A sign requesting "No Soliciting" hangs on the door of New England Compounding in Framingham, Mass., Thursday, Oct. 4, 2012. (AP Photo/Stephan Savoia)
(CBS) -- The specialty pharmacy linked to a deadly meningitis outbreak may have misled regulators and done work beyond the scope of its state license, Massachusetts Gov. Deval Patrick said Wednesday.
That pharmacy also settled a lawsuit alleging it produced a tainted shot that caused a man's death in 2004.
Meanwhile, a second pharmacy connected to the New England Compounding Center in Framingham has shut down for state and federal inspection, and was accused by a business customer this summer of failing to separate sterile and non-sterile supplies, a charge the company denies.
The Framingham-based compounding center made a steroid that was used in injections for back pain that were later found to be contaminated. More than 130 people in 11 states have been sickened. Twelve have died.
On Wednesday, Patrick told reporters that state and federal agencies "may have been misled by some of the information we were given" by the compounding center.
The company was licensed to fill specific prescriptions for specific patients but exceeded that, he said.
"What they were doing instead is making big batches and selling them out of state as a manufacturer would, and that is certainly outside of their state license," he said.
Massachusetts U.S. Rep. Ed Markey seized on Patrick's statement and sent a letter to the U.S. Food and Drug Administration, asking if it believes it was misled by the company.
"This company may have disregarded federal guidelines, and we need to know from the FDA whether the company misled regulatory authorities and if sanctions against the company are available or warranted," Markey said.
A company spokesman declined comment beyond a statement that company officials are focused on cooperating with the investigation. The company has shut down operations, recalled the fungus-contaminated steroid and is cooperating with investigators.
On Wednesday afternoon, the state announced that the pharmacy Ameridose had agreed to temporarily shut down, pending inspection by state and federal regulators.
Ameridose was founded in 2006 by Greg Conigliaro and Barry Cadden, who opened the New England Compounding Center eight years earlier.
Ameridose said in a statement that its shutdown ends Oct. 22, though the agreement with the state allows the shutdown to be extended or shortened. The step is being taken as a precaution, not because of evidence of contamination, officials said Wednesday.
Dr. Madeleine Biondolillo, director of the state's Bureau of Healthcare Safety, said there's no evidence of problems at Ameridose and the state hasn't requested a recall of any Ameridose products.
Ameridose said that, as part of the agreement, Cadden has resigned all corporate positions with the company, where he has not had a day-to-day role.
Andrew Paven, a spokesman for both companies, said, "Ameridose is a separate entity from New England Compounding Center, with distinct operational management."
Allegations of a shot tainted with a different form of meningitis were at the heart of a lawsuit filed against the New England Compounding Center over the 2004 death. An 83-year-old man died about a year-and-a-half after receiving a shot produced by the company.
The 2004 lawsuit filed in upstate New York's Monroe County claimed that New England Compounding Center produced the shot that infected William Koch with bacterial meningitis at Rochester General Hospital on July 17, 2002. Koch died Feb. 28, 2004, at the age of 83.
The lawsuit complaint said the shot was the source of Koch's meningitis, but did not explain how that determination was made.
Bacterial meningitis is contagious and much more common than the fungal meningitis involved in the current outbreak. Fungal meningitis is more difficult to catch, according to the Centers for Disease Control.
The compounding pharmacy reached a settlement with Koch's widow in 2007 before the case went to trial, according to her lawyer Mark S. Nunn. He declined to elaborate Wednesday because the terms were confidential.
This summer, an organization that represents hospitals in purchasing deals with drug suppliers cancelled a contract with Ameridose over allegations that it had poor quality control practices that "rose to a level of concern for patient safety," according to a lawsuit that Ameridose filed in August.
Ameridose denies those allegations and filed a defamation and slander lawsuit in U.S. District Court in Massachusetts on Aug. 8, saying Novation LLC hurt its reputation by making allegations including that there was "no separation between sterile and non-sterile products" in an Ameridose warehouse.
The lawsuit doesn't say what the products were or elaborate on how they were stored. Novation declined to release a copy of its report.
Novation, which leverages hospitals' combined buying power to get better prices on medical goods, sent two employees to audit Ameridose on July 15 and terminated its contract, the lawsuit said.
"Novation has determined that Ameridose does not meet the quality systems requirements needed to maintain a Novation agreement," Novation said to its members in an Aug. 2 newsletter, according to the lawsuit.
Ameridose strongly objected to the allegations and said in its defamation lawsuit that the Novation auditors were unqualified and made false and misleading statements. Ameridose also said it had been audited in recent years by several other organizations that determined its quality control system "meets or exceeds their high quality standards." Ameridose is regulated by the U.S. Food and Drug Administration.
The lawsuit ended in a confidential settlement Sept. 24.
Paven, the Ameridose and New England Compounding Center spokesman, said Wednesday in an email that the "suit involved contractual commercial issues between the companies that have since been resolved."
A statement from Novation said that, while it "vigorously disputed each and every claim made in the lawsuit, the parties ultimately agreed to settle the lawsuit."
Ameridose compounds drugs at one of its two facilities in Westborough, but also provides medication in prefilled oral syringes to hospitals nationwide.
A pharmacy manager at Ameridose, Sophia Pasedis, has been a member of the regulatory body, the Massachusetts Board of Registration in Pharmacy, since 2004. But the state said she has recused herself from all matters related to Ameridose and the New England Compounding Center.
Compounding pharmacies supply products that aren't commercially available, based on an individual doctor's prescription. Some have grown into larger businesses, operating across state lines and supplying drugs to thousands of hospitals, clinics and physicians.
Biondolillo said the state has reminded Massachusetts pharmacies that compounding can be done only in response to a patient-specific prescription. She said the state is now requiring all compounding pharmacies to sign an affidavit that they are following all regulations.
The state has 1,100 pharmacies that can compound drugs.
Massachusetts last inspected the New England Compounding Center in March in response to a pending complaint unrelated to the outbreak, officials have said. It also inspected the pharmacy in 2011 when it moved operations, and found no problems.
Asked if the state had tried to determine if the company was making large batches of drugs, a possible signal it was operating outside the bounds of its license, Biondolillo said, "Each time we go out and inspect, we're looking at all aspects of the operation."
She didn't give specifics about what the inspectors found in the most recent visit.
In Ohio, the state's board of pharmacy on Wednesday suspended the company's license to distribute in the state, citing evidence that the company's practices presented a danger of serious and immediate harm to others.
As many as 13,000 people received steroid shots from the New England Compounding Center, according to the federal Centers for Disease Control and Prevention.
Compounded drugs have never been reviewed for safety and effectiveness by the FDA. The outbreak has led to calls from lawmakers, including Markey and Connecticut Rep. Rosa DeLauro, to strengthen the agency's oversight over the drugs.
© 2012 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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