious deficiencies and significant violations of pharmacy law and regulations that clearly placed the public's health at risk."

The Food and Drug Administration and the CDC said they have identified bacterial and/or fungal contamination in unopened vials of some NECC products.

The House Energy and Commerce Committee's Subcommittee on Oversight and Investigations is investigating what went wrong at the company and why it was able to continue to function despite a history of problems.

Last month, NECC's owner and director, Barry Cadden, cited his constitutional right to remain silent before the subcommittee.

Federal authorities have launched a criminal investigation into the practices at the company, which is based in Framingham.

The state pharmacy board has voted to permanently revoke the company's license to operate as well as the licenses of the company's three principal pharmacists.

Symptoms of fungal meningitis can include headache, fever, nausea, stiff neck, new weakness or numbness anywhere in the body, slurred speech, pain or swelling at the injection site and sensitivity to light, according to the CDC.

Treatment, which can have toxic side effects, is expected to continue for infected patients for "many months," Dr. John Jernigan told reporters this month. He leads the CDC's meningitis outbreak clinical team.

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