Fund for Meningitis Outbreak Victims Jumps by $30.5 Million

By Walter F. Roche Jr.

The fund to benefit victims of the 2012 national fungal meningitis outbreak has been boosted by $30.5 million thanks to a last minute settlement with a firm which had a cleaning contract with the drug firm blamed for the outbreak.
The $30.5 million settlement agreement filed this week in U.S. Bankruptcy Court in Massachusetts boosts the total available to victims and creditors of the outbreak to an estimated $165 million.
The payment will come from insurance companies for UniFirst Corp., which had a contract to perform monthly cleaning services for the New England Compounding Center. NECC has been named as the source of thousands of vials of tainted spinal steroids that sickened 778 patients across the country, killing 76 of them.
According to the 48-page filing by Bankruptcy Trustee Paul D. Moore, $4 million will be paid by National Union Fire Insurance and $26.5 million by North American Elite Insurance. Both firms had  agreements with UniFirst.
The $30.5 million will be added to the $135 million previously committed to a trust fund which will be used to pay victims or their survivors along with other creditors of the defunct Framingham, Mass. firm.
Lawyers for victims of the outbreak said the agreement marked a significant step forward.
"The plaintiffs steering committee and others have worked hard to hold the wrongdoers accountable," said Nashville attorney Mark Chalos, calling the settlement "another step toward achieving justice."
Both he and Gerard Stranch, another Nashville lawyer representing victims, vowed to continue to pursue claims against other parties including the Saint Thomas Outpatient Neurosurgical Center,
 where dozens of Tennessee victims were injected with
Tom Sobol, a Boston attorney representing plaintiffs, said the settlement is "another step in the right direction."

The single largest settlement amount, nearly $50 million, comes from the officers and stockholders of NECC, members of the Conigliaro and Cadden families.
Barry Cadden, a founder of NECC, and members of the Conigliaro family have been named in an indictment issued late last year by a federal grand jury. Cadden and Glenn Chin, a supervisory NECC pharmacist, have been charged with 25 counts of second degree murder.
UniFirst, which was named as a defendant in dozens of suits filed by victims, had insisted that it was not at all responsible for the fungus tainted methylprednisolone acetate.
UniFirst did acknowledge that it had a contract to provide monthly cleaning services for the clean rooms where the drug was produced.
In a statement issued over a year ago, a UniFirst spokesman said, "“UniClean was not in any way responsible for NECC’s day-to-day operations, its overall facility cleanliness, or the integrity of the products they produced.”
In subsequent filings with the U.S. Securities and Exchange Commission, including one filed early this year, the company warned its shareholders that it could not predict what effect the lawsuits would have on the company's future.
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Judge Takes Compounder's Disclosure Plan Under Advisement

By Walter F. Roche Jr

A federal bankruptcy judge has taken under advisement a disclosure statement filed by the bankruptcy trustee for the defunct drug compounding firm blamed in the deaths of 76 patients in a 2012 fungal meningitis outbreak.
Judge Henry Boroff heard arguments for and against the disclosure statement during a session Tuesday in Springfield, Mass.
The filing and accompanying documents outline part of a liquidation plan that would provide some $135 million to victims and creditors of the New England Compounding Center. Federal and state regulators have concluded that fungus tainted drugs shipped by NECC cause the deadly nationwide outbreak which sickened 778 patients in 20 states.
The disclosure statement filed by Paul D. Moore was challenged by the U.S. Trustee and other parties who questioned whether it foreclosed additional financial penalties being imposed on those responsible and their affiliated companies.
A federal grand jury has issued an indictment charging 14 owners and employees of NECC with violations of federal law. Two of those were charged with multiple counts of second degree murder.
Boroff did give his approval Tuesday to a settlement agreement between the trustee and the Ohio Board of Pharmacy.
Under the agreement NECC' will permanently surrender its license to sell drugs in the state. NECC and the  board also agreed to drop any claims against each other.
A similar agreement was reached earlier with the Tennessee Pharmacy Board, but Tennessee's agreement includes a possible $5 million claim by the state for the costs of its investigation. That claim, however, would not be considered ahead of those filed for victims. Both states had multiple victims in the outbreak.
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Tennessee Clinics File Objections in Bankruptcy Case

 By Walter F. Roche Jr.

