Indicted Drug Compounder Shipped Other Drugs to Health Care Facilities

By Walter F. Roche Jr.

The long awaited indictment from a probe of a nationwide fungal meningitis outbreak shows that there may be even more victims of the now defunct drug compounding firm already officially blamed for 64 deaths and 751 illnesses in 20 states.
The 73-page indictment made public in Boston Wednesday states that additional injectable drugs were shipped from the New England Compounding Center even though testing showed they were not sterile.
The 2012 outbreak has been linked to fungus tainted vials of a single spinal steroid, methylprednisolone acetate, which is generally injected into the spine, neck or joints.
According to the indictment those other drugs include cardioplegia, a drug used during cardiac surgery to slow or stop the heart from beating, bags of potassium chloride and bacitracin. All were injectable drugs that were supposed to be sterile but weren't, the indictment charges.
And the grand jury found that those unsterile drugs were shipped to health facilities in states not previously implicated in the 2012 fungal meningitis outbreak.
For instance bacitracin syringes were  shipped to a hospital in Illinois and other injectables were shipped to a Glens Falls, N.Y. hospital despite failing tests for sterility. Cardioplegia found not sterile was shipped to Brigham and Women's Hospital in Boston, the indictment states. Injectable drugs made from expired components were shipped to the USC University Hospital in Los Angeles, Calif.
Already there are at least two pending federal suits blaming the deaths of two children at a Las Vegas hospital on tainted cardioplegia injections from NECC.
The defendants, the indictment charges, acted "in a manner inherently dangerous to human life."
The 131-count indictment charges  NECC owner Barry Cadden and its chief pharmacist, Glenn A. Chin, with 2nd degree murder in the deaths of 25 patients in seven states, including Tennessee, Michigan, Virginia and Indiana.
Ten others charged include Cadden's partners in the Framingham, Mass. business and former employees of the now defunct compounding firm.
The charges include racketeering, creating fraudulent prescriptions for patients and multiple violations of state and federal drug statutes and regulations.
According to the indictment, the faked prescriptions listed names like Big Baby Jesus, Mickey Mouse and Flash Gordon. Those names were used despite warnings to NECC salesmen not to use obvious faked names.
NECC officials, the indictment charges, lied repeatedly to state and federal regulators to conceal the fact that they were not in compliance with laws and regulations, including a requirement that before drugs could be compounded a prescription had to be issued in an individual patient's name.
The indictment also charges that Douglas and Carla Conigliaro, who are relatives and partners of Cadden, violated a temporary restraining order issued in a related bankruptcy case by withdrawing $33.3 million from bank and investment accounts over the past 18 months.
The indictment charges that they attempted to hide their actions by keeping multiple withdrawals below the amount which would have triggered an automatic report to the federal government.
Another defendant, Gregory Conigliaro, recently transferred more than $1 million of his interest in real estate to his wife.
Among the NECC employees indicted was Scott M Connolly, who had voluntarily surrendered his license as a pharmacy technician years earlier yet continued to compound drugs for NECC until the facility was shut down in the Fall of 2012.
The indictments, which come more than two years after the outbreak was first reported, are providing at least some relief to the living victims.
Joan Peay, one of several Tennessee victims said she was "very relieved and grateful to know that these criminals will be prosecuted. These are truly criminals," she added. "I hope they (federal officials) find and take even more of their assets."
Under a pending plan filed in U.S. Bankruptcy Court in Massachusetts about $135 million would be available for victims and their survivors. That total includes nearly $50 million from NECC's owners.
Lawyers for the victims, including Mark Chalos of Nashville, said they were hopeful additional assets would be made available.
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Operators of Drug Compounding Firm Arrested, 2nd Degree Murder Charged

