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NECC Files for Chapter 11 Protections in Wake of Meningitis Outbreak

New England Compounding Center, the Massachusetts-based pharmaceutical company that was the source of a deadly fungal meningitis outbreak earlier this year, has filed for Chapter 11 bankruptcy last week. Sources also indicate that the company intends to establish a victims’ compensation fund.

In October of 2012, there were reports across several states of cases of fungal meningitis, that the CDC ultimately traced back to 3 lots of epidural steroid injections that had been packaged and marketed by NECC. The tainted drugs were shipped to 75 medical facilities over 23 states, and as of December 17th 19 states had reported 620 patients with fungal infections, of which 39 had died.

NECC is a compounding pharmacy, meaning that it combines or alters existing drugs to meet the needs of specific patients.  Because they do not actually manufacture the drugs they use to create their end product, compounding pharmacies are not subject to the strict FDA regulations that traditional drug manufacturers are.

Industry observers have expected the filing as the company is anticipating high litigation costs due to the outbreak. In a statement, chief restructuring officer said that the company recognizes “the need to compensate those affected by the meningitis outbreak fairly and appropriately.”

The Chapter 11 bankruptcy filing operates to stop all litigation in its tracks, leaving people harmed by the faulty drugs looking for other options. One option that they may have is to pursue claims against the companies that supplied the original drugs to NECC, or that may have other ties to the company. Also at issue is the fact that NECC does not have much in the way of assets, making it unlikely that victims of the outbreak will receive sufficient compensation.

NECC’s filing is an example of how a strategic bankruptcy filing can operate to limit liability for anticipated litigation. Consumers can similarly use bankruptcy as a shield to limit liability, as the automatic stay stops all collection activity and lawsuits to collect debts. In order to determine whether bankruptcy is a good option for you, it is important that you have your case reviewed by an experienced St. Louis bankruptcy attorney. The Westbrook Law Group practices exclusively in the area of bankruptcy and consumer protection, and has helped hundreds of clients get back on their feet financially. To schedule a free consultation with a St. Louis bankruptcy lawyer, call the Westbrook law group today at (636) 493-9231, or fill out our contact form to the right and a member of our staff will contact you soon.