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New England Compounding Pharmacy Files Bankruptcy

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New England Compounding Pharmacy Inc., the Massachusetts pharmaceutical company blamed for a nationwide meningitis outbreak, filed for Chapter 11 bankruptcy protection to deal with lawsuits filed against it. The case is In re New England Compounding Pharmacy Inc., 12-19882, U.S. Bankruptcy Court, District of Massachusetts (Boston).

Contaminated steroid injections from the New England Compounding Center (NECC) have been blamed for 39 deaths and 620 illnesses since a nationwide meningitis outbreak began over the summer. The Chapter 11 filing in U.S. Bankruptcy Court shields the company from the threat of creditor lawsuits while it establishes a fund to compensate individuals and families affected by the outbreak.

The company said in its filing that 130 lawsuits have been filed against it and 270 other people have claimed injury from the tainted drugs.

"The number or lawsuits and demands is rising on a daily basis," the filing read. "The sheer volume and wide geographic distribution of cases — bringing the prospect of chaotic, conflicting and value-destroying pretrial orders and remedies — has necessitated commencing this case at this time."

Under bankruptcy law, all litigation against a company or individual who seeks protection is stayed while the case is pending. The bankruptcy judge can grant a request for relief from stay, and allow the claims to proceed outside the bankruptcy court in some instances.

NECC hired accountant Keith D. Lowery to lead the effort to set up the compensation fund. NECC has made it clear it doesn't have enough money to fully compensate victims "to the level and degree of their injury." However, the compounding pharmacy reportedly may have discovered other parties that may be jointly liable for the contaminated steroid injections. The search for additional sources of recovery will no doubt be pursued by all interested parties.

Compounding pharmacies custom-mix medications in doses or in forms that generally aren't commercially available. This process must be performed in a sterile environment, as the medications are often infused or injected into a patient's body.

Meningitis is an inflammation of the lining of the brain and spinal cord. The fungal meningitis outbreak was discovered in Tennessee in September, though Centers for Disease Control and Prevention officials say the earliest deaths tied to the outbreak date back to July.

Health officials say as many as 14,000 people received the steroid shots, mostly for back pain. In early October, the company issued a nationwide recall of the steroid and ceased operations. Later that month, Massachusetts moved to permanently revoke the company's pharmacy license after inspectors found unsterile conditions at its Framingham facilities.