Plan filed to set aside $135M for NECC fungal meningitis victims

A new plan has been filed to establish a fund of at least $135 million in compensation for victims and families affected by a 2012 fungal meningitis outbreak that killed 64 people, sickened hundreds and led to Congress granting the FDA new powers to regulate large compounding pharmacies.

The trustee for the now-bankrupt New England Compounding Center (NECC) that was the root of what was the largest outbreak of fungal meningitis in U.S. history recently filed the compensation plan in federal court. In July, a federal bankruptcy judge approved a deal to settle many of the lawsuits filed against NECC. The compensation plan is expected to be approved in a hearing next spring.

"The filing of this plan marks a crucial step in this tragic saga to provide much needed financial relief to the victims and their families," David Molton, a lawyer with NECC's creditors' committee, told Reuters. "When NECC entered bankruptcy, many people doubted that the victims would ever receive compensation through the bankruptcy process."

The outbreak sickened more than 750 people and led to a public outcry that resulted in Congress passing the Drug Quality and Security Act, which gives the FDA new, but limited, powers to oversee compounding pharmacies that volunteer to be regulated. The idea is that FDA oversight will set these companies apart and that hospitals will use those operators that agree to the stricter oversight.

NECC was shut down in October 2012 after authorities traced the outbreak to its facility that produced a tainted steroid, which was distributed to health providers in 20 states. It declared bankruptcy two months later, leaving victims and their families uncertain if they would receive any compensation. However, less than a year later, owners, operators and insurers of the bankrupt company reached a preliminary agreement to set up a victims' fund.

- see the Reuters story