July 13, 2017

NECP: The Industry’s Lesson

In the last days of June, the final chapter of the New England Compounding Pharmacy (NECP) story unfolded in the Boston federal courtroom of Judge Richard G. Stearns. Barry J. Cadden, the head pharmacist and former co-owner of NECP was sentenced to nine (9) years in federal prison. As we previously reported on this website, Cadden was convicted earlier this spring on federal fraud and racketeering charges arising from an outbreak of fungal meningitis and related infections, which has been described as among the worst recent public health crises in the United States.

Every compounding pharmacist in the United States, of no matter what size, needs to understand the broader meaning of this case. There will be a reflexive denial among many that this “couldn’t happen to me.” But in the words of the New York Times, the case has drawn attention to “the loosely regulated world of compounding pharmacies, which mix drugs at lower prices than large drug manufacturers.” Some of NECP’s victims specifically urged Judge Stearns to impose the maximum allowable punishment “as a deterrent to other compounding pharmacies.” Putting aside the issue of whether compounders’ prices are, in fact, lower, the fallout from the case places a legal target on the back of the entire industry.

Indeed, as a result of the case, Massachusetts has passed stricter state-level rules of quality and safety. Both the Boston Globe and the Times observed that while Congress has passed new federal legislation, “experts” claim that “key provisions” (presumably the new outsourcing facility rules) were “voluntary.” Thus the possibility of another catastrophic outbreak was said still to exist. Law professor Kevin Outterson of Boston University called for much stricter regulation and declared: “We’ve done very little to make sure that this won’t happen again,” It is our view at the HLG that this case will drive FDA enforcement and inspection policies for at least a decade.

The Scope of the Disaster. This case developed as a slow-rolling disaster, commencing in 2012 with a handful of unusual meningitis cases that rapidly snowballed, particularly in Indiana, Tennessee, and Michigan. The cases were quickly linked to NECP of Framingham, Massachusetts. Their contaminated product, tainted by mold, was an injectable steroid, routinely used to treat back pain.

By October, 2015, the CDC attributed 753 infection-related illnesses and 64 deaths to NECP. By the time of the sentencing hearing, the death toll had reached 76. State health officials calculated that 13,000 people could have been injected with the contaminated drug, so many patients were left with the anxiety of waiting to see whether they would develop symptoms.

The NECP Trial. Federal prosecutors claimed that Cadden ran NECP like a criminal organization, and charged him under the Racketeer Influenced and Corrupt Organizations Act (RICO), usually applied to members of organized crime. He was convicted in March of more than fifty counts of federal mail fraud and racketeering, but acquitted of twenty-five counts of second-degree murder and other charges. (However, notes on the verdict form have raised questions about the result of the trial. Most jurors wanted to convict Cadden of murder charges.)

The Human Toll. The sentencing followed powerful, emotionally-charged testimony by persons who had become infected or lost family members. Judge Stearns said, prior to sentencing, that he had read more than 600 pages of victim statements. These victim impact statements are worthy of attention by even the most-compliant pharmacists, because they vividly demonstrate the horrendous effects that can result when contaminated drugs are released into a national market.

A victim from Indiana, walked slowly to the witness podium with a cane, then delivered what the Boston Globe described as a “gut-wrenching” statement, which began with a description of the automobile accident that changed her life. Her doctor prescribed steroid shots to aid her recovery, and she was infected by NECC’s contaminated steroids. “My days are just full of stress and pain,” she said, choking back tears. While she was hospitalized, “My priest came and gave me last rites, and my kids said goodbye to me.” She told her husband that he ought to leave her, but he refused. “I was just ready to give up,” she said. The tainted injections left her with pain requiring fifteen medications to manage She told the Court, “I will die from this,” and that she hoped to live only two more years.

Among the eight survivors who testified, some said they continued to live with pain and had received little money from a victim assistance fund. A man who lost his mother said Cadden “got away with murder.” A widow spoke about the empty space on the other side of the bed. Another survivor said that the pain was so severe that she prayed for death and had considered suicide. One survivor pointedly asked the Judge to give Cadden the maximum sentence “or give him two shots of his own steroid.” Another said: “I will die imprisoned in my body, slowly and in anguish, and he should die in prison,” A widow said that she had suffered from PTSD after watching her husband die a painful death.

The Meaning of the Sentence. According to Judge Stearns’ calculations, the federal sentencing guidelines called for incarceration of between 87 and 108 months (seven years to nine years). Cadden’s lead lawyer asked for three years. He argued that Cadden was only convicted on mail fraud, and was acquitted on twenty-five counts of murder. The Court was not persuaded. Judge Stearns’ sentence was at the very top of the guidelines–108 months! In addition to maxing out the guideline sentence, the Judge will soon set a date to determine financial restitution.

What Went Wrong and What is the Industry’s Lesson? The essential lesson to be drawn from the case, for the compounding industry, is the criticality of sterile conditions. At trial, former NECP workers told of extensive mold, other unsterile conditions, falsified prescriptions, and expired ingredients. The prosecution, arguing for a 35-year prison term: “Mold was blooming in his clean room and he did nothing about it,” “He put tens of thousands of people at risk after those fungal blooms because he just didn’t care.”

As the industry wrestles with the first wave of federal regulation after the 2013 amendments to the Food, Drug, and Cosmetics Act, there has been much intra-industry discussion of the FDA’s internal procedures and the costs of compliance with its new administrative guidelines and regulations. However, the entire NECP tragedy, and Cadden’s sentence, should bring the attention of compounding pharmacists back to two basic legal issues: (1) Are my risk management measures (insurance policies, corporate form, standard operating procedures) adequate in light of potential liabilities; and (2) Do I have personal criminal exposure? The answers to both questions begins with an examination of every compounding pharmacy’s sterile conditions.

In this area, HLG believes that the FDA’s new compliance sword may, if the industry responds appropriately, become the industry’s legal shield. If a compounding pharmacy is compliant with the FDA’s new regulations and standards on sterile conditions, it will be very difficult to claim either negligence or criminal intent in the event of a NECP-type catastrophe.

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