The New England Compounding Center (NECC) was the epicenter of a nationwide outbreak of meningitis that resulted in 77 deaths. The NECC produced a painkilling steroid for use in back treatments. The company's steroid doses contained fungal meningitis that resulted in hundreds of patients becoming sick and 64 deaths.

NECC is part of a nationwide network of smaller firms that mix together existing drugs to produce treatments such as the steroid injections that are at the heart of the controversy. Compounding companies such as NECC operate in a gray area. They are not subject to FDA direct supervision because they are not pharmaceutical firms. Rather, they are regulated as pharmacists under state laws. However, they do ship their products across state lines. The effect of their operation in this regulatory "demilitarized zone" is that they are regulated as if they were pharmacies dispensing drugs, when they are more like pharmaceuticals that produce drugs. The result is what the Wall Street Journal refers to as a "shadow industry."

Since 1996, when David Kessler was head of the FDA, Congress has attempted federal regulation of compounding companies because of fears that the production processes in compounding "could result in serious adverse effects, including death." \({ }^{176}\) Those were Mr. Kessler's words as he tried to carry forward some additional federal regulation over compounding labs as early as 1996. The compounding companies spent \(\$ 1.1\) million on lobbying in 2007 to stop a bipartisan bill that would have given the FDA some authority over the labs..................

These compounded drugs gained popularity and NECC rode the wave of heavy expansion of compounding companies and sales of such specially developed drugs. The demand was high, and demand often exceeded supply and production capability. There was a great deal of pressure within NECC to get the compounded drugs out the door to patients.
Former NECC employees have offered examples of shortcuts that managers encouraged even if safety was compromised. For example, a pilot project at the company substituted quality control workers for pharmacists to conduct preliminary checks on drug content and proper settings on pumps for IV bags. There were mistakes, such as the time the company almost shipped a drug at twice its potency level, a mistake that resulted from overtime work in an effort to meet production. There were potency errors that state regulators caught over the years, but employees maintain that the goal was always to keep the production line going. One employee quoted the management mantra: "This line is worth more than all your lives combined, so don't stop it."177 Other "rounded corners" have emerged as regulators, news organizations, and plaintiffs' lawyers have combed through the NECC records. They have discovered that NECC was shipping drugs without waiting the necessary 14 days for the lab tests on potency to be processed. The records also show that drugs were shipped without the names of specific patients, a requirement under state laws. Buyers would just fax in the names of the patients later so that there was no delay in booking sales or having the drugs on hand. Interestingly, one buyer for a hospital in Nevada pushed back when a NECC salesperson tried to encourage the fax-the-names-later approach, with the simple reminder, "I'm on the pharmacy board in Nevada, and that won't fly here."178 Since the time of the discovery of the defective steroids at the lab, prosecutors have responded to the actions of those owning and running NECC. The federal government brought charges of 25 counts of murder in seven states (Florida, Indiana, Maryland, Michigan, North Carolina, Tennessee, and Virginia). The indictments charge a former NECC owner and its head pharmacist. Twelve other individuals, including senior pharmacists at the company, were charged in the 161 -count indictment. The original founders of the company, Carla and Douglas Conigliaro, were charged with fraud in the transfer of assets ( \(\$ 33\) million in total) after NECC went into bankruptcy following the deaths and regulatory shutdown of the lab. \({ }^{179}\) All the defendants charged, including the Conigliaros, initially denied guilt, but in July 2016, Mr. and Mrs. Conigliaro entered guilty pleas to the financial crime charges, with the result being that they are facing 10 years and five years in prison, respectively, for these crimes. Two pharmacy employees who have already entered guilty pleas and the Conigliaros await sentencing as issues over victims' testifying are resolved. The head pharmacist at NECC was convicted of 57 of the 96 charges against him, but spared a life sentence by the jury by rejecting the murder charges. \({ }^{180}\)
The indictment charged that employers and managers had a reckless disregard for testing, labeling, and expiration dates with the result being that tainted drugs, expired drugs, and drugs that had failed tests (i.e., they were not free of bacteria) were shipped for patient use. The indictment also noted that regulatory inspections of the NECC lab found bacteria in the air, on surfaces, and on employees' hands, with NECC taking no action to clean up the bacteria. During 2012, regulatory testing found bacteria in 37 of 38 weeks the regulators were onsite......................................

Discussion Questions 1. Explain how and when the regulatory cycle worked here.
2. What happened to those labs in this field that were following good practices and were not responsible for the problems caused by one lab?
3. How does ethical leadership apply in an industry?
4. Based on the fate of NECC and its founders and leaders, are there some thoughts about a credo that come to mind?