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UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

LORI RAVENSCROFT GEARE and 

ROBERT J. CASEY, II, derivatively for the 

benefit of Hospira, Inc., 

 Plaintiffs, 

vs 

CHRISTOPHER B. BEGLEY, F. MICHAEL 

BALL, THOMAS E. WERNER, SUMANT 

RAMACHANDRA, IRVING W. BAILEY, II, 

JACQUE J. SOKOLOV, BARBARA L. 

BOWLES, ROGER W. HALE, JOHN C. 

STALEY, CONNIE R. CURRAN, HEINO 

VON PRONDZYNSKI, MARK F. 

WHEELER, TERRENCE C. KEARNEY, 

RONALD A. MATRICARIA, and BRIAN J. 

SMITH, 

 Defendants, 

and 

HOSPIRA, INC., a Delaware Corporation 

 Nominal Defendant. 

Case No. 11-cv-09074 (JJT) 

CONSOLIDATED VERIFIED 

SHAREHOLDER DERIVATIVE 

COMPLAINT 

Plaintiffs Lori Ravenscroft Geare ("Geare") and Robert J. Casey, II ("Casey") 

(collectively, "Plaintiffs"), by and through their undersigned counsel, allege upon personal 

knowledge as to themselves and their own acts, and as to all other matters upon information and 

belief, as follows: 

NATURE OF THE ACTION 

1. This is a shareholder derivative action brought on behalf of Hospira, Inc. 

("Hospira" or the "Company") against certain of its current and former officers and directors for 

breach of fiduciary duties, corporate waste, and unjust enrichment, all of which have caused and 
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continue to cause substantial damage to the Company. Plaintiffs are long-time Hospira 

shareholders. 

2. Hospira is a public company that serves as a contract manufacturer for injectable 

drugs used in hospitals, dialysis clinics, and outpatient settings. Because Hospira's officers and 

directors are entrusted with protecting public health and safety, they must take every reasonable 

measure to ensure that the Company's short-term concerns do not adversely impact the safety of 

its products. As detailed herein, however, Hospira's fiduciaries failed miserably in their duties. 

Beginning in early 2009, Hospira's Board of Directors (the "Board") approved a reckless costcutting program called "Project Fuel" without a sufficient review of the impact this program 

would have on the Company's quality controls and compliance with mandatory regulations. 

During Project Fuel's thirty-two month existence, necessary safety measures were ignored, key 

quality control personnel were cut, adulterated products were shipped out, and plants already in 

need of a major overhaul to meet federal requirements deteriorated. Even increased scrutiny 

from the U.S. Food and Drug Administration ("FDA"), including the receipt of two "Warning 

Letters" from the FDA that discussed the Company's deficient quality controls and serious 

violations of FDA regulations and Current Good Manufacturing Practices ("CGMP"), could not 

spur the Individual Defendants (as defined herein) to act in accordance with their duties. Rather, 

the Individual Defendants continued to promote Project Fuel, while making or causing the 

Company to make improper statements that, among other things, failed to disclose the extensive 

quality control issues that undermined the viability of the supposed financial savings that could 

be generated by Project Fuel. The profitability promised by the Project Fuel campaign was 

actually nothing more than a façade, intended to divert attention from the true health of the 

Company. 
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3. The key impetus for this wrongdoing was the Individual Defendants' frustration 

with Hospira's stock price "stagnation." Hospira began its corporate life as a public company 

when it was "spun off" from Abbott Laboratories ("Abbott") in 2004 under the leadership of 

then-Chief Executive Officer ("CEO"), defendant Christopher B. Begley ("Begley"). From 2004 

through 2008, revenues soared from $2.4 billion to $3.6 billion. Likewise, earnings were robust. 

Hospira ended 2008 with working capital (current assets minus current liabilities) at $1.1 billion. 

In the first quarter of 2009, business slowed somewhat due to the economic recession affecting 

all companies, but revenues and earnings were still healthy. Hospira's stock price, however, hit 

new lows due to market factors. 

4. In an attempt to boost the stock price, in or about January 2009, the Individual 

Defendants adopted the aforementioned Project Fuel program to slash spending throughout the 

Company and "fuel" growth. The two-year program was designed to eliminate 1,400 jobs, and 

result in costs savings of $110 to $140 million per year. But these cost-cutting initiatives were 

disastrous to Hospira's controls over product quality and safety, which were already severely 

deficient even prior to the implementation of Project Fuel. 

5. As fiduciaries charged with adhering to the laws concerning safe manufacturing 

practices, it was incumbent on the Individual Defendants to determine on a fully-informed basis 

that Hospira was in substantial compliance with all FDA rules and regulations at the time it 

adopted such a severe cost-cutting program, that the contemplated cuts would not adversely 

affect mandatory quality controls and safety measures and that the Company maintained 

sufficient quality controls and adhered to mandatory FDA regulations throughout the existence 

of Project Fuel. Unfortunately, it later became clear that the Company's controls over "product 

quality and safety" were severely lacking, and had been since at least 2007. 
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6. During the course of Project Fuel, the FDA expressed increasing concern to 

Hospira about its lack of legal compliance, its lack of adherence to necessary safety procedures, 

and to particulate matter found in medicinal products Hospira manufactured. In August 2009 

and April 2010, the FDA issued Warning Letters which contained findings that would have 

alarmed any fiduciary acting in good faith.1 Despite the Individual Defendants' heightened and 

specialized duties to identify and address Hospira's regulatory and compliance risks, however, 

these fiduciaries consciously disregarded the continuous and pervasive misconduct for ten 

consecutive financial quarters. The Individual Defendants had already committed to Project 

Fuel, and refused to take immediate and comprehensive remedial actions which could undo all of 

the savings Project Fuel had achieved. Instead, the Individual Defendants caused or allowed 

Hospira to downplay its regulatory issues (and to exaggerate the steps taken to address those 

issues) so that the stock price could remain high. Meanwhile, the Board authorized Hospira to 

repurchase hundreds of millions of dollars of stock at inflated prices (following receipt of the 

Warning Letters), knowing that Hospira had not fully assessed or addressed its regulatory 

problems.2

 Further, certain of the Individual Defendants took advantage of the artificial spike in 

 

1

 FDA inspections may result in: (i) a clean bill of health; (ii) observations as to significant 

problems that should be remedied (known as a Form 483); or (iii) a Warning Letter. A Warning 

Letter reflects a finding that a company has significantly violated FDA regulations. The 

Warning Letter identifies the violation, such as poor manufacturing practices. The letter also 

makes clear that the company must correct the problem and provides directions and a timeframe 

for the company to inform the FDA of its plans for correction. In the same month the FDA 

issued its second Warning Letter to Hospira, the Company recalled two drugs – Propofol, an 

anesthetic, and Liposyn, an intravenous nutritional product – for a second time in six months 

because of manufacturing defects. The drugs had been contaminated by particulates during 

manufacturing. These recalls, however, did not spur the Board to undertake a Company-wide 

review of production methods. 

2

 Based on the price to which Hospira stock fell once adverse material facts were known, this 

reckless repurchase plan damaged Hospira in the amount of roughly $140 million.
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Hospira's stock by collectively selling over $54 million worth of their personally held Hospira 

stock on the basis of non-public information. 

7. While Project Fuel allowed Hospira to claim improved financial results, which 

greatly boosted its stock price, this was just a mirage. By September 2011, Hospira could no 

longer hide the disastrous deterioration of its quality and safety programs.3 At that point, Project 

Fuel was undone, and the Company admitted that emergency remediation measures were needed. 

In fact, the Individual Defendants disclosed the serious extent of their mismanagement by also 

revealing that an ongoing FDA investigation was the cause for a production slowdown affecting 

approximately 25% of the Company's sales. Hospira's stock price plummeted. Remediation 

costs were estimated to reach as high as $375 million.4

 At the end of the day, the actions of 

Hospira's officers and directors have left Hospira with these staggering remediation costs, and 

struggling with FDA issues, plant slowdowns, contract penalties, and repeated product recalls. 

Hospira also faces a securities fraud class action lawsuit,5 which may cost the Company 

 

3

 The "Relevant Period" extends to at least October 2011 because it appears that even to the 

present time Hospira is not able to ensure that its plants are producing medicinal products in a 

safe manner. As discussed infra, on August 23, 2012, Hospira received yet another Warning 

Letter from the FDA regarding production of "adulterated" products at its Costa Rica plant and 

noting that Hospira was in violation of federal regulations due to its: "Failure to identify the 

actions needed to correct and prevent recurrence of nonconforming product and other quality 

problems...." This comes on the heels of a July 16, 2012 recall of four cancer drugs. As Reuters

reported: "Hospira Inc said it has issued a nationwide recall of four of its injectable cancer drugs 

because of particles embedded in the glass at the neck of the vial.... Injury could result if the 

solution were injected into a patient, the FDA said. Signs and symptoms might include bleeding, 

bruising, inflammation, itching, rash, chest pain and respiratory symptoms." Yet another drug 

was recalled on August 16, 2012, due to an "overdose risk." 

4

 As of September 30, 2011, cash on Hospira's balance sheet only amounted to $527 million. 

Thus, the announced remediation efforts were projected to consume up to 70% of Hospira's thenavailable cash. 

5

 The securities fraud class action is entitled City of Sterling Heights General Employees' Ret. 

Sys. v. Hospira, Inc., et al., Case No. 11-cv-08332-AJS ("Federal Securities Action"). As 

alleged below, Hospira has a claim for contribution over and against certain of the Individual 
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hundreds of millions in damages (or lead it to pay out a significant sum in settlement). In 

addition, Hospira faces a broad FDA review, which may lead to an onerous Consent Order. 

Such a Consent Order would likely involve significant further costs and put Hospira under third 

party supervision for a number of years. 

8. Indeed, the situation was so bad that, in January 2012, Hospira's CEO at an 

industry healthcare conference analogized remediation efforts to "draining the swamp." As 

many as 150 third-party consultants needed to be hired to help Hospira repair the damage Project 

Fuel had done. Even as recently as August 1, 2012, Hospira's CEO stated in a conference call 

that "additional issues keep bubbling up" and "much work remains to be done." Events 

throughout 2012, including recalls and a new Warning Letter from the FDA regarding the 

production of "adulterated" products at Hospira's Costa Rica plant, evidence the magnitude of 

Hospira's compliance issues. 

9. Project Fuel caused damage from which Hospira may not recover for many years, 

if ever. Hospira's stock price was considerably boosted by Project Fuel (and the concealment of 

Hospira's true problems) to a high of roughly $57 per share. It now trades at roughly $35 per 

share. Indeed, the two-year stock performance of Hospira's shares has been dismal: a decline of 

approximately 40% between September 21, 2010 and September 12, 2012, during which other 

companies in the Drug Delivery & Accessories sector have experienced very substantial stock 

price growth. Worse, there is no sign of a recovery for Hospira. 

10. Because it would be grossly unfair for Hospira to suffer all the damages incurred 

as a result of the Individual Defendants' wrongdoing, Plaintiffs seek to recover these damages 

 

Defendants (the Class Action Individual Defendants, as defined below), under section 10(b) of 

the Securities Exchange Act of 1934 (the "Exchange Act") by way of section 21D of the Private 

Securities Litigation Reform Act, 15 U.S.C. §78u-4, and against all of the Individual Defendants 

under state law for breach of fiduciary duty. 
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derivatively from the responsible fiduciaries. Such a derivative recovery will serve the dual 

goals of compensation and deterrence.6

 This derivative action may be prosecuted by Plaintiffs 

because Plaintiffs adequately allege that that the majority of the Board failed to exercise 

reasonable business judgment and/or face a substantial likelihood of liability – standards that are 

sufficient to survive the preliminary showing that making a demand on the Board would have 

been a futile and useless act. 

JURISDICTION AND VENUE 

11. This Court has jurisdiction over this action pursuant to 28 U.S.C §1331 (federal 

question jurisdiction) insofar as this action arises under both section 10(b) of the Exchange Act, 

15 U.S.C. §78j(b), pursuant to which there is a private right of action for contribution, and 

section 21D of the Exchange Act, 15 U.S.C. §78u-4, which governs the application of any 

private right of action for contribution asserted pursuant to the Exchange Act. 

12. Prior to Congress having enacted an express provision for contribution under 

section 21D of the Exchange Act, the United States Supreme Court recognized that a federal 

cause of action existed for contribution pursuant to section 10(b) of the Exchange Act and U.S. 

Securities and Exchange Commission ("SEC") Rule 10b-5. See Musick, Peeler & Garrnett v. 

Employers Ins. of Wausau, 508 U.S. 286 (1993). Thus, pursuant to federal statutory law and 

Supreme Court authority, this Court has original federal question jurisdiction over the federal 

contribution claim alleged herein. 

13. In addition, to the extent Hospira was caused to repurchase its own securities at 

fraudulently inflated prices, it has a claim under section 10(b) of the Exchange Act for resultant 

damages, and such claim is asserted herein. 

 

6

 In addition to the financial harm and the loss of management credibility Hospira has endured, 

the Company has lost its sterling reputation as manufacturer of products of impeccable quality. 
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14. This Court also has subject matter jurisdiction over the pendent state law claims 

asserted herein pursuant to 28 U.S.C. §1367 (supplemental jurisdiction), since this statute 

provides that the district court has supplemental jurisdiction over all other claims where, as here, 

they are so related to claims in the action within the original jurisdiction of the Court, that they 

form part of the same case or controversy. 

15. This Court also has jurisdiction over all claims asserted herein pursuant to 28 

U.S.C. §1332 in that complete diversity exists between Plaintiff Casey and each of the 

defendants and the amount in controversy exceeds $75,000 exclusive of interests and costs. 

16. This action is not a collusive one designed to confer jurisdiction on a court of the 

United States which it would not otherwise have. 

17. The Court has personal jurisdiction over each defendant because each either is a 

corporation that conducts business in and maintains operations in this District or is an individual 

who either is present in this District for jurisdictional purposes or has sufficient minimum 

contacts with this District as to render the exercise of jurisdiction by this Court permissible under 

traditional notions of fair play and substantial justice. 

18. Venue is proper in this judicial district pursuant to 28 U.S.C. §1391 because acts 

and offenses pertinent to the causes of action stated herein were committed in part in this 

jurisdiction. 

THE PARTIES

Plaintiffs 

19. Plaintiff Geare was a shareholder of Hospira at the time of the wrongdoing 

complained of, has continuously been a Hospira shareholder since the Company's 2004 spin off 

from Abbott. Geare is a citizen of Arizona. 
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20. Plaintiff Casey was a shareholder of Hospira at the time of the wrongdoing 

complained of, has continuously been a Hospira shareholder since May 4, 2004. Casey is a 

citizen of Pennsylvania. 

Nominal Defendant 

21. Nominal Defendant Hospira is a Delaware corporation with its principal executive 

offices located at 275 North Field Drive, Lake Forest, Illinois. Hospira a global specialty 

pharmaceutical and medication delivery company that develops, manufactures, and markets 

products that help improve the safety, cost, and productivity of patient care. Hospira is also the 

world's leading provider of injectable drugs and infusion technologies, with a portfolio ranging 

from generic acute-care and oncology injectables to integrated infusion therapy and medication 

management products. Hospira's products are used by hospitals and alternate site providers, such 

as clinics, home healthcare providers, and long-term care facilities. The Company has thirteen 

manufacturing facilities, including facilities in Rocky Mount ("Rocky Mount") and Clayton, 

North Carolina ("Clayton"), Morgan Hill, California ("Morgan Hill"), and Costa Rica. Rocky 

Mount is one of its largest facilities, accounting for about 25% of the Company's annual 

revenues. 

Individual Defendants 

22. Defendant Begley was Hospira's Executive Chairman of the Board from March 

2011 to January 2012 and a Hospira director from 2004 to January 2012. Begley was also 

Hospira's CEO from 2004 to March 2011 and Chairman of the Board from May 2007 to March 

2011. Begley was a member of Hospira's Science, Technology and Quality Committee from at 

least March 2008 to at least December 2011. As the Company's founding CEO, Begley oversaw 

Hospira's 2004 spin-off from Abbott. Begley either knowingly, recklessly, or in conscious 

disregard of the truth: (i) made or authorized improper statements regarding the nature of the 
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Company's remediation efforts in response to the FDA investigation; and (ii) failed to maintain 

adequate internal controls concerning Hospira's manufacturing practices and the accuracy of the 

public disclosures regarding the extent of the remediation necessary to fix deficiencies in the 

Company's manufacturing process. While in possession of material, non-public information 

concerning Hospira's jeopardized business health, Begley sold 386,112 shares of his stock for 

$22,008,384 in proceeds. Hospira paid Begley the following compensation as an executive: 

Year Salary 

Option 

Awards 

Stock 

Awards 

Non-Equity 

Incentive Plan 

Compensation

Change 

in 

Pension 

Value 

All Other 

Compensation Total 

2010 $1,086,538 $1,999,998 $3,000,001 $1,189,759 $486,866 $76,057 $7,839,219

2009 $1,050,000 $1,422,353 $2,478,790 $2,100,000 $420,374 $94,500 $7,566,017

Begley is a citizen of Illinois. 

