State officials also said the New England Compounding Center shipped steroids from the possibly contaminated batches suspected in the outbreak before it received its own test results confirming the drugs were sterile.
Gov. Deval Patrick said he's ordered state pharmacy regulators to conduct surprise inspections - the first of which happened Tuesday - at companies similar to the NECC and take other steps to tighten oversight. The state also has moved to revoke the company's operating license and the licenses of its top three pharmacists.
"Those whose laboratory practices caused this outbreak should never practice pharmacy or manufacture in Massachusetts again," Patrick said.
The outbreak of fungal meningitis, an inflammation of the lining of the brain and spinal cord, has sickened 308 people, including 23 who have died, in 17 states. The outbreak has been linked to a steroid made by the NECC and taken mainly for back pain. Compounding pharmacies like NECC custom mix solutions in doses or forms generally not commercially available.
The federal government is conducting a criminal investigation.
The state said Tuesday that its preliminary investigation, which began last month after the company was first suspected in the growing outbreak, found batches of drugs ready for general distribution but not labeled for specific patients.
Its state license permits the company to fill out only specific prescriptions for specific patients, and distributing drugs in batches like a manufacturer would violate that, said Dr. Madeleine Biondolillo, director of the state Department of Public Health's Bureau of Healthcare Safety.
But company attorney Paul Cirel said it's "hard to imagine" state regulators weren't previously aware of the scale of its operations because they've worked so closely together. The state Board of Registration in Pharmacy has always had complete access to the facility, and board members were there as recently as last summer, he said.
"NECC's transparency in dealing with the board since inception in 1998 demonstrates its good-faith intention to operate in compliance with the requirements of its license," Cirel said.
Besides possible state license violations, Biondolillo said the inspections also revealed "several health and safety deficiencies" at the NECC facility in Framingham, just west of Boston.
Three lots of steroids produced by the company are suspected in the outbreak, and the company shipped orders from those lots 13 times before receiving the results of its own tests to confirm those lots were sterile, Biondolillo said. Some medication was shipped as many as 11 days before the company received test results, she said.
Biondolillo also detailed signs of flawed sterilization procedures, including black specks of fungus in sealed vials of the steroids, which were returned to the company during a recall.
Investigators found the company didn't sterilize its products long enough and didn't adequately test whether its sterilization equipment was working, she said.
In addition, mats on which people wiped their shoes to remove contamination before entering a sterile environment were "visibly dirty and soiled with assorted debris," she said. And a leaking boiler adjacent to a pharmacy clean room left an unsanitary pool of water around it and the adjacent walls, she said.
None of what's been found is enough to definitively determine what caused the contamination, and the investigation is ongoing, Biondolillo said.
Meanwhile, Patrick's moves to increase oversight at the state's 25 compounding pharmacies have already started.
The first of the unannounced inspections, to take place at least annually, was done on Tuesday, health department spokesman Alec Loftus said. He wouldn't give the inspected facility's name and said the results are being reviewed.
Patrick said compounding pharmacies will now be required to file annual compliance reports that could help regulators determine if they are acting as manufacturers.
Associated Press reporter Bob Salsberg contributed to this report.