By Walter F. Roche Jr.
Owners and employees of a defunct drug compounding firm have been arrested on charges ranging from second degree murder to racketeering in an investigation of a deadly fungal meningitis outbreak that sickened 751 patients and killed 64.
Arrested Wednesday in the Greater Boston area were Barry Cadden, Gregory Conigliaro, Carla Conigliaro and her husband Douglas, all part owners of the New England Compounding Center, the Massachusetts firm blamed for the 2012 fatal outbreak.
Cadden and Glenn Chin, the former NECC chief pharmacist, were charged with second degree murder in the deaths of some of the victims.
Ten other people connected with NECC were also charged, according to a 73 page 131 count indictment handed down by a federal grand jury this week.
The indictment for the first time discloses that health facilities in even more states than previously reported received drugs from NECC that may not have have been sterile. The additional drugs include cardioplegia, a compound used to slow the heart during surgery. The additional drugs were sent to health care facilities in states from California to Massachusetts.
The sudden arrests follow the disclosure that Gregory Conigliaro last month transferred more than a million dollars of real estate he owned to his wife for a fraction of the assessed value. U.S. Justice Department officials declined to comment this week when asked whether they were aware of the transfers.
The indictment seeks a court order to seize real estate and other assets of the defendants under a forfeiture statute. It includes everything from a late model BMW to jewelry to a sailboat.
Mail fraud charges already had been brought against Glenn Chin, who was the lead pharmacist for NECC. His wife Kathy was named in the new indictment.
The 2012 outbreak was caused, state and federal health officials have concluded, by fungus tainted methylprednisolone acetate injected into the victims at health facilities across the country. Particularly hard hit were patients in Tennessee, Michigan, Indiana and Virginia.
The indictment lists seven victims in Tennessee, including Kentucky Judge Eddie Lovelace, and eight in Michigan who died in the outbreak.
Mark Chalos, a Nashville attorney representing some of the victims said, "these arrests are a significant step toward achieving justice for the families who have had loved ones sickened or killed," but adding "There is still much work to be done."
Gerard Stranch, who also represents Tennessee victims, said he was hopeful the indictments would lead to an increase in funding available to victims. Thus far about $135 million has been gathered by the trustee overseeing the NECC bankruptcy.
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Drug Compounding Owner Sells Real Estate to Wife at Bargain Price

By Walter F. Roche Jr.

One of the owners of the drug compounding company blamed for a fatal fungal meningitis outbreak has sold his interest in two properties assessed at more than $2.5 million for a fraction of their apparent value.
Registry of Deeds records in two Massachusetts counties show Gregory A. Conigliaro sold his interest in both properties for a total of $380,000 to his wife Cynthia. Both sales were recorded on Nov. 7 of this year.
The sales come at a critical time as a $135 million bankruptcy settlement proposal is awaiting action by a federal judge. It also comes as a federal criminal investigation into the outbreak is continuing.
Conigliaro is one of the owners of the New England Compounding Center, the now defunct firm blamed for the 2012 outbreak which sickened 751 and killed 64 patients.
According to records in the Barnstable County Registry of Deeds, Gregory Conigliaro sold his interest in property at 155 Salten Point Road on Cape Cod to his wife for $155,000. The property is assessed for $2.1 million. They purchased it for $2.35 million on March 2, 2012.
In Worcester County, land records show Conigliaro sold his interest in property at 50 Sears Road in Southborough for $225,000. That property is assessed for $450,300, according to local tax records. The Conigliaros purchased the property for $300,000 on Feb. 1, 2010.
The sales took place after the release of a $21 million lien that had been placed on properties owned by Conigliaro and the other owners of NECC.
Paul D. Moore, the court appointed bankruptcy trustee, said in an email, "It does not appear to present an issue with respect to the settlement, the attachments or related injunctions. Under the terms of the settlement, the attachments were released and the injunctions lifted upon the funding into escrow of the cash deposits, all of which were in fact funded."
Conigliaro's lawyer could not be reached for comment.
Lawyers for victims of the outbreak said they were not aware of the property transfers but said they were now investigating the transactions.
The criminal investigation of the outbreak already has led to the indictment of NECC's chief pharmacist Glenn Chin. He is awaiting trial on a mail fraud charge.
In addition to the bankruptcy case, hundreds of civil suits have been merged before a federal judge in Boston.
The outbreak has been blamed by state and federal regulators on thousands of fungus tainted vials of methylprednisolone acetate that were shipped from NECC to health care providers across the country. Most of the victims were injected in the spine with the drugs and were stricken with fungal meningitis.
According to court filings Gregory Conigliaro owned 10 percent of NECC's stock with the balance owned by other members of his family and in-laws. Under the bankruptcy settlement plan, Gregory Conigliaro contributed $2.75 million to the $135 million total.
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Court Date Set for Meningitis Bankruptcy Plan

By Walter F. Roche Jr.