23. Defendant F. Michael Ball ("Ball") is the CEO and a director of Hospira. Ball 

was appointed as CEO and director in March 2011, succeeding the Company's founding CEO, 

defendant Begley. Ball is also a member of Hospira's Science, Technology and Quality 

Committee and has been since March 2011. Ball either knowingly, recklessly, or in conscious 

disregard of the truth: (i) made or authorized improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation; and (ii) failed to maintain 

adequate internal controls concerning Hospira's manufacturing practices and the accuracy of the 

public disclosures regarding the extent of the remediation necessary to fix deficiencies in the 

Company's manufacturing process. Ball is a citizen of Illinois. 

24. Defendant Thomas E. Werner ("Werner") is Senior Vice President, Finance, and 

the Chief Operating Officer ("COO") of Hospira. Werner either knowingly, recklessly, or in 

conscious disregard of the truth: (i) made or authorized improper statements regarding the nature 

of the Company's remediation efforts in response to the FDA investigation; and (ii) failed to 
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maintain adequate internal controls concerning Hospira's manufacturing practices and the 

accuracy of the public disclosures regarding the extent of the remediation necessary to fix 

deficiencies in the Company's manufacturing process. While in possession of material, nonpublic information concerning Hospira's jeopardized business health, Werner sold 85,849 shares 

of his stock for $4,901,269.76 in proceeds. Hospira paid Werner the following compensation as 

an executive: 

Year Salary 

Option 

Awards 

Stock 

Awards 

Non-Equity 

Incentive Plan 

Compensation

All Other 

Compensation Total 

2010 $444,999 $700,013 $707,484 $311,856 $30,960 $2,195,312

2009 $445,000 $559,331 $648,231 $712,000 $25,673 $2,390,235

Werner is a citizen of Illinois. 

25. Defendant Sumant Ramachandra ("Ramachandra") is Hospira's Senior Vice 

President, Research & Development, Medical and Regulatory Affairs and Chief Scientific 

Officer and has been since July 2008. Ramachandra either knowingly, recklessly, or in 

conscious disregard of the truth failed to maintain adequate internal controls concerning 

Hospira's manufacturing practices and the accuracy of the public disclosures regarding the extent 

of the remediation necessary to fix deficiencies in the Company's manufacturing process. While 

in possession of material, non-public information concerning Hospira's jeopardized business 

health, Ramachandra sold 99,462 shares of his stock for $5,334,912.92 in proceeds. Hospira 

paid Ramachandra the following compensation as an executive: 

Year Salary 

Option 

Awards 

Stock 

Awards 

Non-Equity 

Incentive Plan 

Compensation

All Other 

Compensation Total 

2010 $485,596 $1,000,006 $1,000,000 $340,306 $33,991 $2,859,899

2009 $475,000 $745,879 $866,182 $760,000 $210,409 $3,057,470

Ramachandra is a citizen of Illinois. 
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26. Defendant Irving W. Bailey, II ("Bailey") has served as a Hospira director since 

the Company's spin-off from Abbott in 2004. Bailey was also Hospira's Lead Director from 

2007 to May 2011. Bailey is a member of Hospira's Audit Committee and has been since at least 

December 2011 and a member of the Science, Technology and Quality Committee and has been 

since at least March 2011. Bailey was also a member of Hospira's Governance and Public Policy 

Committee from at least March 2008 to at least March 2011. Additionally, Bailey served as a 

Managing Director of Chrysalis Ventures, a private equity management firm, from June 2001 to 

January 2005, and has served as a Senior Advisor to Chrysalis Ventures since January 2005. 

Bailey also served as President of Bailey Capital Corporation, a private equity management firm, 

from January 1998 to June 2001, and as CEO of Providian Corporation, an insurance and 

diversified financial services company, from 1988 to 1997. Bailey also serves as Vice Chairman 

of Aegon, N.V. and as a director of Computer Sciences Corporation. Bailey knowingly or 

recklessly or in conscious disregard of the truth: (i) made or authorized improper statements 

regarding the nature of the Company's remediation efforts in response to the FDA investigation; 

(ii) failed to maintain adequate internal controls concerning Hospira's manufacturing practices 

and the accuracy of the public disclosures regarding the extent of the remediation necessary to 

fix deficiencies in the Company's manufacturing process; and (iii) reviewed and approved 

improper statements regarding the extent of the Company's manufacturing deficiencies and the 

remediation necessary to get manufacturing operations up to the FDA's CGMP requirement. 

Hospira paid Bailey the following compensation as a director: 

Year Fees Paid in Cash Stock Awards Total 

2010 $125,125 $150,000 $275,125 

2009 $87,000 $150,000 $237,000 

Bailey is a citizen of Florida. 
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27. Defendant Jacque J. Sokolov ("Sokolov") has served as a Hospira director since 

the Company's spin-off from Abbott in 2004. Sokolov is also a member of Hospira's Science, 

Technology and Quality Committee and has been since at least March 2008 and was Chairman 

of that committee from at least March 2008 to at least March 2010. Additionally, Sokolov has 

served since 1997 as the Chairman and Managing Partner of SSB Solutions, Inc., a national 

healthcare management consulting, project development and investment firm. From 1987 to 

1992, Sokolov served as the Vice President of Healthcare for Southern California Edison. In 

1992, Sokolov became CEO of Advanced Health Plans Inc., which was acquired in 1994 by 

Coastal Physicians Group Inc. From 1994 to 1997, Sokolov served as Chairman of the Board, 

Chairman of the Executive Committee, and Chairman of the Management Action Committee of 

Coastal Physician Group, Inc., which later became PhyAmerica Physician Group, Inc. Sokolov 

also serves on the board of directors of MedCath. Sokolov knowingly or recklessly or in 

conscious disregard of the truth: (i) made or authorized improper statements regarding the nature 

of the Company's remediation efforts in response to the FDA investigation; and (ii) failed to 

maintain adequate internal controls concerning Hospira's manufacturing practices and the 

accuracy of the public disclosures regarding the extent of the remediation necessary to fix 

deficiencies in the Company's manufacturing process. Hospira paid Sokolov the following 

compensation as a director: 

Year 

Fees Paid in 

Cash 

Stock 

Awards 

All Other 

Compensation Total 

2010 $86,688 $150,000 $1,000 $237,688 

2009 $82,500 $150,000 - $232,500 

Sokolov is a citizen of California. 

28. Defendant Barbara L. Bowles ("Bowles") has served as a Hospira director since 

her election to the Board in May 2008. Bowles is also Chair of Hospira's Audit Committee and 
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has been since at least March 2011 and a member of that committee since at least March 2009. 

Bowles is a member of Hospira's Governance and Public Policy Committee and a member of the 

Science, Technology and Quality Committee and has been since at least March 2011. 

Additionally, Bowles served as the Vice Chair of Profit Investment Management, an equity 

investment advisory firm, from January 2006 until retiring on December 31, 2007. Bowles was 

also the founder and served as Chairman (2000 to 2006) and CEO (1989 to 2005) of the 

Kenwood Group, Inc., an equity investment firm until The Kenwood Group was acquired by 

Profit Investment Management. From 1984 to 1989, Bowles was Corporate Vice President and 

Director, Investor Relations, for Kraft, Inc., a diversified packaged food and beverage company. 

Bowles also serves as a director of Wisconsin Energy Corporation, Children's Memorial 

Hospital, the Chicago Urban League, the Museum of Science and Industry, Chicago, and Hyde 

Park Bank. Bowles is a trustee of Fisk University and also serves on the University of Chicago, 

Booth School of Business Advisory Council. Within the past five years, Bowles also has served 

as a director of Black & Decker Corporation (from 1993 to 2010), Dollar General Corporation 

(from 2000 to 2007), and Georgia Pacific Corporation (from 2000 to 2005). Bowles knowingly 

or recklessly or in conscious disregard of the truth: (i) made or authorized improper statements 

regarding the nature of the Company's remediation efforts in response to the FDA investigation; 

(ii) failed to maintain adequate internal controls concerning Hospira's manufacturing practices 

and the accuracy of the public disclosures regarding the extent of the remediation necessary to 

fix deficiencies in the Company's manufacturing process; and (iii) reviewed and approved 

improper statements regarding the extent of the Company's manufacturing deficiencies and the 

remediation necessary to get manufacturing operations up to the FDA's CGMP requirement. 

Hospira paid Bowles the following compensation as a director: 
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Year 

Fees Paid in 

Cash 

Stock 

Awards Total 

2010 $95,438 $150,000 $245,438 

2009 $72,000 $150,000 $222,000 

Bowles is a citizen of Illinois. 

29. Defendant Roger W. Hale ("Hale") has served as a Hospira director since his 

election to the Board in October 2006. Hale is also a member of Hospira's Governance and 

Public Policy Committee and has been since at least March 2008 and a member of the Science, 

Technology and Quality Committee and has been since at least March 2011. Additionally, Hale 

has served as Chairman of the Board and CEO of LG&E Energy Corporation, a diversified 

energy services company, from August 1990 until retiring in April 2001. Prior to joining LG&E 

Energy Corporation, Hale was Executive Vice President of BellSouth Corporation, a 

communications services company. From 1966 to 1986, Hale held several executive positions 

with AT&T Co., a communications services company, including Vice President, Southern 

Region from 1983 to 1986. Hale is also a director of Ashland, Inc. Within the past five years, 

Hale also has served as a director of H&R Block, Inc. (from 1991 to 2008). Hale knowingly or 

recklessly or in conscious disregard of the truth: (i) made or authorized improper statements 

regarding the nature of the Company's remediation efforts in response to the FDA investigation; 

and (ii) failed to maintain adequate internal controls concerning Hospira's manufacturing 

practices and the accuracy of the public disclosures regarding the extent of the remediation 

necessary to fix deficiencies in the Company's manufacturing process. Hospira paid Hale the 

following compensation as a director: 

Year 

Fees Paid in 

Cash 

Stock 

Awards Total 

2010 $92,000 $150,000 $242,000 

2009 $68,500 $150,000 $218,500 

Hale is a citizen of Kentucky. 
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30. Defendant John C. Staley ("Staley") has served as a Hospira director since the 

Company's spin-off from Abbott in 2004, and has served as Lead Director since May 2011 and 

Chairman since January 2012. Staley is also a member of Hospira's Governance and Public 

Policy Committee and has been since at least December 2011 and a member of the Science, 

Technology and Quality Committee and has been since at least March 2011. Staley was a 

member of Hospira's Audit Committee from at least March 2008 to March 2011 and was 

Chairman of that committee from at least March 2008 to at least March 2010. Additionally, 

Staley served as the Managing Partner of the Lake Michigan Area of Ernst & Young LLP, a 

public accounting firm, a position that he held from 1985 to his retirement in June 2001. Staley 

also serves as a director of eLoyalty Corporation and Nicor Inc. Staley is also a member of, and 

the former Chairman of, the Board of Trustees of DePaul University. Within the past five years, 

Staley has also served as a director of Centerpoint Corporation (from 2002 to 2006). Staley 

knowingly or recklessly or in conscious disregard of the truth: (i) made or authorized improper 

statements regarding the nature of the Company's remediation efforts in response to the FDA 

investigation; (ii) failed to maintain adequate internal controls concerning Hospira's 

manufacturing practices and the accuracy of the public disclosures regarding the extent of the 

remediation necessary to fix deficiencies in the Company's manufacturing process; and (iii) 

reviewed and approved improper statements regarding the extent of the Company's 

manufacturing deficiencies and the remediation necessary to get manufacturing operations up to 

the FDA's CGMP requirement. Hospira paid Staley the following compensation as a director: 

Year Fees Paid in Cash Stock Awards Total 

2010 $90,854 $150,000 $240,854 

2009 $84,000 $150,000 $234,000 

Staley is a citizen of Florida. 
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31. Defendant Connie R. Curran ("Curran") has served as a Hospira director since the 

Company's spin-off from Abbott in 2004. Curran is also Chair of Hospira's Governance and 

Public Policy Committee and a member of the Science, Technology and Quality Committee and 

has been since at least March 2008. Curran was a member of Hospira's Audit Committee from at 

least March 2008 to at least March 2011. Additionally, Curran has served as the president of 

Curran Associates, a healthcare consulting firm, since July 2006. Curran also previously served 

as the Executive Director of C-Change, formerly the National Dialogue on Cancer, a health 

advocacy organization, from 2003 to July 2006. From 1995 to 2000, Curran served as President 

and CEO of CurranCare, LLC, a healthcare consulting company. Upon the acquisition of 

CurranCare by Cardinal Health Consulting Services in November 2000, Curran served as 

President of Cardinal Health Consulting Services, a consulting company with expertise in 

surgical services, hospital operations and case management, and home care, until February 2002. 

Curran has previously served as Vice President of the American Hospital Association and Dean 

of the College of Nursing at the Medical College of Wisconsin. Curran also serves as a director 

of DeVry, Inc. and Volcano Corporation. Within the past five years, Curran also has served as a 

director of CardioDynamics International Corp. (from 2000 to 2006) and IDX Systems 

Corporation (from 2002 to 2006). Curran knowingly or recklessly or in conscious disregard of 

the truth: (i) made or authorized improper statements regarding the nature of the Company's 

remediation efforts in response to the FDA investigation; (ii) failed to maintain adequate internal 

controls concerning Hospira's manufacturing practices and the accuracy of the public disclosures 

regarding the extent of the remediation necessary to fix deficiencies in the Company's 

manufacturing process; and (iii) reviewed and approved improper statements regarding the 

extent of the Company's manufacturing deficiencies and the remediation necessary to get 
- 18 - 

manufacturing operations up to the FDA's CGMP requirement. Hospira paid Curran the 

following compensation as a director: 

Year 

Fees Paid in 

Cash 

Stock 

Awards 

All Other 

Compensation Total 

2010 $106,688 $150,000 $2,000 $258,688 

2009 $90,500 $150,000 - $240,500 

Curran is a citizen of California. 

32. Defendant Heino von Prondzynski ("von Prondzynski") has served as a Hospira 

director since March 2009. von Prondzynski is also a member of Hospira's Science, Technology 

and Quality Committee and has been since March 2009. Additionally, von Prondzynski has 

served as CEO of Roche Diagnostics and as a member of the Executive Committee of F. 

Hoffman-La Roche Ltd., a Swiss-based healthcare company that develops diagnostic and 

therapeutic products, from early 2000 to 2005, retiring from Roche at the end of 2006. From 

1996 to 2000, von Prondzynski held several executive positions at Chiron Corporation, a 

multinational biotechnology firm that develops biopharmaceuticals, vaccines, and blood testing 

products, and from 1976 to 1996 at Bayer AG, a German-based maker of healthcare products, 

specialty materials, and agricultural products. von Prondzynski also serves as chairman of the 

board of Nobel Biocare Holding AG, Switzerland. von Prondzynski also serves on the board of 

Qiagen NV and Koninklijke Philips Electronics NV. Within the past five years, von 

Prondzynski also has served as a director of Epigenomics AG (from 2007 to 2010). von 

Prondzynski knowingly or recklessly or in conscious disregard of the truth: (i) made or 

authorized improper statements regarding the nature of the Company's remediation efforts in 

response to the FDA investigation; and (ii) failed to maintain adequate internal controls 

concerning Hospira's manufacturing practices and the accuracy of the public disclosures 
- 19 - 

regarding the extent of the remediation necessary to fix deficiencies in the Company's 

manufacturing process. Hospira paid von Prondzynski the following compensation as a director: 

Year 

Fees Paid in 

Cash Stock Awards Total 

2010 $90,000 $150,000 $240,000 

2009 $59,250 $162,492 $221,742 

von Prondzynski is a citizen of Switzerland. 

33. Defendant Mark F. Wheeler ("Wheeler") has served as a Hospira director since 

his election to the Board at the 2006 annual meeting. Wheeler is also Chairman of Hospira's 

Science, Technology and Quality Committee and has been since at least March 2011 and a 

member of that committee and has been since at least March 2008. Wheeler is a member of 

Hospira's Audit Committee and has been since at least March 2008. Since September 2010, 

Wheeler has also served as the System Vice President, Chief Information Officer, and Chief 

Medical Information Officer for PeaceHealth, an integrated delivery network of hospitals in the 

Pacific Northwest. From January 2007 to September 2010, Wheeler served as the Director of 

Clinical Informatics for PeaceHealth. Wheeler previously served as Acting Vice President 

Engineering, Centricity Enterprise Business Unit of General Electric Company, a diversified 

technology, media, and financial services company, from February 2006 to January 2007. 

Wheeler also served as Chief Technical Architect of IDX Systems Corporation, a healthcare 

information technology services provider, from 1997 until December 2005, when IDX was 

acquired by General Electric, and served on IDX's board of directors from 1999 through 2005. 