The Saint Thomas Outpatient Neurosurgical Center and other Tennessee clinics have joined health care providers in several other states in filing objections to a disclosure statement filed in the bankruptcy case of the company blamed for a nationwide fungal meningitis outbreak.
In papers filed this week in U.S. Bankruptcy Court in Massachusetts, lawyers for the clinics cited a lack of information in the disclosure documents filed late last year. The objections were filed in the pending case of the New England Compounding Center.
"The lack of information is particularly troubling in light of the fact that at least some of the released parties apparently retained $18 million after settling with the Chapter 11 trustee," the objection states.
Cited in the filing was the fact that the underlying agreement will release from further responsibility various entities controlled by the owners of NECC.
The filing makes clear that while they are filing objections, the clinics do not want to delay the granting of compensation to victims.
Similar objections to the disclosure statement have been filed by other health care providers who are being sued by patients who were sickened after being injected with a fungus tainted spinal steroid shipped from NECC to health care providers across the country.
The U.S. Trustee also has filed objections to the disclosure on similar grounds.
A limited objection also was filed by lawyers for Tennessee victims of the outbreak which sickened 778 patients, 76 of whom died. State and federal regulators concluded that NECC was responsible for the outbreak.
A hearing on the disclosure statement is scheduled for Tuesday.
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Claims Procedure Details Emerge for Outbreak Victims

By Walter F. Roche Jr.


Extensive filings in a Massachusetts bankruptcy case are giving new details on a complex plan to compensate victims of a deadly nationwide 2012 fungal meningitis outbreak.
The 58-page compensation plan filed in U.S. Bankruptcy Court in Springfield, Mass. shows that age, the number of dependents and the length of hospitalization are among multiple factors that are likely to be used in determining whether and how much compensation will be awarded to victims or their survivors.
By the latest count, court documents show, 778 patients were sickened and 76 of those died after treatment with the tainted spinal steroid produced  by the defunct New England Compounding Center.
An outline of the compensation plan had been filed previously but the recent filings provide far greater detail.
The proposed plan also would provide compensation to victims of the 2012 outbreak who did not contract fungal meningitis and were not treated with the fungus tainted spinal steroid, methylprednisolone acetate, that caused most of the deaths and illnesses.
Under the plan patients  who were treated with doses from six specific lots of other NECC products, including bacitracin, triaminoclone and cardio plegia, which the U.S. Centers for Disease Control  and Prevention and the U.S. Food and Drug Administration found were contaminated with bacteria, can qualify for compensation.
The filing also spells out the proof  victims will be required to provide to be eligible for compensation. Medical records and diagnoses by physicians can be used. Victims can also qualify by showing that they are included on official lists of victims compiled by state health officials during the outbreak.
For the survivors of victims who died in the outbreak, death certificates with the correct cause of death will be necessary.
Under the plan there will be seven basic categories of victims ranging from those who died in the outbreak to those who suffered joint infections. Survivors of deceased victims will get the most points while those suffering little or no illness will get less.
Once placed in a particular category, victims can be awarded additional points based on 20 different factors.  For instance victims under age 65 will get extra points as will victims who are married or have dependent children. Still other factors include the loss of income due to the illness. Tax returns can be used to show a drop in annual income, according to the filing.
Also detailed in court papers is an appeal process for victims not satisfied with their point award which will be overseen by U.S. Magistrate Judge Kenneth P. Neiman.
Overseeing the compensation process will be a national settlement administrator who will ultimately decide how much compensation will be provided for each point. Court filings show some $135 million is expected to be available for transfer to a trust fund to compensate victims and creditors.
The plan is subject to court approval.
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Hearing Set for Compounding Firm's Bankruptcy, Challenges Filed

By Walter F. Roche Jr.

