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$100m settlement reached over meningitis cases

Deal struck with insurers, owners of firm that made tainted prescription drugs

Bankruptcy lawyers have reached a settlement worth more than $100 million with insurers and the family that owns the defunct Framingham pharmacy that manufactured tainted drugs blamed for killing 64 people and sickening hundreds more in 2012, a deal that paves the way to eventually providing compensation for victims.

Under the proposed settlement filed in US Bankruptcy Court in Boston on Tuesday, New England Compounding Center owners Barry Cadden and his wife, Lisa Conigliaro Cadden, will contribute $21 million to a fund for creditors. Lisa’s sister-in-law and co-owner Carla Conigliaro will add $24 million, and Lisa’s brother and co-owner Greg Conigliaro will contribute $2.75 million.

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Barry Cadden, who married into the Conigliaro family, was also the pharmacist who helped oversee the firm’s operations.

The court had already frozen about $21 million in family bank accounts.

In addition, insurers for New England Compounding and its landlord are expected to contribute $29 million. And $20 million is expected to come from tax refunds New England Compounding will receive as a result of its losses. Lawyers hope to raise up to $10 million more by selling Ameridose, a defunct sister company that manufactured and repackaged drugs for hospitals and medical centers.

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Lawyers announced late last year that they were close to reaching the $100 million deal, but it took months to finalize the details. A judge must still approve the deal and a system for allocating the settlement to people who are owed money by the firm.

The vast majority of the $100 million is expected to go to victims, because the company had few other creditors when it shut down in 2012 after federal regulators traced a national fungal meningitis outbreak to contaminated steroids made at the compounding pharmacy.

More than 3,000 creditors have filed claims with the bankruptcy court, mostly victims and their family members. Though the US Centers for Disease Control and Prevention estimated that about 750 people contracted fungal meningitis or related diseases from the tainted drugs, many additional patients have since reported headaches, fatigue, and other symptoms, and may qualify for compensation, diluting the pool of money available to each person.

Still, lawyers are hoping to raise additional money from clinics that administered the drugs and from other companies that could potentially share liability for the contamination — from the company that designed the clean room where the drugs were produced to the firm hired to regularly clean portions of that room.

Paul D. Moore, the bankruptcy trustee who helped lead the negotiations, said he hopes the plan can be approved by the end of the year, with payments to begin soon afterward. He said it is difficult to forecast how much victims will receive, but said the settlement filed Tuesday “represents an excellent first step.”

David Molton, a Brown Rudnick lawyer advising the committee of unsecured creditors, including victims, said he expects the first payments could come early next year.

Lawyers cautioned that the final total — even after raising money from additional parties — is still likely to fall short of fully compensating victims for their losses, but said it is significant given that New England Compounding is bankrupt.

The owners, who have declined interview requests in the past, released a joint statement Tuesday that said their thoughts and prayers are with the victims. “We know that no amount of money can adequately compensate the bereaved families for their loss of loved ones, nor those who are suffering today from the terrible effects of this tragedy.”

Federal investigators are continuing to consider bringing criminal charges against anyone responsible for selling the tainted drugs. A spokeswoman for the US attorney’s office in Boston said Tuesday that the investigation was ongoing.

The government has pressed charges in past cases in which people died from tainted food or medicine, so an indictment would not be unprecedented. In January, two Colorado cantaloupe farmers were given probation and home detention after their farm was blamed for a listeria outbreak that killed 33 people three years ago. The farmers in that case provided $4 million for victims.

Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.
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