Wheeler knowingly or recklessly or in conscious disregard of the truth: (i) made or authorized 

improper statements regarding the nature of the Company's remediation efforts in response to the 

FDA investigation; (ii) failed to maintain adequate internal controls concerning Hospira's 

manufacturing practices and the accuracy of the public disclosures regarding the extent of the 
- 20 - 

remediation necessary to fix deficiencies in the Company's manufacturing process; and (iii) 

reviewed and approved improper statements regarding the extent of the Company's 

manufacturing deficiencies and the remediation necessary to get manufacturing operations up to 

the FDA's CGMP requirement. Hospira paid Wheeler the following compensation as a director: 

Year 

Fees Paid in 

Cash 

Stock 

Awards Total 

2010 $96,063 $150,000 $246,063 

2009 $81,500 $150,000 $231,500 

Wheeler is a citizen of Washington. 

34. Defendant Terrence C. Kearney ("Kearney") was Hospira's COO from April 2006 

to January 2011. Kearney was also Hospira's Acting Chief Financial Officer ("CFO") from April 

2006 to August 2006. Kearney either knowingly, recklessly, or in conscious disregard for the 

truth failed to maintain adequate internal controls concerning Hospira's manufacturing practices 

and the accuracy of the public disclosures regarding the extent of the remediation necessary to 

fix deficiencies in the Company's manufacturing process. While in possession of material, nonpublic information concerning Hospira's jeopardized business health, Kearney sold 300,640 

shares of his stock for $17,197,411.42 in proceeds. Hospira paid Kearney the following 

compensation as an executive: 

Year Salary 

Option 

Awards 

Stock 

Awards 

Non-Equity 

Incentive Plan 

Compensation

Change 

in 

Pension 

Value 

All Other 

Compensation Total 

2010 $639,615 $2,740,662 $1,049,990 $448,242 $250,776 $44,773 $5,174,058 

2009 $625,000 $1,419,016 $917,391 $1,000,000 $214,132 $56,250 $4,231,789 

Kearney is a citizen of Illinois. 

35. Defendant Ronald A. Matricaria ("Matricaria") was a Hospira director from 2006 

to June 2010. Matricaria was also a member of Hospira's Science, Technology and Quality 

Committee from at least March 2008 to at least March 2010. Matricaria knowingly or recklessly 
- 21 - 

or in conscious disregard of the truth: (i) made or authorized improper statements regarding the 

nature of the Company's remediation efforts in response to the FDA investigation; and (ii) failed 

to maintain adequate internal controls concerning Hospira's manufacturing practices and the 

accuracy of the public disclosures regarding the extent of the remediation necessary to fix 

deficiencies in the Company's manufacturing process. Hospira paid Matricaria the following 

compensation as a director: 

Year 

Fees Paid in 

Cash 

Stock 

Awards Total 

2010 $45,000 - $45,000 

2009 $82,500 $150,000 $232,500 

Matricaria is a citizen of Arizona. 

36. Defendant Brian J. Smith ("Smith") is Hospira's Senior Vice President, General 

Counsel, and Secretary and has been since 2004. As the Company's attorney, Smith had the 

unique legal knowledge to counsel the Company about its regulatory requirements, including the 

minimum CGMP standards that were ultimately violated. While in possession of material, nonpublic information concerning Hospira's jeopardized business health, Smith sold 80,000 shares 

of his stock for $4.6 million in proceeds. Smith is a citizen of Illinois. 

37. The defendants identified in ¶¶22-25, 34, 36 are referred to herein as the "Officer 

Defendants." The defendants identified in ¶¶22-23, 26-33, 35 are referred to herein as the 

"Director Defendants." The defendants identified in ¶¶26, 28-31 are referred to herein as the 

"Governance and Public Policy Committee Defendants." The defendants identified in ¶¶26, 28, 

30-31, 33 are referred to herein as the "Audit Committee Defendants." The defendants identified 

in ¶¶22-23, 26-33, 35 are referred to herein as the Science, Technology and Quality Committee 

Defendants." The defendants identified in ¶¶22, 24-25, 34, 36 are referred to herein as the 
- 22 - 

"Insider Selling Defendants." Collectively, the defendants identified in ¶¶22-36 are referred to 

herein as the "Individual Defendants." 

THE INDIVIDUAL DEFENDANTS' DUTIES 

Specific Duties in These Circumstances 

38. By reason of their positions as officers, directors, and fiduciaries of Hospira and 

because of their ability to control the business and corporate affairs of the Company, the 

Individual Defendants owe Hospira and its shareholders fiduciary obligations of good faith, 

loyalty, fair dealing, and candor, and were and are required to use their utmost ability to control 

and manage Hospira in a fair, just, honest, legal, and equitable manner and to ensure that the 

Company maintained adequate internal controls. 

39. Certain of the Individual Defendants' duties were heightened through their 

obligations either as executives or members of various Board Committees: 

(a) Defendants Begley and Ball both served as CEOs during the Relevant 

Period. As such, they had the greatest access to non-public information, and significant control 

over Hospira's day-to-day operations, and its long-range plans. They were each required, as 

Hospira's top executives, to ensure compliance with the law, and that all public statements were 

full, truthful and complete, and did not conceal or misrepresent any material information; 

(b) Defendants Bailey, Ball, Begley, Bowles, Curran, Hale, Matricaria, 

Sokolov, Staley, Prondzynski, and Wheeler served on Hospira's Science, Technology and 

Quality Committee during the Relevant Period. This Committee is obligated to ensure adequate 

controls exist as to "product quality and safety." As members of this Committee, each of these 

defendants were required to review the Company's "overall quality strategy and internal quality 

processes [and] the results of, and responses to, product quality and quality system assessments 
- 23 - 

by the Company and external regulators (i.e., the FDA) and other national and international 

regulatory bodies; and ... important product quality and field actions." Given these 

responsibilities, these defendants had intimate knowledge of Hospira's FDA issues and 

compliance deficiencies, yet chose to defer any adequate response until after the completion of 

Project Fuel. In addition, they knowingly or recklessly permitted false statements to be made 

during the Relevant Period, exposing Hospira to huge damages for securities fraud. The Science, 

Technology and Quality Committee met five times per year between 2008 and 2011. 

(c) Defendants Bailey, Bowles, Curran, Staley and Wheeler served on 

Hospira's Audit Committee during the Relevant Period. Their responsibilities as Audit 

Committee members included assisting the Board with respect to its internal controls over "the 

integrity of the Company's financial statements" and "the Company's compliance with legal and 

regulatory requirements." Further, these Audit Committee members were responsible for 

"reviewing and discussing [the Company's] financial statements and financial press releases with 

[the Company's] management." By dint of such responsibilities, these defendants had intimate 

knowledge of Hospira's FDA issues and compliance deficiencies, yet chose to defer any 

adequate remedial response until after the completion of Project Fuel. In addition, they 

knowingly or recklessly permitted false statements to be made during the Relevant Period, 

exposing Hospira to material damages for securities fraud. The Audit Committee met eleven 

times, twelve times, eleven times, and twelve times, in 2008, 2009, 2010, and 2011, respectively. 

(d) Defendants Bailey, Bowles, Curran, Hale and Staley served on Hospira's 

Governance and Public Policy Committee during the Relevant Period. As members of the 

Governance and Public Policy Committee, these defendants were responsible for overseeing and 

making recommendations to the Board on "[t]he Company's environmental, health and safety 
- 24 - 

compliance programs" as well as "[t]he Company's enterprise risk management in areas affecting 

the Company's public policy, compliance and government affairs activities or programs." By 

dint of such responsibilities, these defendants had intimate knowledge of Hospira's FDA issues 

and compliance deficiencies, yet chose to defer any adequate response until after the completion 

of Project Fuel. In addition, they knowingly or recklessly permitted false statements to be made 

during the Relevant Period, exposing Hospira to huge damages for securities fraud. The 

Governance and Public Policy Committee met five times, two times, seven times, and five times, 

in 2008, 2009, 2010, and 2011, respectively. 

40. Additionally, The Company has in place a Code of Business Conduct (the 

"Code") which applies to all officers, employees, contractors, and agents of Hospira. Further, the 

Corporate Governance Guidelines state that "[d]irectors shall adhere to the Company's Code." 

The Code states that the Company expects these individuals to "provide full, accurate, fair, 

timely and understandable disclosures when making public communications or in reports and 

documents filed with government agencies, such as the [SEC] and the [FDA]." 

41. Additionally, Project Fuel was a major corporate undertaking requiring the 

Individual Defendants' closest attention, both at the time of its initiation and throughout its 

existence. Prior to implementing the cost-cutting initiatives of Project Fuel, these fiduciaries had 

a duty to obtain a sufficient independent comprehensive review of Hospira's current compliance 

with FDA rules, and any effects Project Fuel would have on the Company's compliance. The 

Individual Defendants also had a duty to ensure that the Company had adequate internal and 

quality controls and adhered to mandatory FDA regulations and CGMP.
- 25 - 

General Duties as to All Matters 

42. The Individual Defendants were and are required to act in furtherance of the best 

interests of the Company and its shareholders so as to benefit all shareholders equally and not in 

furtherance of their personal interests or that of a company or entity with which they are 

associated. 

43. Each director and officer of the Company owes to Hospira and its shareholders 

the fiduciary duty to exercise good faith and diligence in the administration of the affairs of the 

Company and in the use and preservation of its property and assets, and the highest obligations 

of fair dealing. 

Control, Access, and Authority 

44. The Individual Defendants, because of their positions of control and authority as 

directors and/or officers of the Company, were able to and did, directly and/or indirectly, 

exercise control over Hospira and its policies, and were able to effect the wrongful acts 

complained of herein. 

45. Because of their advisory, executive, managerial, and directorial positions with 

Hospira, each of the Individual Defendants had access to material, non-public information 

regarding the Company which they were obligated not to use for their personal benefit, and 

which they were required to use in the best interests of the Company. 

46. At all times relevant hereto, each of the Individual Defendants was the agent of 

each of the other Individual Defendants and of Hospira, and was at all times acting within the 

course and scope of such agency. 

Reasonable and Prudent Supervision 

47. To discharge their duties, the officers and directors of Hospira were required to 
- 26 - 

exercise reasonable and prudent supervision over the management, policies, practices, and 

controls of the financial affairs of the Company. By virtue of such duties, the officers and 

directors of Hospira were required to, among other things: 

(a) Exercise good faith, to consciously adhere to their obligations and 

known duties to act, and to ensure that the affairs of the Company were conducted in an 

efficient, business-like and legal manner so as to make it possible to provide the highest quality 

performance of their business; 

(b) Exercise good faith to ensure that the Company was operated in a 

diligent, honest and prudent manner and complied with all applicable federal and state laws, 

rules, regulations and requirements, internal policies and standards set by the Company, and all 

contractual obligations, including acting only within the scope of its legal authority;7

(c) Refrain from selling stock based upon insider information; 

(d) Properly, fairly, and accurately guide investors and analysts as to the 

true financial condition of the Company at any given time; and 

(e) When put on notice of problems with the Company's business practices 

and operations, exercise good faith in taking appropriate and necessary action to correct the 

misconduct and prevent its recurrence. 

Breaches of Duties 

48. Each of the Individual Defendants, by virtue of his or her position as an officer 

and/or director, owed to the Company the fiduciary duty of loyalty and the exercise of due care 

in the management and administration of the affairs of the Company, as well as in the use and 

 

7

 A fiduciary must never allow profits to take precedence over adherence to the law. See Metro 

Commc'n Corp. BVI v. Advanced MobileComm Techs., Inc., 854 A.2d 121, 131 (Del. Ch. 2004) 

("Under Delaware law, a fiduciary may not choose to manage an entity in an illegal fashion, 

even if the fiduciary believes that the illegal activity will result in profits for the entity."). 
- 27 - 

preservation of its property and assets. The conduct of the Individual Defendants complained of 

herein involves a knowing and culpable violation of their obligations as officers and directors of 

Hospira, and a reckless disregard for their duties to the Company that the Individual Defendants 

were aware or consciously disregarded and posed a risk of serious injury to the Company. The 

conduct of the Individual Defendants who were also officers and/or directors of the Company 

have been ratified by the remaining Individual Defendants who collectively made up Hospira's 

Board. 

SUBSTANTIVE ALLEGATIONS 

The Individual Defendants Adopt the Reckless Project Fuel and Issue Misleading 

Statements 

49. On February 17, 2009, Hospira management held a conference call to discuss 

2008's fourth quarter and full year financial results. CEO defendant Begley stated he was 

pleased with Hospira's "solid revenue and strong profit growth," but displeased with the 

Company's "average" performance when measured against its peers. The solution he announced 

was a cost-cutting program dubbed, "Project Fuel." Begley stated: 

To provide a little history on this project, we spent a good deal of time in 2008 

measuring our financial progress and related metrics against our peers. We have 

made significant progress over the past five years. We transformed Hospira from 

an under invested, no-growth business with declining margins to a Company with 

top line growth and improving margins. Our gross margin increased by over 1000 

basis points and our operating margin increased by approximately 400 basis 

points. But as far as we have come our analysis told us we still only measure as 

average against our peers from operating margins to return on invested capital. 

We are certainly not satisfied with being in the middle and we know we can do 

better. 

This compelled us to move forward with a project we call FUEL which is 

aligned with our overall strategy to improve margins and cash flow and drive 

sustained growth for Hospira.In January we announced to our employees the first 

of what will be several phases of Project FUEL. In addition to the cost 

containment measures I mentioned previously, the first phase includes 

streamlining our organizational structure to optimize operational effectiveness. To 

reduce complexity we have dissolved the Global Pharma and Global Device 
- 28 - 

strategic business unit structure centralizing our global marketing, strategy and 

business development activities to best meet the needs of the overall Company 

and better support the geographic regions. We have also streamlined our senior 

leadership team to more effectively enable change and focus the business. These 

actions will drive further efficiencies and better enable us to take advantage of 

growth opportunities. 

The next phases of Project FUEL will include streamlining processes, reducing 

product line complexity, and aggressively managing low product lines. In 

addition, we believe there is opportunity to improve efficiency and performance 

in several departments such as global procurement, finance, IT, U.S. sales force 

and R&D. We are in the midst of a detailed review of those particular areas. 

50. On March 24, 2009, the Individual Defendants caused the Company to begin what 

would turn into a two-and-a-half year long deception by issuing a press release entitled "Hospira 

Announces Plans to Optimize Operations, Increase Shareholder Value." Project Fuel, the plan 

that the Company was referring to, was not increasing shareholder value and operational 

efficiency as claimed. In fact, as later admitted, Project Fuel's cost-cutting priorities were 

responsible for taking focus off the manufacturing quality issues that are causing the Company 

widespread production breakdowns today. The press release provided, in pertinent part, as 

follows: 

Hospira, Inc. (NYSE: HSP), a leading global specialty pharmaceutical and 

medication delivery company, today announced details regarding Project Fuel, a 

multi-phased initiative to improve the company's margins and fuel its growth. 

Project Fuel will capitalize on the company's potential to increase shareholder 

value and improve operational efficiency by optimizing its product line, 

evaluating non-strategic assets and streamlining its organizational structure. 

In conjunction with these actions, which are slated to occur over the next 24 

months, Hospira expects to reduce its global workforce by approximately 10 

percent and deliver annual cost savings of approximately $110 million to $140 

million. 

"To maximize our opportunities for growth and sustainable shareholder value, 

Hospira is taking a number of important steps to simplify our business, strengthen 

our financial position and establish a strong foundation for our future," said 

Christopher B. Begley, chairman and chief executive officer, Hospira. "By 

reducing costs and improving efficiencies, we can free up more dollars to invest 

for profitable growth and shareholder returns. And with a streamlined, focused 
- 29 - 

organization, we will reduce complexity, improve performance and be better 

positioned to advance our significant opportunities." 

Optimizing the product line 

Hospira's global product line encompasses thousands of list numbers, or SKUs, 

many of which represent multiple presentations of the same drug compound and 

serve the same medical need. By simplifying presentation choices, Hospira can 

better meet the needs of its customers with a focused, yet robust, portfolio. In 

addition to improving inventory management and manufacturing efficiency, 

Hospira expects the streamlined product line to produce indirect cost reductions 

through associated decreases in functional support. Importantly, customers will 

also realize enhanced service levels and value, while continuing to benefit from 

product choice across the continuum of care. 

* * * 

Workforce impact 

The net projected reduction associated with these collective actions represents 

approximately 10 percent of the company's global workforce, with the majority of 

reductions occurring in the next 12 months. Hospira will help prepare employees 

for the transitions through the provision of assistance packages. 

51. As a result of this announcement, the price of Hospira's common stock increased 

by 7.4%. The day after the Company issued the press release, Leerink Swann & Co. raised 

Hospira's rating to "outperform" and Hospira's stock price rose an additional 5.6% as the market 

reacted favorably to the positive news. 

52. On April 28, 2009, the Company issued a press release reporting its first quarter 

financial results for the three months ended March 31, 2009, touting "improved manufacturing 

efficiency." The press release stated, in part: 

"Hospira delivered on its commitments in the first quarter, generating solid sales 

and earnings growth in a period marked by continued economic uncertainty," said 

Christopher B. Begley, chairman and chief executive officer. "Looking forward, 

we believe the results of our strategic investments and our focus on execution 

position us well to deliver our financial commitments for 2009. In addition, we 

are driving operational excellence through our optimization initiatives under 

Project Fuel, which will create long-term, sustainable growth and increased 

shareholder value." 
- 30 - 

* * * 

Adjusted* operating income increased 3.2 percent to $150 million in the first 

quarter of 2009, compared to $145 million in the first quarter of 2008. Driving 

the majority of the increase was improved manufacturing efficiency, with a 

contribution from favorable volume/mix. 

