Pharmacy blamed for outbreak paid $70 million to insiders

Posted: 7:42 PM Updated: 8:32 PM

The Associated Press

SPRINGFIELD, Mass. An attorney for creditors of a pharmacy blamed for a nationwide meningitis outbreak said Thursday that the firm paid out $70 million to company insiders over the last six years.

Attorney David Molton made the disclosure at a U.S. Bankruptcy Court hearing in Springfield as he argued that creditors should be allowed to seek to freeze the assets of the New England Compounding Center's owners.

Molton said the company had paid its four owners, or companies they owned, $37 million over the last two years, $68 million over the last four years and $70.5 million over the last six years. He argued the company's history of big payouts indicated there was a "grave, grave, grave risk" that what remained of those payments would be further depleted before creditors get paid.

"When money came in, it went out," Molton said.

Judge Henry Boroff granted the motion and scheduled a hearing Friday on arguments about tying up the defendants' assets.

A tainted steroid produced by the Framingham-based compounding pharmacy has been linked to a fungal meningitis outbreak that's killed 44 people and sickened more than 600. The outbreak was discovered in Tennessee in September, and subsequent inspections turned up unsanitary conditions and lax sterility testing at the firm's Framingham office.

The pharmacy filed for Chapter 11 bankruptcy in December, saying it wanted to set up a compensation fund for victims. About 150 claims have been filed.

The firm listed $32 million in net sales last year but just $1.3 million in total assets, versus $885,000 in liabilities, not counting any judgments against it. Plaintiffs' attorneys say what's left isn't nearly enough to adequately compensate victims.

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Pharmacy blamed for outbreak paid $70 million to insiders