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Hospira adds $60m to Rocky Mount's turnaround in lawsuit settlement

Dan Stanton

By Dan Stanton+

Last updated on 31-Mar-2014 at 12:42 GMT2014-03-31T12:42:14Z

Hospira agrees to pay $60m to settle lawsuit against actions at Rocky Mount, North Carolina
Hospira agrees to pay $60m to settle lawsuit against actions at Rocky Mount, North Carolina

Hospira has agreed to pay $60m (€44m) to settle a lawsuit related to manufacturing and quality control deficiencies at its Rocky Mount facility, which is already subject to a $200m remediation programme.

The plant in North Carolina has been the focus of Hospira’s quality issues, receiving a Warning Letter form the US Food and Drug Administration (FDA) in 2010 to which it is still subjected.

Hospira has pumped $200m into the site and hopes the plant to be given the regulatory all clear later this year but must first pay a further $60m to settle a lawsuit from a group of stakeholders who accused the company of concealing quality issues at the plant, artificially inflating the share price.

According to papers filed by the US District Court for the Northern District of Illinois last week, the company “concealed significant deteriorating conditions, manufacturing and quality control deficiencies at its largest manufacturing facility located in Rocky Mount, North Carolina, and the costly effects of these deficiencies on production capacity.”

It continued: “The Complaint also alleges that Defendants misrepresented the effectiveness of an ‘optimization’ initiative which reduced quality control efforts and delayed and increased the cost of necessary remediation at Rocky Mount.”

Such “allegedly false and misleading statements artificially inflated the price of Hospira common shares,” the Court Papers added, during the period of February 2010 to October 2011.

Hospira agreed to pay $60m last Thursday to settle and dismiss the Action, but denied it had violated any laws, maintaining its “conduct was at all times proper and in compliance with all applicable provisions of law,” the papers stated.

Swamp Drained, Gators still Looming

An inspection at Rocky Mount in February 2013 ended with a Form 483 with 20 observations, but Hospira has been upbeat in the last six months claiming the end of its troubles is in sight.

Last month CEO Michael Ball told investors during an end of year conference call the plant had been updated by the FDA to ‘voluntary action indicated’ status, though there may be a few problems still holding full clearance back:

“I never say never in terms of the gators but I think we’ve got the swamp drained. There might be one or two hiding deep in the mud but I think we’ve pretty much dug most of the stuff out.”

However, earlier this month the firm received a Warning Letter related to an inspection of device-related matters at the site.

According to the letter dated March 7 , drug device products failed the Quality System (QS) requirement of cGMP regulations. Such products as Sterile Empty PCA vials and Injectors have been subject to voluntary recalls and shortages, due to manufacturing delays

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