53. On July 29, 2009, the Company issued a press release reporting its second quarter 

financial results for the three months ended June 30, 2009. Defendant Begley announced that the 

Company was making "significant progress toward [its] Project Fuel initiatives." The press 

release stated, in part: 

"Hospira delivered a very good second quarter, marked by strong sales and 

earnings, and significant progress toward our Project Fuel initiatives," said 

Christopher B. Begley, chairman and chief executive officer. "Based on our 

results for the first half of the year and our expectations for the remainder of 

2009, we have increased our full-year adjusted earnings guidance. We remain 

committed to improving shareholder value through sustainable top- and 

bottom-line growth." 

54. Also on July 29, 2009, the Company filed with the SEC its quarterly report on 

Form 10-Q for the three months ended June 30, 2009. The Company's Form 10-Q, which 

reiterated the Company's financial results, was signed by defendant Werner, and contained the 

required Sarbanes-Oxley Act of 2002 ("SOX") certifications signed by defendants Werner and 

Begley. The Form 10-Q discussed Project Fuel and stated, in part: 

In March 2009, Hospira announced details of a multi-stage restructuring and 

optimization plan ("Project Fuel") which will occur over the next two years. 

Project Fuel includes the following activities: optimizing the product portfolio, 

evaluating non-strategic assets, and streamlining the organizational structure. 

The Company Receives the FDA's August 2009 Warning Letter 

55. On August 14, 2009, Hospira filed a Form 8-K with the SEC announcing that the 

Company had received what would be the first of two Warning Letters from the FDA (the 

"August 2009 Warning Letter"). The August 2009 Warning Letter, which followed an April 

2009 FDA investigation, was summarized in the Form 8-K as follows: 
- 31 - 

On August 13, 2009, the Company received a warning letter, dated August 12, 

2009, from the FDA related to the Company's corrective action plans with respect 

to the failure of certain AC power cords manufactured by a third party. The 

affected power cords are used on certain of the Company's infusion pumps and 

related products. The Company takes this matter seriously and intends to respond 

fully, and in a timely manner, to the FDA's warning letter. There can be no 

assurance that the FDA will be satisfied with the Company's response. The 

Company is initiating a voluntary recall of the affected power cords. 

The Company does not expect either of these events to adversely impact the 

Company's ability to achieve the 2009 financial projections communicated with 

the second quarter 2009 earnings release. 

56. Hospira's Form 8-K announcing the Company's receipt of the August 2009 

Warning Letter was materially misleading and failed to disclose important information 

concerning Hospira's significant operational, manufacturing, and quality control deficiencies, as 

well as the fact that Hospira was selling adulterated power cords as part of its infusion products, 

in violation of FDA regulations and CGMP requirements. 

57. In fact, the August 2009 Warning Letter stated, among other things, that the FDA 

had inspected the Company's Morgan Hill facility between April 21, 2009 through May 22, 2009 

and had determined that the Company "manufactures infusion pumps ... [which] are adulterated 

... in that the methods used in, or the facilities or controls used for, their manufacture, packing, 

storage, or installation are not in conformity with the CGMP requirements of the Quality System 

(QS) regulation found at Title 21, Code of Federal Regulations (C.F.R.), Part 820." The August 

2009 Warning Letter also stated that Hospira's violations included a "[f]ailure to identify the 

actions needed to correct and prevent the recurrence of nonconforming product and other quality 

problems." Despite the Company creating a "Correct and Preventative Action report" to 

"investigate reports of failing AC power cords," the Company "continue[d] to distribute the old 

AC power cords as replacement parts." Specifically, the August 2009 Warning Letter provided 

as follows: 
- 32 - 

WARNING LETTER 

VIA FEDERAL EXPRESS 

August 12, 2009 

Joseph A. Bellah 

General Manager, Global Electro-Mechanical Device Operations 

Hospira, Inc. 

755 Jarvis Drive 

Morgan Hill, California 95037 

Dear Mr. Bellah: 

During an inspection of your firm located in Morgan Hill, California on 

April 21, 2009 through May 22, 2009, an investigator from the United 

States Food and Drug Administration (FDA) determined that your firm 

manufactures infusion pumps (including the Plum Family line, LifeCare 

PCA3, and Symbiq). Under section 201(h) of the Federal Food, Drug, 

and Cosmetic Act (the Act), 21 U.S.C. 321(h), these products are devices 

because they are intended for use in the diagnosis of disease or other 

conditions or in the cure, mitigation, treatment, or prevention of disease, 

or are, intended to affect the structure or function of the body. 

 

This inspection revealed that these devices are adulterated within the 

meaning of section 501(h) of the Act (21 U.S.C. 351(h)), in that the 

methods used in, or the facilities or controls used for, their manufacture, 

packing, storage, or installation are not in conformity with the Current 

Good Manufacturing Practice (CGMP) requirements of the Quality 

System (QS) regulation found at Title 21, Code of Federal Regulations 

(C.F.R.), Part 820. We received a response to the Form FDA 483, List of 

Inspectional Observations, that was issued to you. We address this 

response below. The noted violations include, but are not limited to, the 

following: 

 

Failure to identify the actions needed to correct and prevent the 

recurrence of nonconforming product and other quality problems, as 

required by 21 C.F.R. ,820.100(a)(3). Specifically, your firm created a 

Correct and Preventative Action report [REDACTED] on [REDACTED] 

to investigate reports of failing AC power cords. Your firm performed a 

risk assessment on [REDACTED] and determined the Risk Priority 

Number (RPN) for the AC power cord to be in the category "As Low As 

Reasonable Practicable." Based on this risk assessment, your firm 

decided to phase-out the then current AC power cords while using up the 

remaining stock, and to begin to distribute newly designed AC power 

cords by [REDACTED]. Although you are currently distributing the 
- 33 - 

newly designed AC power cords, your firm continues to distribute the 

old AC power cords as replacement parts.8

 

Since [REDACTED] your firm has received the following reports of 

failures involving the old AC power cords: 

• On [REDACTED] a user filed a report of flames discarding from the 

Plum 1.6 pump, 8-12 inches in height. No injury was reported for this 

event. This event was to you through your internal complaint handling 

system, [REDACTED] 

• On July 5, 2008, a user sustained electric stock from your Plum XLMD 

Pump and required medical treatment. Your firm reported this event to 

the FDA on October 16, 2008 under MDR Number 2921482-2008-

00337. 

• On June 3, 2008, a user received electrical stock from your Plum A+ 

Pump and required medical treatment. Your firm reported this event to 

the FDA on June 30, 2008 under MDR Number 2921482-2008-00201. 

Your firm's procedure titled "Rev. W, Guideline for Risk Management" 

[REDACTED] addresses the use of previously approved risk assessment 

reports for nonconformities that have already been investigated. 

Specifically, your procedure [REDACTED] states that [REDACTED] 

(emphasis in original). During our inspection, no documents were 

provided to the FDA investigator to demonstrate that a new RPN was 

generated based upon a re-evaluation of reported complaints associated 

with old AC power cords received after [REDACTED] as required by 

your firm's procedure. By failing to generate an updated RPN for the AC 

power cord issue, your firm failed to determine whether additional 

corrective and preventive action is warranted to address the continuous 

shipment of the old AC power cord design. 

We have reviewed your response to the FDA-483 Inspectional 

Observations in which your firm states that [REDACTED] will be 

required to assure that corrections are adequate. 

You should take prompt action to correct the violation(s) addressed in 

this letter. Failure to promptly correct these violation(s) may result in 

regulatory action being initiated by the Food and Drug Administration 

without further notice. These actions include, but are not limited to, 

seizure, injunction, and/or civil money penalties. Also, federal agencies 

are advised of the issuance of all Warning Letters about devices so that 

 

8

 Redactions were made by the FDA before public release of the August 2009 Warning Letter, 

and not by Plaintiffs herein. 
- 34 - 

they may take this information into account when considering the award 

of contracts. Additionally, premarket approval applications for Class III 

devices to which the Quality System regulation deviations are reasonably 

related will not be approved until the violations have been corrected. 

Requests for Certificates to Foreign Governments will not be granted 

until the violations related to the subject devices have been corrected. 

Please notify this office in writing within fifteen (15) working days from 

the date you receive this letter of the specific steps you have taken to 

correct the noted violations, including an explanation of how you plan to 

prevent these violation(s), or similar violation(s), from occurring again. 

Include documentation of the corrective action you have taken. If your 

planned corrections will occur over time, please include a timetable for 

implementation of those corrections. If corrective action cannot be 

completed within 15 working days, state the reason for the delay and the 

time within which the corrections will be completed. 

* * * 

Finally, you should know that this letter is not intended to be an allinclusive list of the violations at your facility. It is your responsibility to 

ensure compliance with applicable laws and regulations administered by 

FDA. The specific violation noted in this letter and in the Inspectional 

Observations, Form FDA 483, issued at the closeout of the inspection 

may be symptomatic of serious problems in your firm's manufacturing 

and quality assurance systems. You should investigate and determine the 

causes of the violations, and take prompt actions to correct the violations 

and to bring your products into compliance. 

Sincerely yours, 

/S/ 

Barbara J. Cassens 

District Director 

58. The August 2009 Warning Letter, a summary of which the Company made 

publicly available, served as a red flag to the Individual Defendants that at least the Morgan Hill 

facility was producing adulterated goods in violation of FDA regulations. 

59. At about the same time, the FDA made further observations about the state of the 

Company's manufacturing facilities in Rocky Mount and Clayton, which the Company chose not 

to disclose, including that Hospira's Clayton facility suffered from severe quality control issues 

and that certain of the drugs produced there, such as Liposyn, Propofol, and Cleviprex emulsion 
- 35 - 

products, were contaminated with stainless steel particles. The Individual Defendants, however, 

failed to take appropriate steps to rectify these problems. 

Notwithstanding the August 2009 Warning Letter, the Individual Defendants Continue to 

Make or Allow False and Misleading Statements 

60. On October 27, 2009, the Company issued a press release reporting its third 

quarter financial results for the three months ended September 30, 2009. The press release once 

again touted progress toward the Company's Project Fuel initiatives. In the press release, 

defendant Begley stated: 

"Hospira delivered strong results in the third quarter, aided by the launch of the 

generic oncolytic oxaliplatin and additional progress toward our Project Fuel 

initiatives," said Christopher B. Begley, chairman and chief executive officer. 

"We continued to position Hospira for future success in this milestone quarter, 

during which we surpassed the billion dollar revenue mark for the first time and 

generated strong double-digit earnings per share growth. We remain confident in 

our projections for full-year sales and are increasing our earnings per share 

guidance." 

61. Also on October 27, 2009, the Company filed with the SEC its quarterly report on 

Form 10-Q for the three months ended September 30, 2009. The Company's Form 10-Q 

explained that the gross profit increase brought by manufacturing efficiency gains associated 

with Project Fuel were only partially offset by the impact of certain quality control costs. The 

Form 10-Q was signed by defendant Werner and contained the required SOX certifications 

signed by defendants Werner and Begley. The Form 10-Q stated, in part: 

The gross profit increase is primarily the result of higher sales volume and 

favorable product mix including the U.S. product launch of generic oxaliplatin 

and manufacturing efficiency gains associated with Project Fuel, partially 

offset by the impact of certain product recall related costs and changes in foreign 

exchange. 

Hospira Recalls Lyposyn and Propofol 

62. On November 6, 2009, Hospira issued a nationwide recall of certain lots of 

Liposyn and Propofol products because they were contaminated with particulate matter. In a 
- 36 - 

press release to the market, which misleadingly claimed that Hospira had identified the "root 

cause" of the problem and implemented "corrective actions," the Company stated, in part: 

Hospira, Inc. (NYSE: HSP), a global specialty pharmaceutical and 

medication delivery company, is voluntarily recalling 85 lots of 

LiposynTM II 10%, Liposyn II 20%, Liposyn III 10%, Liposyn III 20%, 

Liposyn III 30% and 73 lots of Propofol Injectable Emulsion 1% 

products that begin with the lot numbers 79 and 80 because some of the 

containers may contain particulate matter. The source of the particulate 

matter has been identified as stainless steel equipment used in the 

manufacturing process. The affected lots were distributed between July 

2009 and October 2009, and no other lots are affected by this recall. 

Hospira is undertaking this recall in consideration of the potential for 

safety issues if the products are administered to patients. Since these 

particulate contaminants do not dissolve in blood they could potentially 

act as emboli and impede blood flow. Particulates may also cause 

mechanical damage to the body and may escalate damage through the 

Systemic Inflammatory Response Syndrome (SIRS). Restriction in blood 

supply to tissues could lead to stroke, respiratory failure, kidney failure, 

liver failure, heart attack and/or death. 

Hospira has not received any reports of adverse events related to this 

issue. Hospira has identified the root cause and corrective actions have 

been implemented. Hospira has made the U.S. Food and Drug 

Administration (FDA) aware of the situation. 

Contrary to these representations, Hospira had not identified the root cause of its particulate 

contamination. In fact, Hospira has failed to fully identify all of its issues even to this day. 

Bullish Statements on Project Fuel Continue Post-Recall 

63. On February 4, 2010, Hospira issued a press release entitled, "Hospira Reports 

Fourth-Quarter and Full-Year 2009 Results."9

 The press release touted the Company's fourth 

quarter and full-year financial results for the three and twelve months ended December 31, 2009, 

crediting Project Fuel for the positive news. The press release stated, in part: 

 

9

 The Class Period in the Federal Securities Action runs from the date of this press release, 

February 4, 2010, and continues through October 17, 2011 ("Securities Action Class Period"). 
- 37 - 

"Driven by double-digit revenue and adjusted earnings growth, the fourth 

quarter concluded a year of transformation for Hospira. In addition to our 

strong financial performance, we made significant progress on many fronts, 

including augmenting our biogenerics program, launching a generic version of 

a blockbuster oncology drug, and advancing Project Fuel, our corporate-wide 

optimization initiative," said Christopher B. Begley, chairman and chief 

executive officer. "Looking forward, we expect 2010 to be another good year of 

growth for Hospira. Backed by our commitment to strong execution and focus 

on sustained operational improvement, we continue to position Hospira for 

sustainable, long-term growth and increased shareholder value." 

* * * 

Adjusted* income from operations increased 8.5 percent to $204 million in the 

fourth quarter of 2009, compared to $188 million in the fourth quarter of 2008. 

Driving the majority of the increase were higher net sales, more favorable 

product mix and improvements resulting from the company's Project Fuel 

optimization initiatives. 

* * * 

"The significant momentum we generated in 2009 has paved the way for 

continued progress in 2010," said Begley. "With our robust product pipeline, 

anticipated advancements in both Specialty Injectable Pharmaceuticals and 

Medication Management Systems, combined with our focus on operational 

optimization through Project Fuel, Hospira is on track for another good year." 

64. On February 18, 2010, the Company filed with the SEC its annual report on Form 

10-K for the year ended December 31, 2009. In the Form 10-K, defendants Begley, Werner, 

Bailey, Bowles, Curran, Hale, Matricaria, Sokolov, Staley, Wheeler, and von Prondzynski 

reiterated that the FDA investigation had not materially impacted Hospira's ability to market and 

sell its products. In addition, the Form 10-K once again underplayed the significance and scope 

of the FDA's August 2009 Warning Letter, instead emphasizing the strength of the Company's 

quality control. It provided, in pertinent part, as follows: 

Hospira has developed and implemented quality systems and concepts throughout 

its organization. Hospira is actively involved in setting quality policies and 

managing internal and external quality performance. Its quality assurance 

department provides quality leadership and supervises its quality systems. An 

active audit program, utilizing both internal and external auditors, monitors 

compliance with applicable regulations, standards and internal policies. In 
- 38 - 

addition, Hospira's facilities are subject to periodic inspection by the FDA and 

other regulatory authorities. Hospira has received notices from regulatory 

authorities alleging violations of applicable regulations and standards, and 

Hospira has developed definitive action plans, implemented remedial programs 

and modified its practices to address these issues. During 2009, Hospira 

received a warning letter from the FDA related to Hospira's corrective action 

plans with respect to the failure of certain AC power cords manufactured by a 

third party. The affected power cords are used on certain infusion pumps and 

related products. Hospira initiated a voluntary recall of the affected power cords 

in August 2009. Hospira has responded to the warning letter and is working 

closely with the FDA to conclude this matter. Hospira initiated other voluntary 

recalls of certain other products and initiated field corrections and other 

remedial actions with respect to those products. Hospira continues to have an 

ongoing dialogue with the FDA. These matters have not materially impacted 

Hospira's ability to market and sell its products. 