A federal bankruptcy judge has set a Feb. 24 date for a hearing on a liquidation plan that could provide a total of $135 million to victims and creditors of a 2012 fungal meningitis outbreak.
The hear date was set this week by federal Judge Henry J. Boroff just days after a massive liquidation plan was filed by the trustee and a committee representing some of the creditors in the case of the New England Compounding, the Massachusetts firm blamed for the fatal outbreak.
The hearing will be held at 10 a.m. in the federal court building in Springfield, Mass.
The plan provides a total of about $135 million to pay victims and some of NECC's creditors, but $19.5 million of that total will be earmarked for victims who were treated at two health facilities, one in New Jersey and the other in North Carolina.
A total of $16 million will go to victims treated at the High Point Surgery Center in High Point, NC, while $3.5 million will go to victims treated at the Inspira Health Network in southern New Jersey.
Those special allotments, according to the plan filed by Trustee Paul Moore, came from mediated agreements with the two health providers.
Other health facilities where victims were treated with tainted spinal steroids, including the Saint Thomas Outpatient Neurosurgical Center in Nashville, Tenn., did not enter the mediation program. Claims by victims against those facilities have yet to be resolved.
Most of the remaining $115.5 million will go to victims on a point system based on the type of illness the victim suffered and its severity. The highest point scores go those who died following treatment with fungus infested methylprednisolne acetate shipped from NECC.
But the pot of money going directly to victims will be reduced by expenses, including reimbursements to health insurers, including the federally funded Medicare and Medicaid programs, which were billed for many of the victims.
According to the filings, there may be an attempt to work out a master agreement with the federal government on a set level of reimbursement covering all cases, otherwise each case will have to be settled individually.
According to attorneys representing victims, it is unlikely that victims will have to pay any taxes on their final awards. They will, however, be required to pay fees to their individual lawyers.
In addition the liquidation plan states that Duane Morris has incurred $3.4 million in fees representing the trustee and an additional $2 million is expected. Mesirow Financial, a financial advisor, has incurred fees of $420,00 and an additional $750,000 in fees are anticipated.
Other fees include $3.3 million to the Brown Rudnick law firm with $1.25 million more anticipated. The plan also calls for an overall eight per cent levy on the total payout for fees incurred under a so-called combined benefit fund that would go to some of the law firms closely involved in the overall settlement.
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TN Drug Compounding Firm Pleads Guilty

 By Walter F. Roche Jr.

A Tennessee pharmacist and his compounding firm have pleaded guilty to violations of federal law in the shipping of a spinal steroid across state lines.
The guilty pleas were entered by David A. Newbaker and the Main Street Family Pharmacy in Newbern to charges of shipping an adulterated drug across state lines.
The pharmacy shipped the steroid, methylprednisolone acetate, which was contaminated with bacteria. The pharmacy recalled all of its sterile products last year but not before some 26 patients reported adverse events such as abscesses at the injection sites.
Under a plea agreement Newbaker will be on probation for a year and a total of $50,000 in fines will be assessed against him and the pharmacy.
The court also imposed a civil consent decree barring Newbaker and his wife from shipping drugs until they come into compliance with federal drug requirements. The decree and the criminal charges were filed in U.S. District Court in Memphis.
The New Bern pharmacy was producing the same steroid which has been blamed for a 2012 outbreak of fungal meningitis that took the lives of 64 patients and sickened 751. Those drugs came from the New England Compounding Center, which has shut down.
State records show the pharmacy is closed and Christy Newbaker is serving a two-year probation on her pharmacist license. She was fined $12,800 in 2013, David Newbaker's license is active.
A state Health Department spokeswoman said that the pharmacy voluntarily ceased operation in August.
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Point System Proposed to Pay Fungal Meningitis Outbreak Victims

By Walter F. Roche Jr.

