By Nate Raymond

BOSTON (Reuters) – A federal judge on Friday tossed the convictions of a co-owner and former employee of a Massachusetts compounding pharmacy accused of conspiring to help it evade regulatory oversight before its drugs caused a deadly 2012 fungal meningitis outbreak.

U.S. District Judge Richard Stearns in Boston ruled that New England Compounding Center co-owner Gregory Conigliaro and former employee Sharon Carter did not have fair warning their actions could subject them to prosecution.

They were among five people convicted in December of engaging in fraud and other offenses that helped boost NECC’s business before the outbreak, fueled by mold-tainted steroids it produced.

The outbreak sickened 793 patients nationally. More than 100 of them have died, according to prosecutors.

Jurors convicted Conigliaro and Carter of conspiring to defraud the U.S. Food and Drug Administration by misleading it into thinking NECC was operating like a conventional pharmacy and not like a drug manufacturer.

State-regulated compounding pharmacies produce customized drugs pursuant to patient-specific prescriptions to address individual needs. But prosecutors said NECC was actually a drug manufacturer making medications in bulk.

But Stearns said the evidence showed that the FDA pre-outbreak was unsure if it could regulate compounding pharmacies like NECC that produced drugs in bulk in anticipation of orders.

Congress passed a law after the outbreak in 2013 that strengthened the FDA’s oversight authority.

“Thus, the bottom line: during the critical times, these defendants (and NECC) could not have defrauded the FDA by interfering with the relevant regulatory functions because there were none to speak of,” Stearns wrote.

Dan Rabinovitz, Conigliaro’s lawyer, said the “decision validates what we have said all along, that there was no legal distinction between a drug manufacturer and a compounding pharmacy.”

U.S. Attorney Andrew Lelling in a statement said prosecutors may seek to appeal the decision.

Both defendants were indicted in 2014 along with 12 other former owners and employees of Framingham, Massachusetts-based NECC, including co-founder Barry Cadden and supervisory pharmacist Glenn Chin.

Jurors in separate trials in 2017 found both guilty of racketeering and fraud but cleared them of second-degree murder over the deaths of 25 patients.

Unlike Cadden and Chin, who were sentenced to nine and eight years in prison, respectively, the other defendants were not charged with having any role in making the contaminated steroids.

Nine other people have been convicted of federal charges, while one was acquitted. Cadden and Chin also face second-degree murder charges in Michigan.

(Reporting by Nate Raymond in Boston; Editing by Tom Brown)