The SEC Notifies the Individual Defendants that They Have Made Insufficient Public 

Disclosures 

65. On April 13, 2010, the SEC sent a letter to Hospira concerning deficiencies in the 

Company's disclosures contained in its Form 10-K filed on February 18, 2010, regarding the 

August 2009 Warning Letter. Specifically, the SEC instructed Hospira to "revise to clarify" the 

disclosures concerning the FDA's August 2009 Warning Letter "to state the failures experienced 

by the AC power cords and to describe the contents of the FDA letter." Continuing, the SEC 

letter stated, in relevant part: 

Furthermore, you note on page 48 that you have recognized costs relating to the 

recall of the power cords "and certain other products." Please revise to clarify 

exactly what costs you have recognized, what other products experienced recall in 

the last fiscal year and the remediation efforts you have undertaken. You should 

also expand your disclosure to state not only that these matters have not 

materially impacted your ability to market and sell your products but also, if 

true, that they have not materially impacted either your Company as a whole or 

your financial results. If you believe there has been no material impact, please 

provide a basis for that opinion. 

The FDA Issues a Second Warning Letter Repeating Many of the Observations in Its First 

Warning Letter 

66. On April 16, 2010, Hospira filed a Form 8-K with the SEC announcing that the 

Company had received a second Warning Letter from the FDA, dated April 12, 2010, "in 
- 39 - 

connection with the FDA's inspection of the Company's pharmaceutical and device 

manufacturing facilities located in Rocky Mount, North Carolina and Clayton, North Carolina." 

("April 2010 Warning Letter"). The April 2010 Warning Letter identified many of the same 

observations and violations that the FDA had informed Hospira about almost a year prior, 

demonstrating that the Individual Defendants were on notice of the FDA violations at many of 

the Company's facilities but consciously disregarded them or failed to take sufficient steps to 

rectify them. For instance, the April 2010 Warning Letter indicated that the Company's 

November 6, 2009, voluntary recall of Propofol and Liposyn products involved lots that 

contained "visible particle contamination" and that, while these batches were manufactured in 

2007, Hospira failed to detect the problem until November 2009. The Form 8-K did not contain 

a copy of the April 2010 Warning Letter, but summarized the FDA's instruction as follows: 

On April 13, 2010, Hospira, Inc. (the "Company") received a warning 

letter, dated April 12, 2010, from the U.S. Food and Drug Administration 

(FDA) in connection with the FDA's inspection of the Company's 

pharmaceutical and device manufacturing facilities located in Rocky 

Mount, North Carolina and Clayton, North Carolina. 

In the warning letter, the FDA cites Current Good Manufacturing 

Practice deficiencies related to particulate in certain emulsion products at 

the Clayton facility and the failure to adequately validate the processes 

used to manufacture the Company's products at the Rocky Mount 

facility. The letter also asserts other inadequacies, including the 

Company's procedures related to the Quality Control unit, investigations, 

and medical device reporting obligations. The letter asserts that some of 

the deficiencies were repeat observations from a prior inspection 

conducted in April 2009, and include a similar violation cited in an 

August 12, 2009 warning letter to the Company's Morgan Hill, 

California facility.

The Company will be undertaking a comprehensive review of its 

manufacturing operations to ensure compliance with applicable 

regulations. The warning letter does not restrict production or 

shipment of the Company's products from these facilities, but the 

Company is holding shipment of certain products pending its further 

investigation and discussions with the FDA. The Company does not 
- 40 - 

anticipate that these matters will adversely impact the Company's 

ability to achieve the 2010 financial projections communicated with the 

full year 2009 earnings release. 

The Company takes this matter seriously and intends to respond fully, 

and in a timely manner, to the FDA's warning letter. Until the violations 

are corrected, the Company may be subject to additional regulatory 

action by the FDA, including the withholding of approval of new drug 

applications, seizure, injunction, and/or civil monetary penalties. Any 

such actions could significantly disrupt our ongoing business and 

operations and have a material adverse impact on our financial position 

and operating results. There can be no assurance that the FDA will be 

satisfied with the Company's response. The warning letter will be posted 

on the FDA's website at www.fda.gov and, once posted, will be available 

for viewing. 

67. Hospira's Form 8-K announcing the Company's receipt of the April 2010 Warning 

Letter was also materially misleading and failed to disclose important information concerning 

Hospira's significant operational, manufacturing, and quality control deficiencies. In addition, 

the promised "comprehensive review of [Hospira's] manufacturing operations to ensure 

compliance with applicable regulations" was not even initiated until eighteen months later. The 

Individual Defendants consciously failed to insist upon this comprehensive review because such 

a review would threaten Project Fuel. 

68. Further, the April 2010 Warning Letter indicated that there were additional 

problems with the Company's products involved in the November 2009 recall that were not 

disclosed to the public, and which were in addition to failures touched on in the FDA's August 

2009 Warning Letter. The April 2010 Warning Letter provided as follows, in part:10 

April 12, 2010 

VIA FEDERAL EXPRESS 

WARNING LETTER 

Christopher B. Begley 

Chief Executive Officer 

 

10 The full text of the April 2010 Warning Letter is incorporated by reference herein, and may 

be viewed at: http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm208691.htm. 
- 41 - 

Hospira, Inc. 

275 N. Field Drive 

Bldg. 2 

Lake Forest, Illinois 60045 

Dear Mr. Begley: 

During our January 12 - 19 and January 26 - February 23, 2010 

inspection of your pharmaceutical and device manufacturing facilities 

located at 4285 North Wesleyan Boulevard, Rocky Mount, North 

Carolina, and at 8484 U.S. Highway 70 West, Clayton, North Carolina, 

respectively, investigators from the Food and Drug Administration 

(FDA) identified significant violations of Current Good Manufacturing 

Practice (CGMP) regulations for Finished Pharmaceuticals, Title 21, 

Code of Federal Regulations, Parts 210 and 211. These violations cause 

your drug products to be adulterated within the meaning of section 

501(a)(2)(B) of the Federal Food, Drug, and Cosmetic Act (the Act) [21 

U.S.C. § 351(a)(2)(B)], in that the methods used in, or the facilities or 

controls used for, their manufacture, processing, packing, or holding do 

not conform to or are not operated or administered in conformity with, 

CGMP. 

We reviewed your firm's responses of February 9 and March 16, 2010, 

and note that they lack sufficient corrective actions. 

Specific violations observed during the inspection include, but are not 

limited, to the following: 

CGMP Violations 

A. Clayton facility 

1. Your firm does not have adequate written procedures for production 

and process controls designed to assure that the drug products you 

manufacture have the identity, strength, quality, and purity they 

purport or are represented to possess [21 C.F.R. § 211.100(a)]. 

For example, your firm failed to assure adequate process design and 

control of Liposyn, Propofol, and Cleviprex emulsion products to 

prevent objectionable particulate contamination (primarily stainless 

steel). Such controls would include, but are not limited, to appropriate 

component controls, equipment suitability, equipment maintenance, 

and filtration. 

This particulate contamination problem has been a persistent and 

serious issue at your firm for multiple years. For example, 16 lots of 
- 42 - 

Propofol and Liposyn manufactured in 2007 contained visible 

particulate contamination. Your firm did not detect the particulate 

problem until November 2009 when you performed the second annual 

retain inspections, which were three to nine months overdue. By then, 

all 16 lots had expired. Further, substandard manufacturing practices 

led to three recent major recalls. These recalls were initiated due to 

excessive contamination with particulates (primarily stainless steel) 

and included 78 lots of Propofol, 121 lots of Liposyn, and 24 lots of 

Cleviprex. These lots were manufactured at your Clayton facility 

between January 2008 and February 2010. 

Your failure to follow written procedures, assure prompt investigation, 

determine root cause, and implement appropriate corrective action 

resulted in exposure of patients to objectionably contaminated drugs. 

Your March 26, 2010 response states that you will enhance your 

monitoring program for particulates and complete revalidation activities 

for all products manufactured at the Clayton facility. The manufacturing 

processes for Liposyn, Propofol, and Cleviprex will now include a 

[REDACTED] prior to filling. Your response is inadequate because it is 

unclear if your firm has determined the root cause of the problem and 

resolved it. In addition, you have not provided an interim plan to ensure 

the quality of drug products that you continue to manufacture and 

distribute, prior to the completion of your corrective action and 

validation activities. 

This is a repeat observation from the April 2009 inspection. 

2. Your firm has failed to ensure the responsibilities and procedures 

applicable to your quality control unit are in writing and are followed

[21 C.F.R. § 211.22(d)]. 

For example, your Quality Control Unit (QCD) failed to: (1) ensure that 

the manufacturing processes for your Liposyn, Propofol, and Cleviprex 

drug products are adequately designed, controlled, and monitored; (2) 

implement adequate corrective and preventive actions related to 

objectionable particulate contamination in Liposyn, Propofol, and 

Cleviprex drug products; and (3) complete and approve 178 

manufacturing investigations within 30 days and issue NDA Field Alert 

Reports (FAR) in a timely manner. 

Your March 16, 2010 response describes a number of improvements 

made to the QCU since the April 2009 inspection, including revising 

procedures and hiring personnel. However, the most recent inspection 

noted serious ongoing violations at this facility despite your efforts to 
- 43 - 

address manufacturing inconsistencies, enhance the monitoring program 

for particulates, and improve your exception reporting practices. 

This is a repeat observation from the April 2009 inspection. 

3. Your firm has not thoroughly investigated the failure of a batch or any 

of its components to meet its specifications, whether or not the batch has 

already been distributed, or extend investigations to other batches of 

drug product that may have been associated with the specific failure or 

discrepancy [21 C.F.R. § 211.192]. 

For example, you failed to conduct adequate investigations that result 

in your implementation of corrective actions to prevent recurrence of 

the problems and evaluate other potentially affected lots. Specifically, 

particulates were identified during an inspection of retain samples for 

two partially distributed lots of Liposyn on January 21, 2010. 

Subsequently, an exception Report (ER) 1685 was opened on January 

25, 2010, due to the particulate contamination. Although your firm 

recently experienced multiple serious particulate issues leading to 

product recalls, you failed to: 1) conduct testing to identify the foreign 

particulates (which were primarily stainless steel) until February 4, 

2010; 2) place the remaining product from the two affected Liposyn 

lots on distribution hold until February 5, 2010; and 3) inspect retain 

samples from associated lots until February 10, 2010. 

Your March 16, 2010 response outlines new and revised procedures for 

investigations and corrective and preventive actions. However, your 

response is inadequate because you do not address the failure of the 

Clayton site to follow QAP-0012, "Exception Reports," or explain 

whether your review of the large number of open investigations indicates 

process related deficiencies. 

We also find your response inadequate because you have not explained 

why Liposyn and Propofol retain samples were not inspected (from the 

October 2009 corrective action implementation) to verify adequacy 

until January 2010. This verification was conducted three months after 

production resumed following the first of three recalls. Timely 

assessment of quality indicators, such as out-of-specification findings 

and complaints, is essential to detecting and determining the scope of 

product or process deficiencies. 

69. This second April 2010 Warning Letter was highly significant, as it displays the 

manner in which the Individual Defendants, in approving Project Fuel and continuing to adhere 
- 44 - 

to its draconian cost-cutting measures, failed to fulfill their duty, in bad faith. In sum the April 

2010 Warning Letter reveals, among other things: 

(a) At the time of the adoption of Project Fuel, Hospira failed to perform 

required testing as scheduled so as to detect contamination by particulate matter. The annual 

retain inspection, in which samples are "retained" and inspected for foreign matter, were three 

to nine months overdue; 

(b) In April 2009, the FDA told Hospira that it was required to adopt an 

interim quality control plan before distributing medications found to be unsafe. For over a 

year, the Individual Defendants ignored this instruction; 

(c) Contaminated products were manufactured at the Clayton facility 

between January 2008 and February 2010. Particulates were found in a 2007 batch production. 

This means that, prior to and at the time Project Fuel was announced, and continuing 

thereafter, Hospira was producing contaminated medications. The Individual Defendants 

consciously and in bad faith disregarded its duty to ensure that such compliance failures were 

not already occurring when it adopted its reckless cost-cutting plan, and thereby recklessly 

endangered the public health and safety; and 

(d) When particulate matter was found, the Individual Defendants failed to 

test it to determine what it was or immediately place the affected medications on distribution 

hold. 

70. All of these red flags, among others identified in the April 2010 Warning Letter, 

would have prompted any fiduciary acting in good faith to immediately concentrate on a fullscale remediation review, and a comprehensive remediation program (based upon an 

independent assessment and review). Not only was this not done, but insiders were not halted 
- 45 - 

from selling shares based upon what they knew regarding the true extent (and cost) of these 

problems. The Board, although it had the authority to do so, imposed no "event-specific black 

out period" on stock sales pending a full review of the Company's legal compliance issues. 

Instead, it allowed CEO defendant Begley and others to sell significant percentages of their 

personally held Hospira stock on the market for ill-gotten proceeds equaling tens of millions of 

dollars. 

71. Throughout this Relevant Period, the Individual Defendants made a conscious 

decision to adhere to Project Fuel despite the ramifications. In fact, they did so even though they 

knew legal compliance and remediation needs had neither been adequately studied nor 

addressed, and that public safety was at risk. 

Hospira Recalls Liposyn and Propofol for the Second Time 

72. Within weeks of receiving this correspondence from the FDA, Hospira faced 

another blow to its production efforts. The Company was forced to recall two drugs – Propofol 

and Liposyn -- for the second time in six months. Unsurprisingly, due to Hospira's poor 

manufacturing practices, the drugs had been contaminated by particulates during manufacturing. 

73. On April 27, 2010, Hospira filed with the SEC its quarterly report on Form 10-Q 

for the period ended March 31, 2010. Hospira's Form 10-Q reiterated the Company's Project 

Fuel initiatives, was signed by defendant Werner, and contained the required SOX certifications 

signed by defendants Werner and Begley. The Form 10-Q discussed "Certain Quality and 

Product Related Matters," and revealed that Hospira had placed a "voluntary hold" on its line of 

Symbiq infusion pumps. It also revealed, without providing specifics, that Hospira was now 

withholding shipment of certain products from its offending facilities but that the Company has 

"completed a substantial portion of the field corrections and other remediation activities." The 

Form 10-Q improperly claimed that: 
- 46 - 

Hospira has initiated and completed a substantial portion of the field 

corrections and other remediation activities with respect to the recalled products 

for which the related costs had been reserved for during 2009. It is possible that 

additional costs related to this recall may be required in future periods, based on 

modifications to the current remediation plans and changes in estimates as a result 

of ongoing dialogue with the FDA. 

In April 2010, Hospira placed a voluntary hold on all shipments 

of SymbiqTM pumps, a large volume infusion device, to new customers. Hospira 

initiated this hold after it received an unexplained increase in customer complaints 

related to the failure of the SymbiqTM pump to alarm at the end of infusion 

therapy under certain use conditions. Hospira cannot predict when it will lift this 

voluntary hold and is developing a comprehensive action plan to address this 

issue. 

* * * 

Hospira has recognized charges in Costs of goods sold for quality assessment 

and testing, materials, labor and freight to remediate the matters described 

above, which have not been significant to date to Hospira. 

74. On May 11, 2010, the Company responded to the SEC's April 13, 2010 letter. In 

its response, the Company purported that it would, in the future, describe "the failures 

experienced by the AC power cords" and would "provide more detail as to the contents of the 

Warning Letter." The Company's May 11, 2010 letter, provided additional details stating that 

Hospira was withholding shipments of Liposyn, Propofol, and Hospira's Symbiq infusion pump, 

but that the Company considered its remediation efforts to be "part of the ordinary course of its 

business." The letter stated, in relevant part: 

Your comment further requests additional disclosure related to the recall costs 

that were recognized, the specific products subject to recall and the related 

remediation efforts. The costs incurred in 2009 in connection with the AC power 

cord recall were not significant to the Company, and were approximately $6 

million pre-tax, which included costs primarily related to quality assessment and 

testing, materials, labor, and freight. The remediation activities related to the AC 

power cords are substantially complete, and the related costs were fully reserved 

for in 2009. This was disclosed in the Company's 2010 First Quarter Form 10-Q. 

The other voluntary product recalls in 2009 were limited in scope and not 

related to the AC power cord warning letter. The Company considered these 
- 47 - 

additional recalls to be part of the ordinary course of its business, namely the 

manufacture and sale of highly regulated pharmaceutical and device products. 

75. On July 16, 2010, the SEC responded to Hospira's May 11, 2010 correspondence. 

The SEC instructed the Company to confirm that its disclosures regarding the August 2009 

Warning Letter "describe[d] the deficiencies cited by the FDA regarding [the Company's] 

corrective action plans and specif[ied] the remediation activities that [the Company has] 

undertaken." 

