Wednesday, May 7, 2014

New England Compounding Pharmacy in $100 Million Settlement

The owners of New England Compounding Pharmacy Inc., the drug supplier blamed for a nationwide meningitis outbreak that killed 64, agreed to a settlement providing $100 million toward compensation for victims.

The settlement, which includes money from insurers, will be implemented as part of a Chapter 11 plan, according to a filing by a trustee seeking approval of the accord in U.S. Bankruptcy Court in Boston. Criminal investigations involving company insiders, 322 lawsuits against the pharmacy (0659829D:US) and 3,300 claims from injury are continuing, according to the filing.

The pharmacy’s tainted drugs, including a steroid administered by spinal injection, caused 64 deaths and 700 cases of meningitis, according to the Centers for Disease Control and Prevention. The company filed for bankruptcy protection in December 2012 as a result of the lawsuits.

The settlement is a “significant step towards funding a Chapter 11 plan that will furnish a mechanism to provide meaningful compensation” for families of those who died and those injured from the allegedly contaminated medications, Jeffrey Sternklar, attorney for Paul Moore, the court-appointed trustee, said in the filing yesterday.
The bankruptcy plan, once confirmed, releases company officers from further claims related to the tainted products.

Company’s Owners

The company’s owners are contributing $47.75 million. In addition, they will turn over about $20 million in tax refunds. The owners will give the trustee all the claims they could make under insurance policies, allowing the collection of about $29 million. The sale of a business owned by the insiders will bring in another $10 million.

The case is In re New England Compounding Pharmacy Inc., 12-bk-19882, U.S. Bankruptcy Court, District of Massachusetts (Boston).

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