In February 2003, 11 federal and state health regulators gathered around a conference table in Boston, joined by three colleagues patched in on telemonitors from Washington, to decide the fate of New England Compounding Center.
The tiny Massachusetts pharmacy seemed too obscure to require so much firepower. But at least four patients had recently died of meningitis caused by contaminated steroid injections made by compounding pharmacies in California and South Carolina, and federal investigators were worried they could have another public health crisis on their hands, according to documents provided by a US Senate committee and the US Food and Drug Administration.
Similar steroids mixed by New England Compounding were believed to contain toxins — they had possibly sickened at least four patients. And the company was expanding — fast. Despite initially promising to sell medicines only to Massachusetts doctors, co-owner Barry Cadden had acquired pharmacy licenses in at least 13 states, filed applications in many more, and begun to hire a sales force to exploit the burgeoning and profitable market for custom-made drugs.
Before the group of regulators disbanded, they decided the state, not the FDA, would take the lead in disciplining the specialty pharmacy. That proved to be a key choice. California and South Carolina regulators took strong steps that cost the compounders involved in the earlier contamination cases their businesses.
But Massachusetts ultimately would take no significant action against New England Compounding, the company that a decade later is blamed for a national meningitis outbreak that has sickened 541 people and killed 36 — allowing it to flourish into a national distributor of thousands of steroids, painkillers, and other medicines to doctors and hospitals.
“Barry owned the market of pain management,’’ said Jim Nahill, who owns Pallimed Pharmacy in Woburn.
The Massachusetts pharmacy board did not take action against New England Compounding until October of this year. It forced the pharmacy to shut down after investigators traced the meningitis outbreak to one of its drugs — methylprednisolone acetate — one of the two steroids believed to have sickened patients in 2002.
Was retail pharmacist
Before Cadden started New England Compounding, he was a traditional retail pharmacist at a Rhode Island Walgreens store for eight years, with no experience managing a business. In his 1998 application for a Massachusetts pharmacy license, Cadden said he planned to customize drugs for Massachusetts doctors, particularly those in the suburbs west of Boston.
The Framingham pharmacy was located in the same red brick complex as a recycling business owned by his wife’s family, the Conigliaros, who helped him start New England Compounding.
Right away, Cadden struck others compounders, who tend to share recipes, as reticent — almost like he wanted to fly under the radar.
“They were still setting up when I knocked on the door,’’ recalled Dennis Katz, the owner of Hopkinton Drug, a compounding pharmacy 15 minutes away from New England Compounding. “I said, ‘Welcome to the area. If I can help you with a formula, let me know.’ I was not invited in, which I thought was weird.’’
New England Compounding was among dozens of independent pharmacies that eagerly began compounding around then, as chain drugstores and Internet mail order outfits threatened small pharmacies by taking over much of the business of filling traditional prescriptions. Insurers were also clamping down on payments, and by the early 2000s, the number of independent pharmacies in the United States had plunged to 23,000 from 40,000 in 1980.
There was also a desire among doctors and patients to more aggressively treat pain, with doses and drug combinations not supplied by big pharmaceutical companies. Patients wanted natural hormone replacement therapies, anti-aging formulas, and veterinary drugs. Consultants and compounders boasted that impossibly large profits could be made.
“Anybody know what the average margin on a compounded product is?’’ businessman Mickey Letson, then president of a major compounding supply company, asked a group at a national trade show in Atlanta in 2002. “Seventy-five percent minimum gross profits. Depending on what field you’re in it can run into the thousands of percent.’’
Lester Nathan of Schenectady, N.Y., who dubbed himself the “million dollar marketing coach,’’ helped over 300 pharmacies market their compounded products. “The raw materials are cheap and the pharmacist is getting paid for a higher level of product,’’ Nathan said in an interview. “Compounding is one of the areas they should have been in anyway, in order to serve their patients better because it’s customizing medicine.’’Continued...