The Individual Defendants Continue to Disseminate False and Misleading Statements 

Despite Two Warning Letters and Ongoing Remediation Efforts 

76. On July 28, 2010, Hospira issued a press release reporting the Company's second 

quarter 2010 financial results for the three months ended June 30, 2010. The press release touted 

the "improved manufacturing efficiency from the company's Project Fuel optimization 

initiatives" as one of the main forces driving growth, stating in pertinent part: 

"Hospira delivered another solid quarter, driven by strong performance in our 

Specialty Injectable Pharmaceuticals business and by continued momentum of 

our Project Fuel optimization initiatives," said Christopher B. Begley, chairman 

and chief executive officer. "We made significant progress in advancing our 

business during the quarter, launching our first product from Hospira India, 

commercializing our second biosimilar product in Europe and strengthening our 

position in acute-care proprietary pharmaceuticals. We are highly focused on 

executing our strategy of investing for growth and improving margins and cash 

flow, as well as on driving quality improvements across our global 

manufacturing organization. We remain on track to achieve our full-year 

earnings projections." 

* * * 

Adjusted* income from operations increased 20.6 percent to $213 million in the 

second quarter of 2010, compared to $177 million in the second quarter of 2009. 

Driving the majority of the increase were more favorable product mix and 

improved manufacturing efficiency from the company's Project Fuel 

optimization initiatives, offset by charges associated with certain quality and 

product-related matters. 
- 48 - 

77. Also on July 28, 2010, Hospira filed with the SEC its quarterly report on Form 

10-Q for the period ended June 30, 2010. The Company's Form 10-Q reiterated the cost 

reductions and future benefits associated with Project Fuel initiatives, was signed by defendant 

Werner, and contained the required SOX certifications signed by defendants Werner and Begley. 

The Form 10-Q stated, in part: 

Gross profit increased $23.0 million, or 6.6%, for the three months ended June 30, 

2010, compared with the same period in 2009. 

The gross profit increase was primarily the result of higher sales volume and 

favorable product mix including the impact of the U.S. oxaliplatin sales and 

continued higher sales of PrecedexTM. In addition, cost reductions associated 

with Project Fuel initiatives and the impact of foreign exchange contributed to 

the increase, partly offset by activities directly associated with the FDA's 

Warning Letter received in April 2010 and voluntary shipment holds on certain 

products, as previously described, as well as penalties for failure to supply 

customers and increased warranty charges on these and other products. 

78. On October 26, 2010, Hospira issued a press release reporting the Company's 

third quarter 2010 financial results for the three months ended September 30, 2010. The press 

release discussed the "continued contributions from Project Fuel" in helping the Company gain 

momentum, stating in pertinent part: 

"Hospira delivered a solid third quarter, despite difficult year-over-year 

comparisons from the temporary discontinuation of U.S. oxaliplatin sales and 

the impact of several divestitures," said Christopher B. Begley, chairman and 

chief executive officer. "During the quarter, we gained momentum on several of 

our existing and newly launched specialty pharmaceuticals; we saw continued 

contributions from Project Fuel, our companywide optimization initiative; and 

we made good progress on our quality-improvement efforts. We believe the 

efforts and advancements we are making this year position Hospira for another 

good year and continued growth going forward." 

79. On October 26, 2010, Hospira filed with the SEC its quarterly report on Form 10-

Q for the period ended September 30, 2010. The Company's Form 10-Q reiterated the 

Company's financial results, was signed by defendant Werner, and contained the required SOX 
- 49 - 

certifications signed by defendants Werner and Begley. The Form 10-Q further discussed 

"Certain Quality and Product Related Matters," and stated, in part: 

Hospira has made significant progress on completing a comprehensive review 

of its manufacturing operations to ensure compliance with applicable 

regulations. 

Hospira has responded to the April 2010 Warning Letter and is working closely 

with the FDA to conclude these matters. As part of Hospira's response, Hospira 

took immediate actions to address the FDA's concerns, including recalling the 

propofol and liposyn products manufactured at the Clayton facility and the 

fosphenytoin sodium injection products manufactured at the Rocky Mount 

facility. Hospira is also working with several third party experts to assist with 

the ongoing activities at both facilities. Hospira has implemented certain 

interim controls, including third party oversight, to ensure products 

manufactured at both facilities meet their specifications prior to release. The 

Warning Letter does not restrict production or shipment of Hospira's products 

from these facilities but Hospira is holding shipment of certain products 

pending its further investigation and discussions with the FDA. Hospira 

resumed shipment of certain products placed on voluntary shipping hold, but 

cannot predict when all products on voluntary hold will be reintroduced to the 

market. 

80. Analysts responded positively to the Individual Defendants' statements. On 

October 26, 2010, analysts from JP Morgan Chase & Co. ("JP Morgan") stated that the Company 

was "[p]ositioned for [s]ignificant 2011 [g]rowth," pointing to Hospira's "good progress on the 

measures it is taking to improve manufacturing quality at its facilities in Clayton and Rocky 

Mount, North Carolina which were the subject of an FDA Warning Letter earlier this year" and 

that the Company "remains on track to complete most of the improvements by year-end." On 

October 27, 2010, Morgan Stanley & Co. LLC analysts stated that Hospira "delivered a solid 

quarter" and that Project Fuel was producing clear benefits. On October 27, 2010, The 

Buckingham Research Group stated that Hospira's 2011 outlook "should benefit from some 

ongoing Project Fuel (optimization program) results with incremental year-year synergies." 

81. On February 2, 2011, Hospira issued a press release reporting the Company's 

fourth quarter and full-year 2010 financial results for the three and twelve months ended 
- 50 - 

December 31, 2010. The press release stated that the Company not only "made substantial 

progress" with its quality initiatives, but did so while meeting its "commitments with Project 

Fuel." This was an improper statement because in actuality, Project Fuel's cost-cutting measures 

were to blame for the Company's quality control manufacturing deficiencies. The press release 

stated in pertinent part: 

"2010 marked a year of progress for Hospira, despite several unanticipated 

challenges," said Christopher B. Begley, chairman and chief executive officer. 

"We launched gemcitabine, a large oncology drug, in the United States during the 

fourth quarter, the first generic version of the drug in the market; we expanded 

both our operations and portfolio geographically; we made substantial progress 

with our quality initiatives; and we met our commitments with Project Fuel, our 

corporate-wide optimization initiative. Looking forward, we expect a year of 

good growth in 2011, as we remain committed to transforming challenges into 

opportunities and driving continuous improvement across the organization." 

* * * 

2011 Projections 

Hospira expects net sales growth for full-year 2011 to be approximately 5 to 7 

percent on a constant-currency basis. The company expects foreign exchange to 

provide a positive contribution of approximately 1 percent, based on current 

exchange rates. The net sales projections assume U.S. launches during 2011 of 

two oncolytics, docetaxel and a solution presentation of gemcitabine. 

Adjusted* diluted earnings per share for 2011 are expected to be in the range of 

$3.90 to $4.00, or year-over-year growth of 18 to 21 percent. 

82. On February 16, 2011, Hospira filed with the SEC its annual report on Form 10-K 

for the fiscal year ending December 31, 2010. Defendants Begley, Werner, Bailey, Bowles, 

Curran, Hale, Sokolov, Staley, Wheeler, and von Prondzynski stated in the Company's Form 10-

K that the cost reductions associated with the Company's Project Fuel initiatives were only partly 

offset by issues relating to the April 2010 Warning Letter. This was an improper statement 

because shortly thereafter, the Individual Defendants would admit that remediation would take as 

much as three years and $375 million to complete, substantially more than offsetting any gains 
- 51 - 

achieved with Project Fuel. Discussing the Company's financial performance, Begley, Werner, 

Bailey, Bowles, Curran, Hale, Sokolov, Staley, Wheeler, and von Prondzynski stated, in relevant 

part: 

Net sales in the Americas segment increased 2.4%, or 1.5% excluding the impact 

of changes in foreign exchange rates. Net sales of Specialty Injectable 

Pharmaceuticals ("SIP") increased primarily due to increased volume for 

PrecedexTM, the launch of generic meropenem and gemcitabine and high-dose 

heparin introduced in late 2009. The increase was partially offset by a decrease 

in volume due to a voluntary hold on shipments of certain emulsion products. 

Other Pharma net sales decreased primarily due to the dispositions noted above 

and lower volumes in nutritional products. Net sales in Medication Management 

were lower driven by decreased volumes related to the voluntary hold on 

shipments of SymbiqTM to new customers, decreased sales of PlumTM and the 

disposal of the critical care business, partly offset by increased sales of dedicated 

administration sets. 

* * * 

Gross profit increased $58.0 million, or 4.0%, in 2010, compared to 2009. 

The gross profit increase was the result of higher sales volume primarily driven 

by growth in PrecedexTM and new product launches. In addition, cost reductions 

associated with Project Fuel initiatives and the impact of changes in foreign 

exchange rates contributed to the increase. These were partly offset by activities 

and related charges directly associated with the 2010 Warning Letter received 

from the FDA and voluntary shipment holds on certain products as well as 

penalties for failure to supply customers and increased product correction 

charges on these and other products. 

83. On March 24, 2011, Hospira issued a press release updating its financial 

projections and raising its outlook as a result of strong demand for its recently-FDA-approved 

drug, Docetaxel. The release also confirmed the Company's full year 2011 guidance. 

84. On April 26, 2011, Hospira filed with the SEC its quarterly report on Form 10-Q 

for the period ended March 31, 2011. The Company's Form 10-Q reiterated that remediation 

costs have not been significant for Hospira, was signed by defendant Werner, and contained the 

required SOX certifications signed by defendants Werner and Ball. The Form 10-Q further 

discussed the Company's "Certain Quality and Product Related Matters," and stated in part: 
- 52 - 

SymbiqTM Infusion Pumps

In April 2010, Hospira placed a voluntary hold on all shipments to new customers 

of SymbiqTM, a large volume infusion device. Hospira initiated this hold after it 

received an unexplained increase in customer complaints related to the failure of 

the SymbiqTM to alarm at the end of infusion therapy under certain use 

conditions. In June 2010, Hospira notified customers on interim steps to be taken 

by customers to mitigate this issue and to avoid the use conditions that can lead to 

the failure of the SymbiqTM to alarm at the end of infusion therapy. In 

August 2010, Hospira initiated a set recall related to the issue. Additionally, 

Hospira notified customers of reports of unrestricted flow when the 

SymbiqTM infusion set cassette is improperly removed from the pump before the 

pump's cassette door is fully opened. Hospira cautioned customers to allow the 

pump's cassette door to fully open before removing the infusion set as the pump 

may not alarm when the infusion set is improperly removed. The FDA has 

classified each of these actions as a Class I recall and Hospira is working closely 

with the FDA to conclude these matters. Hospira has not asked customers to 

return or cease using their SymbiqTM pumps. Hospira has recognized charges in 

Cost of products sold for quality assessment and testing, materials, and labor to 

remediate these matters, which have not been significant to date to Hospira. 

85. Reacting positively to the Company's seemingly strong results and announced $1 

billion stock repurchase program, analysts from JP Morgan issued a report titled "What a 

Difference a Qtr Makes; Solid Results Across Pharma And Medication Mgmt." In the report, JP 

Morgan raised its yearend 2011 price target to $66 per share. 

86. On July 27, 2011, Hospira filed with the SEC its quarterly report on Form 10-Q 

for the period ended June 30, 2011. The Company's Form 10-Q reiterated the Company's 

financial results, was signed by defendant Werner, and contained the required SOX certifications 

signed by defendants Werner and Ball. The Form 10-Q further discussed the Company's 

"Certain Quality and Product Related Matters," and stated in part: 

Hospira has responded to the April 2010 Warning Letter and is working closely 

with the FDA to conclude these matters. As part of Hospira's response, Hospira 

took immediate actions to address the FDA's concerns, including recalling certain 

products manufactured at the Clayton and Rocky Mount facilities. Hospira has 

worked with several third party experts to assist with the activities at both 

facilities. Hospira had implemented certain interim controls, including third party 

oversight, to ensure products manufactured at both facilities meet their 

specifications prior to release. Hospira has completed a comprehensive review of 
- 53 - 

its manufacturing operations to ensure compliance with applicable regulations, 

and continues to ensure compliance with new regulations. The Warning Letter 

does not restrict production or shipment of Hospira's products from these facilities 

but Hospira is holding shipment of certain products pending its further 

investigation and discussions with the FDA. Hospira resumed shipment of certain 

products placed on voluntary shipping hold, but cannot predict when all products 

on voluntary hold will be reintroduced to the market. 

In January 2011, the FDA conducted a follow-up inspection at the Clayton facility 

to evaluate Hospira's corrective actions in response to items raised in the 

April 2010 Warning Letter. The FDA did not issue an Inspectional Observation 

("Form 483") of any potentially objectionable conditions related to the Clayton 

inspection. The FDA conducted a follow-up inspection at the Rocky Mount 

facility in May 2011. The FDA issued a Form 483 for the Rocky Mount 

inspection listing their observations related to certain quality systems, facilities, 

and operating procedures. Hospira has submitted a response to the FDA, and 

continues to interact and work with the FDA to resolve the matters identified in 

the Form 483. 

During 2010, Hospira incurred charges of $54.3 million related to the activities 

associated with the matters cited above for the Clayton and Rocky Mount 

facilities as well as Hospira's assessment of the status of its quality operations 

on a holistic basis throughout its global manufacturing facilities. During 2011, 

Hospira continued to invest in quality operations throughout its global 

manufacturing facilities including at the Clayton and Rocky Mount facilities. 

However, to remediate the specific matters cited above, charges incurred were 

not significant during the three and six months ended June 30, 2011. 

87. The true facts, which were known by defendants but concealed from the investing 

public, were as follows: 

(a) Hospira suffered from extensive quality control issues, which undermined 

both the viability of and the supposed financial savings that would be generated by Project Fuel; 

(b) Hospira was unable to comply with problems identified in FDA Warning 

Letters related to Hospira's infusion pumps, quality control deficiencies, and manufacturing 

weaknesses; and 

(c) Hospira's revenue guidance for 2011 was misstated and lacked a 

reasonable basis when made. 
- 54 - 

88. Project Fuel was, according to defendant Werner, designed to produce 

"operational excellence." In truth, it produced operational disaster. 

89. As detailed in the Federal Securities Action, the foregoing statements concerning 

the purported success of Project Fuel and the Company's financial stability were known to be 

false and misleading to Hospira's insiders for the following reasons: 

(a) The Individual Defendants knew or recklessly disregarded and omitted to 

disclose that Rocky Mount's manufacturing operations were nowhere near "operational 

excellence" but in fact suffered from serious issues with regard to quality control and the 

deterioration of its facilities and equipment. By early 2010, for example, necessary quality 

control staff had been cut through Project Fuel, the plant's Standard Operating Procedures had 

been diminished and ignored, in-process quality sampling was eliminated, and pharmaceutical 

mixing processes were relying on unsound science and could not be validated. These problems 

were not being fixed but were actually worsening as a result of cost cutting pursuant to Project 

Fuel; 

(b) The Company's facilities and equipment were not in "good operating 

condition" or "well maintained"11 because, as former Senior Vice President of Operations James 

Hardy, Jr. ("Hardy") would later admit, Hospira had inherited "aged" facilities that were in need 

of a "facelift" and modernization that would cost millions of dollars, and they were further 

plagued with mold, equipment failures, antiquated and unusable DOS-based documentation 

systems, and other operational deficiencies; 

(c) The deficiencies at Rocky Mount and beyond were so substantial that, 

beginning in 2010, they resulted in widespread manufacturing disruptions and delays that caused 

 

11 As stated in Hospira's February 18, 2010 Form 10-K for the year ending December 31, 2009. 
- 55 - 

many of the Company's products to be on back order, which ultimately cost Hospira not only lost 

sales and revenues, but also tens of millions of dollars in hard costs each month as a result of 

"failure to supply" penalties; 

(d) In contrast to enjoying a "very good relationship" with the FDA, Hospira 

was, in fact, facing heightened scrutiny from the FDA as a result of its myriad production and 

quality control deficiencies, which scrutiny included an inspection of Rocky Mount in January 

2010 that revealed problems so severe as to warrant the second April 2010 Warning Letter; 

(e) Rather than "working closely with the FDA" and adapting to any 

regulatory changes following the August 2009 Warning Letter, from then and up to well over a 

year thereafter, the Individual Defendants made no concerted effort nor any meaningful 

commitment in dollars to address the FDA's concerns, particularly at Rocky Mount, as revealed 

by the issuance of the June 2011 and August 2011 Form 483s identifying even more problems at 

the plant; 

(f) The Company was not "actively involved in setting quality policies"12 but 

actually had encouraged a shift in corporate culture to reward "quantity over quality," which 

would take significant time and effort to reverse; and 

(g) The Individual Defendants hid from the market the devastating effects of 

Project Fuel on Hospira's manufacturing and quality assurance efforts, particularly at Rocky 

Mount. Instead of driving "sustainable," "long-term" profitability, in reality, Project Fuel's shortterm savings would be eclipsed by the long-term costs of the sacrifices in quality resulting from 

the initiative, which costs would include a remediation bill topping $300 million, the need to hire 

additional quality control personnel to ensure the safety of Hospira's products, and the eventual 

 

12 See id.
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- 56 - 

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- 57 - 

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- 58 - 

n overview 

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e Company's

a plunge of o

- 59 - 

for the first 

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conference 

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- 60 - 

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- 61 - 

But Mr. Hertz warned output may not recover to previous levels: "My 

interpretation, having read the correspondence, is that the FDA thinks the 

Rocky Mount plant has reached the end of its useful life, which would have 

serious long-term consequences for Hospira." 

