Joe Connolly: We became a manufacturer overnight. So we were basically trying to have the best of both worlds. It was trying to manufacture without the oversight of a manufacturer. And it was just, we all got overtaxed and everything.
Which made it harder, he says, to follow the strict procedures that kept drug preparation sterile.
Scott Pelley: They would occasionally find mold in the clean room?
Joe Connolly: Occasionally. Yes.
Scott Pelley: How often?
Joe Connolly: I would say maybe a dozen times in three years we would find it.
He told us they would clean up and keep moving. But a month before the first steroid death, he says he warned his supervisor.
Joe Connolly: Something's going to happen. Something's going to get missed. And we're going to get shutdown.
Scott Pelley: What did you mean by that?
Joe Connolly: We were going to hurt a patient. We were just thinking-- hurt a patient. We weren't compounding anymore, we were manufacturing.
Scott Pelley: When you went to your supervisor and told him that, he said what?
Joe Connolly: That's verbatim. He shrugged. That was his response for a lot of our questions or comments or concerns, was a shrug.
Scott Pelley: Meaning?
Joe Connolly: Just do it. He'd-- either he didn't care, or he was powerless to change it.
NECC was growing explosively and so was the compounding industry. It started in 1998 when Congress exempted compounding pharmacies from the oversight of the Food and Drug Administration. The theory was, mixing drugs one prescription at a time shouldn't require federal inspection. The law passed, over the strong objections of then-FDA Commissioner David Kessler.
Scott Pelley: You as FDA commissioner testified before them and you said, "Don't do this."
David Kessler: If you're not going to have oversight, one day people are going to die.
Scott Pelley: That day's arrived.
David Kessler: This should not happen in 2013. Maybe at the turn of the previous century where we didn't have institutions like the FDA. There is no reason why people had to die.
Without FDA supervision compounding took off. State health departments are responsible for regulating what is now nearly a $2 billion industry. Dr. Margaret Hamburg is FDA commissioner now and she told us, because of the 1998 law, she doesn't know how many compounders there are or what they're making.
Scott Pelley: You know, I can just hear the folks at home saying, "Wait a minute. I thought every pharmaceutical drug in this country was approved by the FDA." And you seem to be telling me in this interview that that's not the case?
Margaret Hamburg: Well, compounded drugs are not FDA approved.
Scott Pelley: So if a patient goes into a clinic and the doctor or the nurse pulls out a vial of something, that patient has no way to know whether that drug has been approved by the FDA or not?
Margaret Hamburg: Well, I think that's right under the current system. And what I think emerged in the meningitis outbreak was that many patients and their health care providers didn't realize that they in fact were using a compounded product.