As Key Hearing Nears, New Details Emerge on Fatal Outbreak

By Walter F. Roche Jr.

With a key hearing just days away, new details are emerging about the negotiations leading to a $200 million proposed settlement of the bankruptcy of the Massachusetts firm blamed for a nationwide fungal meningitis outbreak.
In a 75-page filing summing up the history of the outbreak and the subsequent court case, Paul D. Moore, bankruptcy trustee of the New England Compounding Center, disclosed details of extensive negotiations with various parties that have agreed to contribute to a trust fund that will provide some relief to hundreds of victims of the 2012 outbreak.
Among the new disclosures is the fact that an inspection of NECC's Framingham, Mass. facilities by attorneys involved in the case was cut short by FBI agents who were involved in the ongoing criminal investigation.
Moore cited the "strict oversight" of the four day inspection by FBI agents.
The filing comes as Bankruptcy Judge Henry J. Boroff is scheduled to preside over a Tuesday hearing on whether to approve the liquidation plan.
According to the filing, claims have been filed in behalf of 3,461victims of the outbreak and the vast majority voted in favor of the plan in balloting ending May 5.
"Many of the personal injury claimants have already waited over 2.5 years for compensation and are suffering substantial financial hardships as a result of the injuries caused by the contaminated methylprednisolone acetate," the filing states.
The brief describes mediation sessions with the contributing parties and details the amount each is expected to provide, including $47.5 million from former owners and officers of NECC.
Only one objection has been filed against the plan. That was filed by the U.S. Trustee who questioned why parties who were not directly contributing to the settlement fund were being granted immunity from further liability.
Moore in his brief said that without the liability waiver, the overall agreement would not have been possible.
State and federal regulators have concluded that fungus laden drugs shipped by NECC to health providers across the country caused the outbreak which sickened 778, killing 76 of them.
Among those contributing to the settlement fund is Unifirst, the firm hired by NECC to clean its clean rooms where the suspect drugs were finally prepared.
"Unifirst," Moore wrote, "repeatedly departed from industry standards and contractual requirements not only failing to accomplish rudimentary clean health standards, but at times exacerbating the unsanitary conditions at NECC."
Unifirst has agreed to provide $30.5 million in the settlement.
Also detailed was a $5 million settlement with an NECC ventilation contractor and a $6.4 million payment from a firm that performed sterility testing for NECC.
The settlement plan includes funding from some but not all of the health care facilities where victims were injected with the fungus tainted steroids.
The High Point Surgery Center in North Carolina and its insurance company have agreed to pay $3.5 million. Some 25 of its patients have filed claims, five of whom were stricken with fungal meningitis.
The owners of the Insight Imaging in Roanoke, Va. and its insurance company have agreed to pay $40 million. Claims have been filed in behalf of 153 of its patients or their survivors. Eight of those patients died. One claim against Insight was already settled in a Virginia court case.
Also agreeing to contribute $16 million was the Inspira Health Network of New Jersey  where patients were injected with NECC steroids.
The payments from the health providers will be earmarked for only those victims actually treated at the individual facilities.
Other health facilities, including the Saint Thomas Outpatient Neurosurgical Center in Nashville, Tenn., did not participate in the mediation process and claims against them remain to be resolved.
Calling the proposed settlement "unprecedented," Moore also filed declarations of support from lawyers representing dozens  of parties with an interest in the case.
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