A proposed bankruptcy plan for the firm blamed for a national fungal meningitis outbreak includes a point system that would be used to determine the amount of money allotted to each victim.
The point system was just one element of a voluminous three-part filling this week by trustee Paul D. Moore in U.S. Bankruptcy Court in Massachusetts. The hundreds of pages of documents detail how an estimated $135 million could be distributed in the case of the defunct New England Compounding Center.
A general outline of that liquidation plan was presented Thursday in a hearing in Boston before U.S. District Judge Rya Zobel. She is presiding over several hundred civil complaints stemming from the 2012 outbreak that took the lives of 64 patients and sickened 751.
The victims were injected with a fungus tainted doses of methylprednisolone acetate, with some getting the shots in the spine and others in peripheral joints or the neck.
Zobel and lawyers in the case praised Moore and others involved in putting the plan together.
The plan is subject to approval by creditors and Bankruptcy Judge Henry J. Boroff. Lawyers for Moore's attorney, Michael Gottfried, told Zobel that the plan could be finalized in 90 to 100 days.
Under the proposed distribution plan points would be allocated to victims based on the severity of their illness.
For instance, the survivors of a victim who died in the outbreak would be awarded 55 points, while a patient who suffered fungal meningitis would be allotted 30 points. The lowest number, a half point, would go to those who were injected with the tainted steroid but suffered no symptoms.
According to the plan, those points could be increased by other factors including the length of treatment or complications.
"The amount of the distribution that will ultimately be made to each individual tort claimant is based on the claimant's point total," one of the filings states, adding that "a number of adjustments " could boost that total.
The filings disclose that 3,350 claims were filed for patients claiming to be victims.
Although the trustee's report includes a substantial increase- from $100 million to $135 million - in the estimated assets available to victims and creditors, some fear the actual payouts will not be that substantial.
Joan Peay, a Nashville Tenn. victim, said that not only may the amounts be small to  begin with, but they may well be reduced by the counterclaims of insurance carriers that paid the original bills. Victims will also face legal fees.
Peay's bills were especially high because she was not only stricken in the 2012 outbreak, but then suffered a relapse a year later. She said the bills for her first bout alone came to $53,000.
"Although I'm glad something is being accomplished, the amount is really not good news," Peay said
One roadblock to Tennessee victims was eliminated yesterday when lawyers for the Saint Thomas Outpatient Neurosurgical Center in Nashville agreed to respond by mid-month to a series of questions or interrogatories posed by the victims' attorneys.
Peay and dozens of other Tennessee claimants were injected with the tainted steroid at the Nashville facility.
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$135 Million Plan filed in Fungal Meningitis Bankruptcy

By Walter F. Roche Jr.

The trustee in the bankruptcy of the firm blamed for a nationwide fungal meningitis outbreak has filed a liquidation plan that would provide at least $135 million, with most of that amount earmarked for victims and their survivors.
The massive plan was filed late Wednesday in U.S. Bankruptcy Court in Massachusetts. The agreement is subject to court and creditor approval. The settlement plan includes previously disclosed contributions of $47.75 million from the owners of the now defunct New England Compounding Center.
The 2012 outbreak sickened 751 persons taking the lives of 64, many from Michigan, Tennessee, Virginia and New Jersey.
The settlement total jumped by some $35 million since preliminary details were revealed to U.S. Bankruptcy Judge Henry Boroff earlier this year. The new contributions include payments from two major providers and their insurance companies plus settlements with a testing company hired by NECC, a contractor used by the compounding firm and agreements with a sister drug firm and its insurance carrier.
There was no settlement, however, with the Saint Thomas Outpatient Neurosurgical Center, the Nashville site where most of the Tennessee victims were injected with fungus tainted methylprednisolone acetate.
According to the filings some 3,500 claims filed in the case were for death or illness caused by the outbreak.
In a statement announcing the details, Paul D. Moore, the trustee, said the plan was the result of "substantial efforts."
Anne Andrews, a California representing victims said the settlement should give victims "a sense of closure," while Thomas Sobol, another plaintiff lawyer from Boston, said the settlement "should provide much needed compensation."
"It is encouraging that some wrongdoers have stepped up and are accepting responsibility for the harm they have caused," said Mark Chalos, a Nashville  attorney for several outbreak victims, adding that they were committed "to fighting for our clients to make sure all wrongdoers are held accountable."
The plan also includes current and anticipated expenses including legal fees and expenses totaling $3.4 million from  Moore's law firm and that number is expected to climb by another $2 million.
Additional funds could be available if NECC's sister firm, Ameridose, can be sold.
The settlements include $10 million from Ameridose and its insurance carrier, $3.75 million from NECC's landlord, $25.2 million from insurance companies, $16 million from the Inspira Health Network in New Jersey and $6.4 million from ARL Biopharma, a testing firm. Many of those settlements include contributions from the respective insurance carriers.
Under an agreement with Tennessee's Board of Pharmacy, Tennessee  could recoup up to $5 million for the costs it incurred in investigating the outbreak.
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