The U.S. Trustee has charged that a plan to end the bankruptcy case of the firm blamed for a fatal national outbreak of fungal meningitis could let unidentified parties off the hook, including some charged with federal crimes stemming from that outbreak.
In a filing in U.S. Bankruptcy Court in Massachusetts, U.S. Trustee William K. Harrington also charged that releases which are part of the plan are "contrary to public policy and are not in compliance with applicable law and First Circuit precedence."
He termed the releases "extremely broad and wide ranging." 
The critical filing comes just days before a hearing is scheduled before U.S. Bankruptcy Judge Henry Boroff.
Also filing objections to a disclosure agreement filed by Bankruptcy Trustee Paul D. Moore were health care providers who administered fungus tainted steroid injections in the spines and joints of patients across the country and a company that constructed some of the facilities used to compound the steroids.
The filings come in the bankruptcy case of the New England Compounding Center, the pharmaceutical firm blamed by state and federal regulators and prosecutors for sickening 778 patients in 20 states and killing 76 of them.
In his 12-page filing, Harrington cited the fact that many of those who stand to benefit from the  releases contained in the trustee's proposal were among 14 people affiliated with NECC who were indicted on fraud and even second degree murders charges late last year.
Harrington also argued that the agreement appeared to benefit parties who have not contributed to the pool of money that will be earmarked for victims and other creditors. He said many of those so-called third parties "are unknown and unidentifiable."
He also criticized the agreement for failing to provide an opt out agreement for those victims and creditors who object to the plan.
In a separate filing, attorneys for Liberty Industries charged that the trustee's proposal would put the small Connecticut firm out of business. They charged that the trustee had refused to negotiate a settlement with the firm though he did reach agreements with several other parties.
Stating that the company had not had any substantive dealings with NECC in seven years, the lawyers stated that Liberty "continues to be unjustly forced to defend itself on multiple fronts."
Liberty constructed the clean rooms that were used by NECC to produce sterile drugs, including fungus tainted methylprednisolone acetate. The firm has been named as a defendant in 99 pending civil suits.
Also filing objections were Pennsylvania based Rothman Institute and, Mercy Health Systems and health care facilities in North Carolina and New Jersey.
Under the proposed plan a total of about $135 million would be available to victims and other creditors. The largest amount, nearly $50 million, would come from the owners of NECC, including Barry J. Cadden.
Cadden and NECC supervisory pharmacist Glenn Chin were charged late last year with 25 counts of second degree murder for their respective roles at the Framingham, Mass. company. They and 12 other defendants have entered not-guilty pleas and are awaiting trial.
The hearing before Boroff is scheduled for 10 a.m. Tuesday at the U.S. Court House in Springfield, Mass.
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Location of Additional Meningitis Outbreak Victims Remains a Mystery

By Walter F. Roche Jr.

Federal investigators say they have identified 27 more victims of a deadly 2012 fungal meningitis outbreak but with one single exception, state health officials across the country say they don't know about any additional cases.
In an affidavit filed in U.S. District Court in Boston, Joseph Ridgley, an investigator for the U.S. Food and Drug Administration stated that not only were there 27 more victims, 12 of them eventually died.
That pushed the death toll for the outbreak from 64 to 76 and the total number of victims from 751 to 778.
FDA spokeswoman Christine Pearson, citing the advice of agency attorneys, declined comment and referred questions about the increase  to federal prosecutors
Christina Sterling, spokeswoman for U.S. Attorney Carmen Diaz in Boston, declined to provide any information beyond that included in the public court filings. She did state in an email that all the new victims were treated in one of the 20 states where victims already have been identified.
"Our investigation has revealed 778 total infected, of which 76 died, but we have not identified publicly from what states,"  Sterling wrote in an email response to questions.
The filing by the FDA agent came as part of a seizure order issued in the aftermath of the indictment of 14 people associated with the now defunct New England Compounding Center, the drug firm blamed for the deadly outbreak.
The last available publicly disclosed victim count was issued by the Centers for Disease Control and Prevention in October of 2013.
CDC officials have stated that any cases uncovered after that date were to be tabulated by state health departments.
Calls to the state officials, however, showed only one state, Virginia, where a single additional case was reported. That pushed the victim total for Virginia from 54 to 55. The number of Virginia deaths remains at 5.
Officials at other state health departments from New York to Pennsylvania to Idaho all reported no changes in the number of overall victims or the number of deaths.
Those reports ranged from states like Michigan and Tennessee, which had the some of the highest number of victims, to states like New York, Pennsylvania  and Idaho, which reported one victim each and no deaths.
Tennessee reported 153 victims, 16 of whom died. Michigan, with the most cases in the country reported 264 victims with 19 dying.
Health officials in South Carolina reported three victims and officially closed their investigation in January of 2013.