Analysts also warned that the firm's focus on the Rocky Mount plant has 

distracted from a multiyear efficiency drive across the company, which had 

delivered significant savings in the last two years. 

The production problems mean revenue in the three months to the end of 

September is likely to be barely higher than the same quarter last year. Earnings 

per share are expected to fall 11 per cent from a year ago to 66 cents. Hospira 

also reduced guidance for full-year earnings to $3 from $3.95. 

98. Analysts reacted negatively as well. JP Morgan analysts pointed to the fact that 

the "[C]ompany offered little clarity on the timing of resolution of these issues" and stated "we 

are not expecting a near-term recovery in the stock." On October 25, 2011, Zacks Investment 

Research analysts downgraded Hospira to "underperform" from "neutral," stating: 

Hospira's third quarter preliminary results were below expectations due to 

continued manufacturing problems at the company's Rocky Mountain facility. 

The facility is expected to continue functioning below full capacity through the 

remainder of 2011. The additional costs for manufacturing remediation resulted 

in lost sales, inventory loss and lower service levels. In addition, management cut 

its 2011 adjusted earnings guidance to $2.95-$3.05 from $3.90-$4.00. We have 

slashed our 2011 earnings estimate from $3.93 to $3.01 and our 2012 estimates 

from $4.47 to $2.85, in line with management's action. Moreover, the Symbiq 

and Plum pump issues remain matters of concern. We have, therefore, 

downgraded our rating on Hospira from Neutral to Underperform. 

99. The startling announcements concerning Hospira's true condition continued on 

October 26, 2011, when the Company issued a press release entitled, "Hospira Reports ThirdQuarter 2011 Results." The press release provided, in pertinent part, as follows: 

Hospira, Inc. (NYSE: HSP), the world's leading provider of injectable drugs and 

infusion technologies, today reported results for the third quarter ended Sept. 30, 

2011. Net sales for the quarter were $977 million, and adjusted* diluted earnings 

per share were $0.66. (Adjusted* measures exclude certain specified items as 

described later in this press release and the attached schedules.) 

"As we indicated in our Oct. 18 press release, despite the continued contribution 

of recently launched products to revenue growth, our third-quarter results were 
- 62 - 

significantly impacted by developments related to our quality-improvement 

initiatives," said F. Michael Ball, chief executive officer. "Addressing these issues 

is Hospira's top priority, and our organization is committed to full resolution. I 

remain confident that Hospira will emerge from this process a stronger, more 

competitive global company that is optimally positioned to serve the needs of our 

customers and patients, and deliver strong value to our shareholders." 

* * * 

Net sales for the quarter were $977 million, an increase of 2.9 percent compared 

to $949 million in the third quarter of 2010, with the increase primarily driven by 

continued strong U.S. net sales of the oncolytic docetaxel. This was partially 

offset by the impact of certain quality actions taken in response to a U.S. Food 

and Drug Administration (FDA) 2010 warning letter and subsequent observations 

related to the company's manufacturing facility in Rocky Mount, N.C., and device 

quality and supply-related issues. On a constant-currency basis, third-quarter net 

sales increased slightly compared to the third quarter of 2010. 

Adjusted* income from operations for the third quarter of 2011 was $142 million 

compared to $189 million in the third quarter of 2010. The decline is primarily 

due to charges and costs associated with certain quality actions and related 

inventory losses. 

* * * 

2011 Projections 

As a result of the lower-than-expected third-quarter results, the company now 

projects net sales for full-year 2011 to increase approximately 1 to 2 percent on a 

constant-currency basis. On a reported basis, the company expects full-year 2011 

net sales growth of 2 to 3 percent. 

As the company announced on Oct. 18, 2011, adjusted* diluted earnings per share 

for full-year 2011 are expected to range between $2.95 and $3.05. 

* * * 

The company is revising its guidance for cash flow from operations, which is now 

projected to range between $350 million and $400 million. The company has also 

revised its projections for capital expenditures, which are now projected to range 

between $325 million and $350 million. Depreciation and amortization is 

projected to range between $230 million and $250 million. 

100. On this same date, Hospira filed its quarterly report on Form 10-Q with the SEC 

for the three months ended September 30, 2011, which included the financial results provided in 

the press release issued on October 26, 2011. The Form 10-Q was signed by defendant Werner, 
- 63 - 

included SOX certifications signed by defendants Werner and Ball, and provided, in pertinent 

part, the issues identified in the FDA Warning Letters as follows: 

Warning Letter 

In April 2010, Hospira received a Warning Letter from the FDA (the 

FDA's Warning Letter is publicly available on the FDA's website) in 

connection with the FDA's inspection of Hospira's pharmaceutical and 

device manufacturing facilities located in Clayton, North Carolina and 

Rocky Mount, North Carolina. In the Warning Letter, the FDA cited 

Current Good Manufacturing Practice deficiencies related to particulate 

in certain emulsion products at the Clayton facility and the failure to 

adequately validate the processes used to manufacture products at the 

Rocky Mount facility. The Warning Letter also asserts other 

inadequacies, including procedures related to the Quality Control unit, 

investigations, and medical reporting obligations. Hospira responded to 

the Warning Letter in 2010, and as part of its response, took immediate 

actions to address the FDA's concerns, including recalling certain 

products manufactured at the Clayton and Rocky Mount facilities. 

In January 2011, the FDA completed a follow-up inspection at the 

Clayton facility to evaluate Hospira's corrective actions in response to 

items raised in the Warning Letter. The FDA did not issue a Form 483 of 

any potentially objectionable conditions related to the Clayton 

inspection. The FDA completed a follow-up inspection at the Rocky 

Mount facility in June 2011, and issued a Form 483 listing observations 

related to certain quality systems, facilities, and operating procedures. In 

August 2011, the FDA completed an additional inspection at the Rocky 

Mount facility, which resulted in additional Form 483 observations that 

identified further areas for remediation and improvement. Hospira is 

implementing a comprehensive remediation plan, including obtaining the 

assistance of third party subject matter experts to help Hospira address 

the FDA's concerns. Hospira has implemented certain interim oversight 

controls, including third party oversight; product assessments; 

retrospective reviews of laboratory results related to out of specification 

findings and investigations; and the development and implementation of 

a comprehensive laboratory action plan. Hospira also has implemented 

significant management changes to the Rocky Mount facility's leadership 

team. 

* * * 

SymbiqTM Infusion Pumps 

In April 2010, Hospira placed a voluntary hold on all shipments of 

SymbiqTM infusion pumps to new customers. Hospira initiated this hold 
- 64 - 

after it received an unexplained increase in customer complaints under 

certain use conditions related to the failure of SymbiqTM to alarm at the 

end of infusion therapy. In June 2010, Hospira notified customers of 

interim steps to be taken by customers to mitigate this issue and to avoid 

the use conditions that can lead to the failure of SymbiqTM to alarm at the 

end of infusion therapy. In August 2010, Hospira initiated a set recall 

related to the issue. Additionally, Hospira notified customers of reports 

of unrestricted flow when the SymbiqTM infusion set cassette is 

improperly removed from the pump before the pump's cassette door is 

fully opened. Hospira cautioned customers to allow the pump's cassette 

door to fully open before removing the infusion set as the pump may not 

alarm when the infusion set is improperly removed. The FDA has 

classified each of these actions as a Class I recall and Hospira is working 

closely with the FDA to conclude these matters. Hospira has not asked 

customers to return or cease using their SymbiqTM pumps. Hospira has 

recognized charges in Cost of products sold for quality assessment and 

testing, materials, and labor to remediate these matters, which were $5.0 

million for the three and nine months ended September 30, 2010 and 

were $6.2 million in aggregate. 

Hospira has submitted the appropriate applications for modifications to 

its SymbiqTM infusion system to regulatory agencies in various countries. 

On March 31, 2011, Hospira submitted a 510(k) application with the 

FDA, which included software updates to further enhance the reliability 

of the infusion system, and to correct the recall issues impacting the 

device. The FDA submitted questions on the 510(k) application. Hospira 

has responded to the first round of questions, and is preparing its 

response to the second round of questions received from the FDA. 

Hospira incurred charges of $1.7 million in the three months ended 

September 30, 2011 related to remediation actions associated with the 

application. New customer pump placements for SymbiqTM will remain 

on voluntary hold until Hospira receives the clearance from the 

applicable regulatory agencies. Hospira believes this 510(k) application 

is one of the first in the industry to be submitted under recent FDA draft 

guidance for 510(k) clearances of infusion pumps, which makes it 

difficult to project the prospects and timeline for FDA clearance. 

PlumTM Infusion Pumps 

In December 2010, Hospira informed the FDA that it had received a 

number of customer reports associated with the Plum A+ TM and XL 

family of infusion pumps regarding failure of the pump's audible alarm 

under certain conditions. Hospira notified customers of the corrective 

action plan to address this issue. For the Plum A+TM pumps, the alarm 

failures are associated with the alarm assembly. For the Plum XLTM

pumps, the alarm failure is associated with fluid ingress and physical 

damage to the alarm assembly over time. Plum XLTM customers were 
- 65 - 

instructed to follow the proper cleaning procedure and inspect the alarm 

assembly for physical damage during routine maintenance. The Plum 

A+TM and Plum XLTM actions have been classified as a Class II field 

recall and the FDA is not requiring Hospira to remove any PlumTM

pumps from the market or halt production. Hospira recognized a charge 

of $26.0 million for the estimated costs of the field recall at the end of 

2010. Hospira is in the process of finalizing its recall plan and beginning 

the replacement of components for the Plum A+TM in the fourth quarter 

of 2011 and expects the remediation to extend through 2012. 

Comprehensive Medication Management Product Review 

In connection with the matters referenced above, Hospira committed to 

the FDA that it would engage in a comprehensive product review for 

each of Hospira's medication management products. The product reviews 

are designed to confirm compliance with current regulatory requirements 

and document safety and performance of the products. The product 

reviews will also include retrospective assessments of customer 

experiences with these products over the preceding two years. The 

product reviews will provide Hospira with important information for 

enhancing the reliability of these products and future products. The 

product reviews, related investigations and remediation are ongoing, and 

the initial reviews are focused on PlumTM, patient controlled analgesia 

(PCA) devices, and GemStarTM. Certain remediation actions, such as 

product recalls or corrective field actions, for Hospira's medication 

management products have been, and may be required upon finalization 

of the product reviews. Hospira expects that the product reviews will be 

completed by the end of 2012 and expects that the remediation actions 

resulting from these reviews could extend over the next two to three 

years. 

In the three months ended September 30, 2011, Hospira incurred charges 

of $26.4 million for certain remediation actions, including recalls, related 

to outcomes of the product reviews and related investigations, primarily 

related to PlumTM products. As described in the section above captioned 

"PlumTM Infusion Pumps," this $26.4 million is in addition to a charge of 

$26.0 million recognized in 2010 for recall costs related to PlumTM. 

These remediation charges are based on management's best estimate of 

the committed corrective actions and consist primarily of development 

costs to address any identified issues and costs for the roll-out or 

deployment to the impacted customer base. 

Financial Related Impact 

For the historical period from the beginning of these matters through 

the period ended June 30, 2011, Hospira had incurred approximately 

$90.7 million of charges for these quality and product related matters 
- 66 - 

referenced above. In addition, beginning with the three months ended 

September 30 2011, Hospira expects to incur over the next two to three 

years, aggregate pre-tax charges related to these quality and product 

related matters in the range of $300 million to $375 million, of which 

Hospira incurred an aggregate of $52.4 million in the three months 

ended September 30, 2011. The amount, timing and recognition of 

charges associated with these matters over this time period will be 

affected by the nature of spending and the occurrence of commitments 

and triggering events as defined under GAAP, among other factors. 

Further, costs for long-term solutions and product improvements will 

depend on various product development efforts and corresponding 

regulatory outcomes in connection therewith. Also, capital expenditures 

to remediate and/or enhance Hospira's existing facilities and 

operations may be required. See matters discussed in section "Facilities 

Optimization and Capacity Expansion" in Item 2. 

101. During a conference call held on this same day to discuss Hospira's financial 

results, the Company again disclosed that estimated costs for remediation are between $300 

million and $375 million over the next three years. Hospira also revealed that the issues 

identified in the FDA Warning Letters were far more widespread than had originally been 

revealed. Hospira disclosed that the FDA was withholding approval of products emanating from 

the Company's Austin, Texas plant ("Austin"), not just its Rocky Mount facility, and that the 

manufacturing issues were being looked at for all of its plants. 

SUBSEQUENT REVELATIONS AND DEVELOPMENTS 

102. The scope of the Company's quality control and manufacturing deficiencies is 

wide-ranging, belying Hospira's optimistic statements during the Relevant Period concerning the 

Company's condition. On November 29, 2011, Bloomberg published an article entitled, 

"Hospira May Face 'Widespread Production' Delays." The article noted that Hospira faces 

"widespread" production breakdowns and manufacturing issues that are "far greater than 

investors realize," all of which "could take two to three years to correct." The article reported in 

pertinent part as follows: 
- 67 - 

Hospira Inc., the maker of generic injectable drugs, may face 

"widespread" production breakdowns that could take two to three years 

to correct, an analyst at RBC Capital Markets LLC said. 

Hospira, based in Lake Forest, Illinois, dropped 9.1 percent to $28.17 at 

the close of trading, the lowest price since March 23, 2009. The 

problems may indicate a systemic issue that will have to be rectified long 

term, Shibani Malhotra, an RBC analyst in New York, said in a note 

today. The shares' decline may leave the company vulnerable to a 

takeover, Malhotra said in an e-mail. 

* * * 

Interviews with consultants working with companies that are regulated 

by the Food and Drug Administration suggest the federal agency may 

obtain a consent decree to ensure violations at Hospira are fixed, 

Malhotra said. Hospira has been working to correct flaws that led to 

recalls of two drugs in 2009 and 2010. 

Hospira's manufacturing issues are "far greater than investors realize," 

Malhotra said in the note. While she did not detail the flaws, she did say 

the violations were across "multiple facilities; perhaps even globally." 

103. Due to these events, the credibility of Hospira management was called into 

question. "You feel a little duped, I guess," said Michael Meyer, an analyst and portfolio 

manager at Philadelphia-based investment firm Cooke & Bieler. On December 7, 2011, 

defendant Begley announced his retirement, with the Chairman position passing to defendant 

Staley. 

104. On January 1, 2012, new Hospira CEO, defendant Ball, spoke at a JPMorgan 

Global Healthcare Conference Breakout Session. Ball compared identifying Hospira's quality 

issues to draining a "swamp." He stated: 

It's going to take resources and it's going to take some time and we will 

find the odd gator along the way. But I think we can deal with them. So 

that's why I want to – but I also don't want to mislead anybody to say 

this is – the swamp is completely drained and I see the way forward. I 

do see the way forward but it will have some bumps associated with it in 

the near term. But again, I am taking the long-term view of this 

Company in saying if we get through – when we get through these 

manufacturing issues we've got great opportunities in front of us which 
- 68 - 

is why I want to keep the pedal to the metal on research and development 

and our remediation activities. 

105. Ball also admitted that third party comprehensive audits were just then being 

ordered (i.e., something that should have been done before Project Fuel was launched): "I am 

currently sending out third party to do an audit of our QA facilities across the United States. So I 

want to be able to say to the FDA that we are on top of these things and demonstrate not by our 

words but by our actions that we mean business." 

106. On February 13, 2012, Hospira announced that it had hired Zena Kaufman, 

former Vice President for Global Quality Systems at Abbott, to join the Company as Senior Vice 

President-Quality. A press release issued that day stated: 

"Zena is a recognized global expert in pharmaceutical quality systems, and her 

proven experience will help establish quality as a strategic, competitive advantage 

across our global operations," said Mr. Ball. "Hospira remains fully dedicated to 

restoring our long-established reputation for the highest-quality products and 

best possible service for our customers, and I'm confident we now have the right 

team in place to deliver against these imperatives." 

Under Ms. Kaufman's leadership, Hospira will advance its global quality and 

compliance strategies, drive the continuous improvement of established quality 

procedures to ensure that processes and products meet high internal standards 

and regulatory requirements, and ultimately deliver high-quality, cost-effective 

products to customers. 

