Saturday, December 29, 2012

NECC, Smoldering Crisis, and Hepatitis: 'People Were Fired for Speaking Up About Safety Issues'

New England Compounding Center is in a crisis from which it may not emerge. NECC is the pharmacy compounder identified as the source of a fungal meningitis outbreak that killed 39 and left 619 sick in late summer. What kind of company is NECC and how did it crumble into bankruptcy, civil liability suits,  Congressional hearings, and criminal investigations? I hope here to dissect the organization and the crisis, like a ninth grade biology student with a preserved frog and scalpel.

Barry Cadden and Lisa Conigliaro were classmates at the University of Rhode Island’s College of Pharmacy. They fell in love and, within a few years of graduating, married. Barry developed a close relationship with Lisa's older brother,
Gregory Conigliaro, full of energy with a good eye for niche businesses. Together, they started New England Compounding Center in Framingham and a second pharmaceutical firm called Ameridose, and turned them into two of the fastest growing drug-compounding businesses in the country.

With Cadden’s scientific know-how and Conigliaro’s enterprising spirit, their fortunes grew. "They launched a half-dozen related corporations and brought in relatives, including Lisa, as ­employees and corporate officers. Together with their wives, each built handsome homes in Massachusetts, bought vacation homes, and gave generously to their favorite charities or political causes." (

Cadden, 45, and Conigliaro, 46, and their extended families have declined to comment since the meningitis outbreak began and have stayed hidden from public view. Many of their colleagues and friends also are not speaking. A spokesman for their businesses had no comment.  NECC's website has been abandoned since posting a company statement on October 22. (

The House Energy and Commerce Committee wanted to know about unsterile conditions in the plant. Cadden pleaded the Fifth Amendment to every question but one. His standard was, "Under advice of counsel, I respectfully decline to answer under basis of my constitutional rights and privileges, including the Fifth Amendment.” The only time he did not respond this way was when he was asked if he would answer all of the questions this way. He simply responded, “Yes.”  (

I received an interesting anonymous comment yesterday to my November 25 post about NECC. "Barry Cadden intentionally took advantage of the lack of FDA authority. He knew what he was doing was wrong. Any employee who spoke up about unsafe conditions was let go as not being a good fit. One sales manager had a 300% turnover ratio in 15 months. RR told salesfolks to fill in names on the prescription forms. He told employees to shred documents. If you didn't you were let go. Gerri Weinstein of HR was a Conigliaro family friend and would just say you are not a right fit all the while knowing that people were fired for speaking up about safety issues. These people are corrupt."  (

Not all employees would agree. "A former employee of New England Compounding, Carrie-Lee Touhey, recalled Gregory Conigliaro as the consummate businessman who provided the financial expertise, while ­Cadden was the sunny pharmacist who always had a smile on his face. Conigliaro normally wore a shirt and tie, while ­Cadden wore blue hospital scrubs, she said." (

Other former employees told CBS News that Cadden was good to his employees and careful about compliance.

Between 2008 and this year, Ameridose went from 50 workers to close to 400 while NECC doubled employment to about 50. Cadden and Conigliaro started another company, Alaunus Pharmaceutical, to distribute generic drugs three years ago.

Both grew wealthy. In 2010, Conigliaro bought a $3.5 million home with six bedrooms, nine bathrooms, and more than 11,000 square feet. That was in addition to a vacation home. The Caddens built a $1.8 million home in 2005. About three years ago, they also purchased and renovated a beach home in Rode Island.

Some of the firms’ former workers saw a downside to the rapid growth. “The environment is very fast pace,” the company said in recent employment ads. Several former workers said the company suffered from high turnover and pressure to meet orders. Two former co-workers said some employees spoke little English, increasing the possibility of critical errors.

