January 2, 2013 — New England Compounding Center (NECC), the Massachusetts pharmacy that has been linked to a deadly outbreak of fungal meningitis, has filed for Chapter 11 bankruptcy and they will seek to establish a compensation fund for the victims. NECC reported that they have assets ranging between $1 million and $10 million, and they have been 200-999 creditors. Thousands of people were exposed to potentially contaminated medicines from the company, 620 people were sickened, and 39 people have died.

The bankruptcy is not surprising — the company was forced to recall all of its medicines in October 2012. Soon afterward, they shut down all operations and voluntarily rescinded their pharmacy license. Subsequent investigations from the FDA uncovered evidence of unsanitary manufacturing practices, mass-production of medicines without proper licenses, and other issues dating back to 1999.

In a statement, NECC stated that they filed for bankruptcy protection in the interest of a “greater, quicker, fairer payout to its creditors than they could achieve through piecemeal litigation.” According to documents in the U.S. Bankruptcy Court for the District of Massachusetts, NECC had less than $2.34 million in debts when they filed for bankruptcy.

The company also appointed Keith D. Lowey to establish the compensation fund and commence payments to affected parties. Lowey said, “We want to establish a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief.”

Hundreds of plaintiffs have already filed lawsuits against NECC, including several class action lawsuits. With so many claims pending, many experts have raised concerns about the compensation fund covering claims against the company. Other concerns include the widespread nature of the litigation, with victims in 23 states. In January, the U.S. Judicial Panel on Multidistrict Litigation (JPML) will consider whether to centralize the litigation into a federal Multidistrict Litigation (JPML), in one courtroom before one judge.