Settlement Seeks $100M Fund for Meningitis Victims

A settlement filed with a federal bankruptcy judge would create a fund of more than $100 million to compensate victims of a nationwide meningitis outbreak linked to a Massachusetts pharmacy, lawyers said on May 6.

The outbreak, blamed on a tainted steroid produced by the New England Compounding Center, sickened more than 750 people in 20 states, the Centers for Disease Control and Prevention said; 64 people died. The company surrendered its license after the 2012 outbreak, which hit Michigan, Tennessee and Indiana the hardest, and later filed for bankruptcy.

The settlement, which must be approved by Judge Henry Boroff, was reached between the owners of the company and court-appointed bankruptcy trustee Paul Moore. It calls for the company’s owners to pay $50 million into the fund, with its insurers contributing another $25 million.

The agreement would allow the owners to seek $20 million in tax refunds, which also would be contributed to the fund, along with the proceeds of the proposed sale of an affiliated company, Ameridose, bringing the total of the fund to more than $100 million.

Attorney Thomas Sobol, representing victims who sued the Framingham, Mass.-based compounding pharmacy, said the settlement is “another important step in a frustratingly long process to get fair compensation to hundreds of victims of the meningitis outbreak.”

Sobol said he hoped the court would approve the plan by the end of the year, with distributions to victims beginning in early 2015. “There was unimaginable human death and suffering that cannot be compensated for in money no matter how much it would be,” he added.

The money would be distributed among families of those who died, those who sustained serious injuries after being injected with the steroid and other creditors. The victims developed fungal meningitis, an inflammation of the lining of the brain and spinal cord, or other infections.

The settlement was filed nearly five months after lawyers reached an agreement in principal.

Moore said the objective of the negotiations was to resolve claims against the company without lengthy court proceedings, and he praised shareholders for their commitment to reaching a settlement that would benefit victims.

No criminal charges have been lodged in the case. The company’s owners have denied wrongdoing or liability.