All this set the background for a smoldering crisis. There were more signs in the years that followed:
  • A patient in upstate New York died of meningitis after receiving a tainted anti-inflammatory shot made by the company in 2002, according to a 2004 lawsuit in New York that was eventually settled. State and federal regulators launched an investigation after receiving complaints about the company, leading to a consent decree from the state and an FDA warning letter in 2006. When FDA inspectors visited NECC, Cadden was initially cooperative in turning over records about production of the drug. But during a second day of inspections, he told officials "that he was no longer willing to provide us with any additional records," according to an FDA report cited by congressional investigators. The inspectors ultimately issued a report citing NECC for poor sterility and record-keeping practices but said that "this FDA investigation could not proceed to any definitive resolution," because of "problems/barriers that were encountered throughout the inspection."
  • At a February 2003 meeting between state and federal officials, FDA staff emphasized "the potential for serious public consequences if NECC's compounding practices, in particular those relating to sterile products, are not improved." The agency issued a list of problems uncovered in its inspection to NECC, including a failure to verify if sterile drugs met safety standards. But the agency decided to let Massachusetts officials take the lead. Congressional investigators say Massachusetts Board of Pharmacy didn't take any action until more than a year later.
  • In October 2004, the board sent a proposed consent agreement to Cadden, which would have included a formal reprimand and a three-year probationary period for the company's registration. The case ended without disciplinary action in 2006, when NECC agreed to a less stringent consent decree with the state.
  • During a 2004 FDA inspection, inspectors asked Cadden if the company made a solution called Trypan blue, to which he replied the company did not unless someone special ordered it, the CBS News Investigate Team's Laura Strickler reported. Then inspectors reportedly followed him into the room where they saw a drawer clearly marked with the product's name, opened it, and found 189 vials. When the FDA came back to ask him about it, Cadden reportedly became "indignant" and told the company's co-owner Greg Conigliaro to no longer answer questions.
  • The FDA sent a warning letter in December 2006 to Cadden, according to Strickler, to which he responded a month later denying the allegations, calling them out of date. The FDA did not respond to the NECC until October 2008, Cadden reportedly never responded, and the communication ended.
  • An FDA inspection of Ameridose in 2008 found ­numerous issues, including that the company did not fully test all the lots of its drugs and shipped some lots before receiving the results of sterility tests. Ameridose recalled a painkiller shortly afterward because it was overly potent. (
The smoldering crisis erupted in headlines last fall with the meningitis outbreak. NECC suspended its operations, Cadden agreed to stop practicing pharmacy in Massachusetts, and Ameridose and Alaunus suspended operations for two weeks while federal and state inspectors reviewed the ­operations.

Cadden and Conigliaro reportedly hope to reopen Ameridose. The company hired a public relations firm to insist that Ameridose and New England Compounding are separate companies with distinct management teams and facilities, even though they were both owned by the Cadens and Conigliaros. Former employees say the companies were intertwined, even holding combined Christmas parties. "The companies had adjoining booths at the National Pharmacy Purchasing Association conference in August in Las Vegas and used the same sister company, ­Medical Sales Management, for sales and marketing. They use the same public relations team. New England Compounding’s privacy policy on its website appeared to be almost an exact replica of Ameridose’s. It was even titled 'Ameridose privacy policy.'

"Until recently, both companies had space in the same complex on Waverly Road in Framingham. And even today, they have adjoining mailboxes at the property.... “I don’t think there was literally any difference,' said the former Medical Sales Management worker who handled sales for Ameridose, while a colleague at the next desk took ­orders for New England Compounding. Now federal and state investigators are probing the ties ­between the two firms."

The crisis is said to be taking a toll on the families emotionally and financially. So far, 130 lawsuits have been filed against NECC nationwide and 270 other people have claimed injury from the tainted drugs. NECC filed for Chapter 11 bankruptcy on December 21, which shields the company from lawsuits while it establishes a fund to pay victims. Mark A. Dotson, a professor at Cooley Law School, said the Chapter 11 filing shows the company plans to continue to conduct business and will address the lawsuits. The company hired accountant Keith D. Lowey to lead the effort to set up the compensation fund. (

Fredric ­Ellis, a Boston attorney who is representing several people with claims, said the Chapter 11 filing will hold up any litigation against New England Compounding.

“'When you file for bankruptcy, that stays all litigation — stops it in its tracks — against you,' Ellis said. That leaves lawyers suing the pharmacy with two options, Ellis said. The plaintiffs could file claims against companies tied to the compounding center facility in Framingham, where the tainted drugs were processed. Ellis said such suits against companies primarily based in Massachusetts would have to be litigated in the Commonwealth. The other option, according to Ellis, is for attorneys to sue the hospitals and pain clinics that administered injections of the steroids wherever those medical facilities are located." (

NECC doesn't have many assets and so may not provide significant compensation for victims. But the third party companies probably have insurance policies that will add to payments for plaintiffs.

There were many warning signs that Cadden and Conigliaro apparently ignored. By not listening to regulators and employees, they allowed a smoldering crisis to flare up and cripple their business and the other businesses they own. Government regulators are a pain in the neck, but refuse to cooperate at your own peril. Plus it's easier to pressure employees to work faster than to take time for safety and cleanliness.

Successful business owners didn't get to the mountaintop by ignoring regulators and employees, nor can they stay there for long. When they fail they fall, and it's a long way down.

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