     VICTIMS and DEATHS BY STATE ACCORDING TO THE LAST CDC REPORT


FL  25                  7
GA 1                    0
ID  1                     0
IL   2                    0
IN 93                   11
MD 26                 3
MI 264                19
MN 12                 1
NC 18                  1
NH 14                  0
NJ 51                   0
NY 1                    0
OH 20                  1
PA 1                     0
RI 3                      0
SC 3                     0
TN 153                16
TX 2                    0
VA 54*                5
WV 7                   0

*Virginia cases number was later increased to 55 by state health officials

Tennessee Defendants in Meningitis Cases Face Questioning

By Walter F. Roche Jr.

For the dozens of Tennessee victims of the 2012 fungal meningitis outbreak longstanding litigation is about to enter a new and critical stage.
This week two key staffers at the Nashville clinic where dozens of patients were injected with fungus laden spinal steroids will undergo what is likely to be hours of questioning.
Court records show Debra Schamberg and Scott Butler will be questioned on Tuesday and Wednesday. Schamberg was a staffer at the Saint Thomas Outpatient Neurosurgical Center. Butler was the chief administrative officer.
The depositions, part of the discovery process leading to an actual trial, are the first to be faced by Tennessee defendants in the meningitis cases. In a typical deposition, witnesses are placed under oath. The sessions are generally held in private attorneys' offices.
Questions are likely to focus on how and why the Nashville clinic turned to the New England Compounding Center to become the supplier of methyprednisolone acetate.
Schamberg and Butler are and were employees of the Howell Allen Clinic, a 50 percent owner of the neurosurgical center.
The attorney for Howell Allen did not respond to a request for comment on the upcoming depositions.
Though the cases were later transferred to federal court, arguments in cases first filed in Davidson Circuit Court, centered on how and why the neurosurgical center decided in 2012 to switch suppliers and purchase drugs from NECC, the now defunct firm blamed for the outbreak which sickened 778 patients, 76 of whom later died.
"We look forward to questioning the corporate decision-makers for the corporations that sold these contaminated drugs to unsuspecting patients," said Nashville attorney Mark Chalos, who represents some of the victims.
He added that the depositions "are another step in our continuing efforts to hold the wrong-doers accountable for the harm they caused."
Court filings include 2011 emails between Schamberg and an NECC salesman about the price that would be charged for individual vials of the steroid.
"What price would we need to give you to earn your business?” the salesman asked.
Schamberg emailed back stating that if he could get the price below $6.50 per vial, “then we can talk.”
Three days later the salesman emailed back offering to provide steroids at that price.
Following that exchange, according to an amended complaint filed in federal court, NECC’s then-current supplier raised its price from $6.49 to $8.95 per vial.
“Saint Thomas was not willing to pay $8.95 per vial of methylprednisolone acetate,” the complaint in one case states.
In a subsequent email to the NECC salesman, Schamberg wrote that if the pricing is still $6.50 per vial, “I am willing to do business with you.”
The same day, an exhibit shows, she placed an order for 700 vials.
In court hearings in Nashville, lawyers for the clinic vehemently denied that pricing had anything to do with the switch in suppliers. Instead they attributed the change to drug shortages.
The questioning also is likely to focus on the relationship between the clinic and the Saint Thomas Health, which owned the other 50 percent stake in the neurosurgical center.
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