The participants in the New England Compounding Center (“NECC”) pharmacy fraud matter were indicted recently, but they are not the only ones facing legal battles. Lawsuits alleging death and injury caused by contaminated drugs compounded by NECC were filed against not only NECC, but also affiliated entities and individuals, and health care providers. All of the cases have been consolidated into a Multi-District Litigation (“MDL”) in Massachusetts federal court.

Most recently in the MDL, US District Judge Zobel ruled on a motion to dismiss. At issue was a complaint by patients alleging negligence and consumer fraud and seeking punitive damages. A physician and his employer, a clinic who administered the compounded, contaminated drugs purchased from NECC were sued by patients who contracted fungal meningitis.

The Court held that allegations that the physician and clinic withheld safety information from the patients and used the contaminated drug with reckless disregard for their safety were sufficient to withstand a motion to dismiss and state a claim for punitive damages (In re New England Compounding Pharmacy, Inc. Products Liability Litigation, January 13, 2015, Zobel, R.).

The drug at issue is methylprednisolone acetate (“MPA”), a compounded drug purchased from NECC. NECC was not licensed by the FDA to manufacture drugs for purchase in bulk, but the physician ordered MPA in bulk quantities from NECC. Allegedly, the physician did not inform the patients that they were receiving a compounded drug.

The physician argued that he had no duty to use diligence before lawfully purchasing compounded drugs from NECC, a licensed pharmacy. However, the Court ruled that there was a duty to use reasonable care to:

(1) assure that the drugs they purchased and administered were procured from companies that complied with the law and used proper quality control and sterility measures;

(2) assure that the drugs they used were not contaminated;

(3) train and supervise the staff who ordered the drugs; and

(4) follow appropriate policies and procedures to avoid purchasing or dispensing contaminated drugs.

The court also allowed allegations of consumer fraud to go forward. The physician allegedly concealed the name and nature of the drug and submitted bills for Depo-medrol, an FDA-approved drug, when they had administered MPA.

Finally, the Court found that punitive damages would be justified on the allegation in the complaint that the physician’s actions “went beyond mere thoughtlessness, inadvertence or error of judgment […] and constituted such utter disregard for the rights of others, and such utter disregard for prudence, that they amount to complete neglect for the safety of patients.”

PLDO will be watching this issue closely and provide updated information as it unfolds. If you have questions about fraud and abuse compliance, the Affordable Care Act or other health care-related issues, please call Attorney Jillian Jagling at 401-824-5100 or email [email protected] We welcome your comments, questions and suggestions.