Hospira Settles Class-Action Lawsuit for $60 Million

A judge in the U.S. District Court for the Northern District of Illinois conditionally approved the deal Mar. 30 and scheduled an August hearing to finalize the agreement.

The lawsuit, filed in November 2011, alleged that Hospira deceived investors in 2009 when it announced Project Fuel, an initiative aimed at streamlining the company’s processes and practices to boost profitability.

The company failed to disclose that it was mired in manufacturing quality problems and “a host of design failures in its critical infusion pump business,” the complaint says.

Things reached a tipping point in October 2011 when Hospira announced disappointing third-quarter results and slashed its full-year guidance due to production problems at its Rocky Mount, N.C., plant. The facility had received a warning letter in 2010 for lax quality control related to particulate matter found in certain emulsion products.

While the company disclosed FDA warning letters, Hospira failed to share its inability to address the problems identified in those warnings, the lawsuit says.

The plaintiffs further alleged that Hospira misstated its revenue guidance for 2010 and 2011, and that the company’s stock price was inflated from March 2009 to October 2011.

Companywide remediation efforts have cost the generic injectable drugmaker more than $458 million since it was first warned by the FDA in 2010.

Hospira plans to fund the settlement through its insurance, spokesman Daniel Rosenberg said.

The drugmaker denied the allegations in the settlement agreement and emphasized that the deal was not an admission of guilt.

“We agreed to settle the lawsuit in order to avoid further risk and disruption to our business,” Rosenberg said.

Hospira has touted quality improvements recently, noting that the FDA upgraded Rocky Mount’s status so that new products can be manufactured there. The facility must have a successful FDA inspection for the 2010 warning letter to be closed, and that inspection could come later this year.

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