$135 mil plan filed to compensate NECC victims

(State House News Service) — Creditors and trustees have worked out a bankruptcy plan that would pay out at least $135 million and end the liability of New England Compounding Center and some other entities for injectable steroids that were contaminated with a deadly fungus.

The proposed plan, filed Wednesday in bankruptcy court, would need the approval of Judge Henry Boroff as well as a positive vote by all the people and entities owed money. For approval, it would need to receive favorable votes from a majority of individual creditors representing at least two-thirds of the dollar amount, according to Paul Moore, the bankruptcy trustee.

“Once the Plan is confirmed, NECC’s creditors finally can receive initial distributions on account of their claims,” Moore said in a statement.

The 2012 outbreak of fungal meningitis and other maladies stemming from the Framingham lab led to laws reforming how the Department of Public Health monitors compounding pharmacies, which are licensed to mix specialty batches of drugs for people with allergies or other specific needs.

According to Centers for Disease Control and Prevention data from October 2013, the contaminated steroids caused fungal meningitis, killing 64 people and sickening hundreds of others. The tainted drugs also caused other infections.

Frederick Ellis, an attorney who represented several victims, said there are different classes entitled to varying levels of compensation, including serious spinal infections, more minor infections and those who were merely exposed to the contaminated drugs.

The $135 million would be available for people with injury or death claims against NECC. Business creditors would be paid roughly $1 million under the plan, Ellis said.

He said he anticipates about 2,500 claims will be made, and said creditors would need to have filed a proof of claim by last January. Ellis said he hopes the plan will be fully approved by spring.

Ellis said the roughly $135 million would be funded by NECC, its insurers and entities that contracted with NECC, such as the company that performed sterility testing and the compounding lab’s air-flow system contractor.

According to a press release about the settlement, NECC’s owners and insurers have already contributed a little less than $50 million and are expected to contribute more. Other entities are expected to kick in $56.8 million.

The plan would establish a tort trust, which would be administered by a tort trustee and overseen by the courts.

An attorney listed as representing NECC said he had no comment and hung up when reached by phone.

Ellis said additional agreements are being sought with individual clinics and hospitals, which would provide compensation only to people who were administered the tainted drugs by those entities.