* Prison sentence possible if violations found in Michigan
* Case shows patchwork nature of state regulations on compounders
* Idaho says unclear if NECC acted as manufacturer or wholesaler
By David Bailey
MINNEAPOLIS, Oct 13 (Reuters) - U.S. states are stepping up scrutiny of the company at the center of a deadly meningitis scare, with two states accusing it of violating licensing rules and several others starting investigations of its activities, according to a Reuters survey of states affected.
Michigan, with the second largest number of meningitis cases, and Massachusetts, where the New England Compounding Center is located, have been the most aggressive, saying they believe NECC violated their regulations.
"(NECC's) pharmacy license did not allow it to ship large quantities for general use," Michigan Attorney General Bill Schuette said on Friday as the state suspended the company's license and opened an investigation.
If found guilty of violating the Michigan public health code, officials of NECC, which produced the tainted steroid linked to the scandal, could face a prison sentence, the attorney general's complaint said.
Several other states including Indiana, Minnesota and Ohio have launched investigations of the company. Still others, including New Hampshire and the hardest hit state of Tennessee, have scheduled administrative hearings on possible violations.
"It was New England Compounding Pharmacy's intent to conform to the rules of any state in which it sold its products to medical providers," a spokesman for the company said on Saturday in an emailed statement.
The meningitis outbreak, which had killed 15 people as of Saturday, has highlighted the patchwork nature of state regulations and licensing requirements and a lack of federal oversight of compounding pharmacies such as NECC. [ID: nL1E8LD2UY]
Compounding pharmacies produce special order medications for clinics and doctors but are not supposed to operate as pharmaceuticals manufacturers and ship drugs in bulk.
201 MENINGITIS CASES
Authorities have said up to 14,000 people could have received injections from the suspect medication shipped to 23 states by the Framingham, Massachusetts-based company. As of Saturday, 201 people were reported with meningitis in 14 states, the CDC and state officials in New Hampshire said.
A separate Reuters investigation found that NECC failed to require proof of individual patient prescriptions as required by Massachusetts regulations, and solicited bulk orders from physicians, according to emails to a customer.
Reuters reviewed more than a dozen emails that show NECC supplied one customer in Mississippi with drugs without patient names or prescriptions.
On Thursday, the Massachusetts attorney general said it was investigating NECC to determine what led to the distribution of the suspect steroids and to determine any potential legal action.
"This organization chose to apparently violate the licensing requirements under which they were allowed to operate," said Madeleine Biondolillo, director of the Bureau of Health Care and Safety at the Massachusetts Department of Public Health.
In Idaho, NECC is licensed to supply drugs for specific prescriptions as an out-of-state mail order pharmacy and it was unclear if it acted as a wholesaler or manufacturer, said Jan Atkinson, senior compliance officer at the state pharmacy board.
Idaho facilities received some of the potentially tainted steroid medication typically injected to alleviate back pain and had reported one case of meningitis as of Saturday.
Cori Anderson, spokeswoman for Pain Specialists in Idaho Falls, said the clinic received about 40 vials of the suspect medication directly from NECC and not directed at a patient.
But laws are not consistent from state to state. Idaho law allows retail pharmacies, including mail-order pharmacies, to sell "minimal quantities" of prescription drugs to licensed practitioners for office use in a provision meant for covering short-term shortages, Atkinson said.
The pharmacy board determines if shipments constitute "minimal quantities" on an individual basis, Atkinson said.
"This may be a new area we need to address," she said.
Tennessee, the state where patients first reported being sickened after the injections, said its pharmacy board will consider a request for NECC to surrender its license on Monday.
Indiana's pharmacy board has turned an investigation over to the state attorney general, director Greg Pachmayr said. NECC was licensed to fill specific prescriptions in Indiana, which had reported two deaths among 27 people sickened as of Saturday.
In Minnesota, the company is licensed to fill prescriptions for a specific patient and would need to be licensed as a wholesaler and a manufacturer to sell drugs in bulk, said Cody Wiberg, executive director of the Minnesota Board of Pharmacy.
"You can't buy it in bulk from a pharmacy and then as you use it, write out a prescription for the patient and mail that back to the pharmacy," Wiberg said.
Minnesota had reported four meningitis cases as of Saturday.
Other states have ordered NECC to halt distributions, a moot point with the company voluntarily suspending operations. Virginia, North Carolina and Ohio suspended its license, while California ordered NECC distributions halted.
The suspect drugs were administered to about 430 patients in Ohio and the state is investigating whether NECC broke any rules. It was registered as an out-of-state wholesaler but compounded drugs could only be ordered for specific patients.
"We want to make sure they didn't make large batches of the drug and then ship them," Ohio pharmacy board spokesman Jesse Wimberly said. (Additional reporting by Laura Zuckerman, Susan Guyett, Kim Palmer, Tim Ghianni, Barbara Goldberg, Jim Forsyth, Colleen Jenkins, Cynthia Johnston, Alex Dobuzinskis, Sharon Begley, David Morgan, Toni Clarke, and Aaron Pressman; Editing by Greg McCune and Bill Trott)