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The Boston Globe

Business

Bankruptcy expected for firm linked to outbreak

New England Compounding Center, the Framingham pharmacy blamed for the meningitis outbreak that has killed 21 people nationwide, will probably file for bankruptcy protection soon to try to stem the growing number of lawsuits against the firm,
accord­ing to bankruptcy and plaintiffs attorneys.

The company already faces at least 10 lawsuits in federal and state court across the country, with more popping up by the day. A bankruptcy filing would immediately freeze such legal actions and block patients from filing new lawsuits.

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“The suits are coming with some regularity,” said John T. Morrier, a bankruptcy attorney with Casner & Edwards in Boston. “A bankruptcy will alleviate some of the pressure to respond to multiple suits in multiple jurisdictions.”

New England Compounding has suspended operations, lost its license in several states, and laid off most of its employees. A company spokesman declined to comment on whether the firm is considering bankruptcy.

Two related pharmaceutical companies, Ameridose LLC of Westborough and Alaunus Pharmaceutical of Framingham, also agreed to halt operations until Nov. 5. The Ameridose and Alaunus suspensions, originally scheduled to end Oct. 22, were extended Friday to give investigators more time to inspect the ­facilities and make sure the companies’ products are not contaminated.

In a statement, Ameridose said it “agreed to this extension in the spirit of full cooperation,” but was not aware of any safety issues with Ameridose products.

Even if New England Compounding files for bankruptcy protection, patients could still pursue claims in bankruptcy court.

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But plaintiffs lawyers believe that it is unlikely the company has enough assets or insurance to cover claims that could amount to hundreds of millions of dollars, because so many people have been infected.

“There is never going to be enough” money, said Edward Jazlowiecki, a Connecticut attor­ney representing a patient in Michigan. There is a “100 percent” chance New England Compounding will file for bankruptcy, Jazlowiecki said.

The Centers for Disease ­Control and Prevention estimates that at least 14,000 people were exposed to potentially contaminated steroids made by New England Compounding, including 21 who have died and hundreds who have been sickened by fungal meningitis. Even patients who have not been diagnosed with the disease could make claims based on pain and anxiety they suffered, as well as the cost of testing to ensure they are disease-free.

“There’s going to be hundreds, if not thousands, of lawsuits filed,” said Minnesota personal injury attorney Fred ­Pritzker, who filed one of the first suits against New England Compounding. “I am not a ­believer there will be enough money to fully compensate all the victims.”

Some lawyers representing patients have started pursuing claims against individual owners or executives at New ­England Compounding.

Peter McGrath, a former federal prosecutor representing a New Hampshire patient, has asked a judge to place a lien against the personal property of three company directors: ­Gregory Conigliaro, his sister Lisa Conigliaro Cadden, and brother-in-law Barry Cadden. A hearing is scheduled Nov. 6 in Middlesex Superior Court.

Boston attorney Fredric ­Ellis, representing a Michigan patient, said it can be difficult to “pierce the corporate veil” and hold officers accountable for their companies’ actions. But Ellis said he sued Barry Cadden, in addition to the company, because Cadden is also listed in state licensing records as the pharmacist of record for New England Compounding.

“He is responsible,” Ellis said.

Jazlowiecki said he is trying to find out whether any suppliers or related companies could be partially responsible for the fungal contamination, such as Conigliaro’s recycling business, located next to New England Compounding.

“We are not leaving any stone unturned,” Jazlowiecki said.

Regulators said they are still attempting to determine how New England Compounding's drugs may have become contaminated. A bankruptcy filing would not halt ongoing investigations by state and federal regulators trying to find the source of the outbreak.

A number of other businesses have been forced to file for bankruptcy after facing a slew of product liability claims. ­Triad Group, a medical device maker in Wisconsin, filed for bankruptcy in August after getting hit with dozens of suits over potentially contaminated alcohol wipes. Jensen Farms, a Colorado cantaloupe grower blamed for a 2011 listeria outbreak that caused at least 30 deaths, filed for bankruptcy earlier this year, and the Peanut Corp. of America filed for bankruptcy in 2009 after being linked to an outbreak of salmonella that led to at least nine deaths and made roughly 700 people ill.

Dr. Elizabeth Mort, interim senior vice president of quality and safety at Massachusetts General Hospital, said the long-term closure of Ameridose could have major repercussions on the overall drug supply.

“All the Massachusetts hospitals are looking to other suppliers to fill the gap,” Mort said. “We’re doing that actively, and so far things are fine. If this is extended for a prolonged period of time, we will have challenges.”

Carolyn Johnson and Kay ­Lazar of the Globe staff contributed to this report. Todd ­Wallack can be reached at ­twallack@globe.com. Follow him on Twitter @twallack. ­

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