107. On February 14, 2012, Hospira held its annual conference call to discuss its 2011 

fourth quarter results and results for the full calendar year. CEO defendant Ball stated in his 

opening remarks: 

The most recent update we provided on our quality transformation was at the JP 

Morgan conference on January 10. I said at that time, and will reiterate on our call 

today, that reinforcing the foundation is our number one priority. I continue to be 

personally involved in discussions with the FDA, and am closely monitoring our 

progress. At JPMorgan, as you may recall, we discussed our headway to date at 

Rocky Mount, including submitting our comprehensive remediation plan to the 

FDA, closing out documentation more quickly to be able to more expeditiously 

release product, ramping up third-party assistance and oversight, and bringing in a 

new team of leadership at Rocky Mount to drive sustainable cultural change. 
- 69 - 

At the conference, we heard that there was some confusion regarding our planned 

maintenance shutdown of Rocky. Some investors had the impression that the 

shutdown was FDA-imposed. I want to clarify that this was not the case. Every 

December, Rocky shuts down for general preventive maintenance. We conducted 

our regularly scheduled maintenance shutdowns in late December as usual. We 

then elected to extend the amount of time the plant was shut down, as well as 

halted the release of product, to allow us to work on certain issues and advance 

some capital improvements. At JPMorgan, we indicated that we expected 

production and product releases to resume in a staged manner over the coming 

weeks.

So what has happened since our last update in January? Well, Rocky Mount 

completed its shutdown. In mid-January, the plant started producing product, and 

over the course of the following weeks began releasing product. Rocky's current 

production levels are returning to where they were prior to the shutdown, in the 

60% to 70% range. We have continued our regular constructive dialogues with 

the agency regarding our current progress. We have not entered into any 

discussions with the agency regarding a consent decree. As we have mentioned 

numerous times in the past, we would tell you if this were to happen. We are 

scheduled to meet with the agency in the next couple of weeks, and expect that 

our remediation plan will be a topic of discussion at that meeting. In the interim, 

we are continuing to implement the remediation plan as submitted.

At our Austin plant, you may recall we indicated that we had signed on a thirdparty consulting firm, Lachman, to verify the status of our 483 commitments. 

Lachman finished their audit, and concluded that 100% of the commitments we 

made in our action plan have been fully addressed. At our McPherson plant, we 

submitted our response to the FDA regarding the 483 observations from the 

inspection that closed out in early January of this year. We will be meeting with 

the FDA shortly to discuss our response and are proceeding to work through that 

plan. 

Finally, we continue to advance our efforts proactively and holistically across our 

manufacturing footprint to assess our readiness for future FDA inspections. I will 

reiterate that I remain firmly committed to reinforcing our foundation, and 

instilling a culture of high quality throughout this organization. I'm confident that 

as a result of our initiatives, Hospira will be even better positioned as the world's 

leading provider of the highest quality injectable drugs and infusion technologies. 

108. On this same conference call, defendant Werner was asked about the possibility 

that Hospira would be saddled with an FDA Consent Decree. He responded: "All I know is that 

we are doing the best job possible of getting the situation fixed, continuing to dialogue with the 

FDA to ensure that they're on board, and know what when we are doing. And I think in that 
- 70 - 

respect, moving forward, I like our chances. But again, I don't think anybody ever really 

knows." 

109. Werner was also asked about the status of remediation efforts at Hospira's Austin 

facility. He stated: 

Austin is quite a bit smaller than our Rocky Mount facility. And from my 

standpoint, as you look at the 483s, in my view, Rocky Mount had a lot more 

work to do than the Austin facility. Having said that, the Austin 483, as we 

mentioned before, was not great. And so I was very pleased that the plant went 

through the remediation process. They indicated to us that they'd completed all 

their commitments. As I mentioned before, a couple days later then we sent in 

Lachman to get a third-party verification on that. So I was extremely happy that 

everything is 100% A-okay from their standpoint. And we're looking and 

continuing to look at third parties reviewing our plants to ensure that, A, we're 

living up to our commitments. But also, B, that we have a state of FDA readiness, 

as the FDA comes through with another round of reviews and inspections. 

110. On April 11, 2012, Hospira named a veteran pharma industry executive as its new 

Vice President Operations. This new Vice President was expected to "advance its plant 

remediation strategies." 

111. On May 1, 2012, Hospira announced much diminished sales in profits for its first 

quarter as compared with the first quarter of the previous year. It attributed these differences to 

ongoing remediation costs, and slowdowns. As reported in the May 2, 2012 Chicago Tribune, 

Hospira was encountering "new" difficulties, while trying to address existing ones: 

Hospira Inc. said Tuesday that its first-quarter net income fell 73.2 percent, to 

$40.2 million, a decline the company blamed on costs associated with 

continuing remediation efforts at its manufacturing plants and a lower supply 

of some key products. 

The Lake Forest-based maker of generic injectable drugs and intravenous pumps, 

battered by a string of quality-control problems cited by the U.S. Food and Drug 

Administration, said sales dropped 3.6 percent, to $965.9 million. 

Adjusted for one-time charges, earnings dropped 49 percent, to $104 million, or 

47 cents a share, down from $203 million, or 93 cents a share, in the same quarter 

of 2011. 
- 71 - 

Analysts polled by Thomson Reuters expected earnings of 45 cents a share on 

revenue of $949.7 million. 

Hospira shares finished up 1.1 percent, at $35.50. 

The company, which has struggled with growing costs to address regulatory 

concerns at its giant Rocky Mount, N.C., plant, also said in a filing on Tuesday 

that it received additional FDA concerns about a another plant in Clayton, N.C. 

In a call with analysts, Hospira Chief Executive F. Michael Ball said the company 

has spoken with the agency about its concerns at the Clayton plant and is making 

progress on addressing them. 

Ball also said remediation efforts continue at the Rocky Mount plant, which has 

been under FDA scrutiny for more than two years for what the agency called 

subpar manufacturing processes. 

The Rocky Mount plant, which manufactures injectable drugs, including 

anesthesia products, irrigation and intravenous solutions and renal and 

cardiovascular care products, produces nearly a quarter of Hospira's annual profit. 

In response to the problems, the company has replaced several members of its 

management team, brought in teams of consultants and invested in manufacturing 

process improvements. 

112. On a May 1, 2012 conference call, defendant Ball provided an update which 

detailed Hospira's continuing struggles, which were so vast they required the attention of 150 

consultants: 

Let's start with Rocky Mount. First, we remain on track with our 

remediation efforts at the plant. As we indicated on our fourth-quarter 

earnings call in February, we are currently maintaining our production 

and release levels in the 60% to 70% range, and anticipate that we will 

remain at these levels through at least mid-year.

Second, we are also making progress with our hiring efforts at Rocky. 

We have placed over 100 full-time employees at the plant since the 

beginning of the year. This is in addition to the more than 150 

consultants we already have working on the plant floor with our 

employees, and assisting us with our remediation efforts. We expect 

these consultants to remain with us for most of the year, after which we 

expect to steadily ramp down as our internal staff takes over many of 

the roles and responsibilities the consultants have been performing for 

us.
- 72 - 

And finally, we have continued our regular constructive dialogues with 

the FDA regarding our current progress at Rocky, and continue to press 

forward with implementation of our remediation plan. The agency has 

told us they are willing to meet with us to discuss our plan, and we are 

communicating with them to finalize a date.

Moving to our other pharma facilities – at our Clayton plant, which is 

also cited under the warning letter with Rocky Mount, the FDA 

conducted an inspection in March. The inspection was not a full cGMP 

audit, but a limited inspection focused on a specific issue. The agency 

had one observation regarding how we conduct investigations, which we 

did not deem to be critical in nature. We have already addressed and 

completed the corrective action for this observation. 

In addition, during the month of March, we encountered some 

manufacturing issues at the plant, and elected to shut down production 

to investigate. This has created a temporary shortage situation with 

Propofol, and has also impacted certain contract manufacturing 

customers. Last week we completed the corrective action, which we 

believe addresses the issue. We have restarted production, and will begin 

a staged release of quarantined product in the coming weeks. 

At our Austin plant – we discussed on our fourth-quarter earnings call 

that we had retained Lachman, a third-party consulting firm, to audit the 

completion of the plant's corrective actions. They concluded that all of 

the commitments we made to the agency in our action plan had been 

fully completed. In March, we received, from the FDA, what is referred 

to as an untitled letter. The letter clarified the agency's expectations 

regarding the scope of some of our corrective actions we took to resolve 

the observations in the 483 they issued last year. We have responded to 

the letter with our plan to address their concerns. And with the additional 

corrective actions in place, we'll be better prepared for their next 

inspection. 

113. On August 1, 2012, Hospira held a conference call to discuss second quarter 2012 

results. CEO defendant Ball again addressed persistent and difficult remediation issues: 

[W]e continue to progress with our remediation efforts at Rocky Mount, our 

annual preventative maintenance shutdown went as planned and we are bringing 

the lines back into production. 

* * * 

As our remediation program progresses across our plants, we have uprooted 

additional issues, some of which have unfortunately resulted in product recalls, 

inventory loss and production disruptions. We are driving to root cause and 
- 73 - 

implementing corrective actions. As we have said in the past, we believe 

identifying and resolving these issues signifies that we are moving in the right 

direction on our journey to achieving sustainable compliance. 

Let me provide additional details on some of these activities starting with Rocky 

Mount....we started the plant back up in a phased approach and are returning to 

the 60% to 70% production and release levels. We expect to remain at this level 

during the third quarter and then modestly increase through the end of the year. 

* * * 

[I] know many of you are looking forward to an update on our interactions with 

the FDA, we have continued to have constructive and productive dialogue with 

the agency including two meetings on Rocky Mount during which we discussed 

our comprehensive action plan and our progress to date. One of the meetings was 

at the FDA's headquarters, or the center, and included representatives from 

districts as well as the Office of Compliance and the Office of Drug Shortage. 

While final minutes in the meeting are circulating at the agency for comments, we 

believe the FDA has accepted the work plan that we previously submitted. The 

agency acknowledged that we were moving in the right direction with the right 

level of commitment, but indicated they needed to see continued progress. We 

realize that much work remains to be done, but left the meeting encouraged. 

As part of our continuing global quality efforts, we are reviewing our quality 

systems across all of our plants. Where there are gaps, we are bringing in thirdparty support on an interim basis as we improve the system. We've already 

started implementing this at Austin and Boulder and will be looking at the other 

plants as we proceed our assessments. 

* * * 

At our Boulder plant, the FDA performed an inspection at the facility and 

issued seven observations. Boulder is a small oncolytic API plant and the 

observations centered around cleaning validation, process validation and 

laboratory investigations. We have responded to the FDA with our plan to 

address the observations, and in a subsequent meeting, the agency did not object 

to the scope of our planned corrections. 

* * * 

At Austin, just this Monday, the FDA began both a follow-up inspection and a 

general cGMP inspection of this site. We recognize that we are receiving 

heightened scrutiny from the FDA as the agency is interested in monitoring our 

progress and ensuring compliance across our manufacturing facilities. We support 

this ongoing interaction with the agency as we believe it will not only help ensure 

that our remediation efforts meet their expectations, but it also supports the 

holistic improvement initiatives we're committed to making across our 

manufacturing footprint.
- 74 - 

* * * 

So as you can see, we had a very busy quarter and continue to move forward with 

both our pharma and device remediation efforts. I realize that some of you are 

concerned about the length of time this is taking and that additional issues keep 

bubbling up. However, from my perspective, we are making progress and we are 

seeing encouraging signs of improvement. 

* * * 

Using the swamp analogy I've referenced over the past several quarters, we are 

draining the swamp and dealing with the gators we have uncovered. As I've 

reiterated numerous times, I am committed to resolving our quality issue and 

getting as much done in 2012 as possible. I believe the FDA understands, and I 

know that our employees do as well, my commitment in this respect. But, it is 

not a quick fix, it's complex, it takes time and money and there may be 

additional gators yet to be uncovered along the way. That said, I know we will 

get through this, it's a matter of when not if, and when we do, we will be in a 

much stronger competitive position. 

114. As CEO defendant Ball concedes, Hospira's problems are so severe and 

widespread that there is no assurance that can be given that they all have even been identified, let 

along rectified. In fact, more and more issues keep coming to light. On July 16, 2012, Hospira 

was forced to recall four cancer drugs. As Reuters reported in an article titled, "Hospira Recalls 

Four Cancer Drugs For Glass Particles": "Hospira Inc said it has issued a nationwide recall of 

four of its injectable cancer drugs because of particles embedded in the glass at the neck of the 

vial.... Injury could result if the solution were injected into a patient, the FDA said. Signs and 

symptoms might include bleeding, bruising, inflammation, itching, rash, chest pain and 

respiratory symptoms." On August 16, 2012, yet another drug was recalled due to an "overdose 

risk." And most recently, on August 26, 2012, Hospira received yet another Warning Letter, 

raising the possibility of an FDA Consent Order. 

The August 2012 Warning Letter 

115. On August 28, 2012, Hospira filed a Form 8-K with the SEC announcing that the 

Company had received yet another Warning Letter from the FDA, dated August 23, 2012 (the 
- 75 - 

"August 2012 Warning Letter"). The August 2012 Warning Letter was summarized in the Form 

8-K as follows: 

On August 23, 2012, Hospira, Inc. (the "Company") received a warning letter 

from the U.S. Food and Drug Administration (FDA) related to an inspection of 

the Company's La Aurora de Heredia, Costa Rica device manufacturing facility 

from April 16, 2012 through April 19, 2012. The Costa Rica site manufactures 

most of the Company's infusion devices and sets. A copy of the FDA's warning 

letter is filed as Exhibit 99.1 to this Form 8-K and is incorporated herein by 

reference. 

The warning letter does not restrict production or shipment of the Company's 

products from this facility. The Company is still in the process of evaluating what 

corrective actions, and associated costs, are required to address the matters raised 

in this warning letter. 

The Company takes this matter seriously and intends to respond fully, and in a 

timely manner, to the FDA's warning letter. Until the violations are corrected, the 

Company may be subject to additional regulatory action by the FDA, including 

the withholding or delay of approval of applications, seizure, injunction, and/or 

civil monetary penalties. Any such actions could significantly disrupt our ongoing 

business and operations and have a material adverse impact on our financial 

position and operating results. There can be no assurance that the FDA will be 

satisfied with the Company's response. 

116. The August 2012 Warning Letter states in relevant part as follows: 

During an inspection of your firm located in La Aurora de Heredia, Costa Rica, 

on April 16, 2012, through April 19, 2012, an investigator from the United States 

Food and Drug Administration (FDA) determined that your firm manufactures 

Symbiq, Plum, Gemstar, and Lifecare PCA branded infusion pumps and 

intravascular administration sets. Under section 201(h) of the Federal Food, Drug, 

and Cosmetic Act (the Act), 21 U.S.C. § 321(h), these products are devices 

because they are intended for use in the diagnosis of disease or other conditions or 

in the cure, mitigation, treatment, or prevention of disease, or to affect the 

structure or function of the body. 

This inspection revealed that these devices are adulterated within the meaning of 

section 501(h) of the Act, 21 U.S.C. § 351(h), in that the methods used in, or the 

facilities or controls used for, their manufacture, packing, storage, or installation 

are not in conformity with the current good manufacturing practice requirements 

of the Quality System regulation found at Title 21, Code of Federal Regulations 

(CFR), Part 820. 

We received a response from Messrs. Randall Obanda, Site Quality Director, and 

Pedro Castillo, Devices Serialized Plant Manager, dated May 8, 2012, concerning 
- 76 - 

our investigator's observations noted on the Form FDA 483 (FDA 483), List of 

Inspectional Observations, which was issued to your firm. We address this 

response below, in relation to each of the noted violations. These violations 

include, but are not limited to, the following: 

1. Failure to identify the actions needed to correct and prevent recurrence of 

nonconforming product and other quality problems, as required by 21 CFR 

820.100(a)(3). 

For example, your firm initiated a recall in February 2011 due to a failure of 

audible alarms on Plum branded infusion pumps. A corrective action was initiated 

with the supplier, Projects Unlimited Incorporated (PUI), to correct defective 

components on the piezoelectric assembly. The original piezo alarm, Hospira part 

number 830-03329-005, was redesigned with new specifications and provided a 

new part number (830-03329-006) effective November 11, 2011. In March of 

2012, your firm received multiple complaints of no audible alarms on Plum 

devices after the supplier corrective action was initiated. 

Your firm did not respond specifically to this citation because it was not listed on 

the FDA 483 issued to your firm. 

2. Failure to implement and record changes in methods and procedures needed to 

correct and prevent identified quality problems, as required by 21 CFR 820.100(a)(5). 

For example: 

a) Your firm initiated a recall (Z-3284-2011) in September 2011 to correct an 

unrestricted free-flow condition on Plum branded infusion pumps. An 

investigation was conducted and corrective actions were implemented by Hospira 

to ensure that proper installation of the regulator closure (source of the failure) 

was completed during manufacturing. During review of the regulator closure 

installation, the investigator noted an obsolete instruction in procedure 502-

95004-006, Mechanism Assembly Instructions PLUM A+, to insert the regulator 

closer with a flat-head screw driver. The corrective action for recall Z-3284-2011 

calls for the regulator closer to be installed using a force gauge with an applied 

force of 20-25 pounds. 

b) One of the corrective actions implemented for recall Z-3284-2011 was to 

perform a visual inspection after installation of the regulator closure. The 

Mechanism Assembly Instructions PLUM A+ procedure, 502-95004-006, 

requires a visual inspection of the assembly after installation of the regulator 

enclosure. During the observation of the regulator closure installation, the 

investigator noted that the visual inspection did not occur.

The adequacy of your firm's response dated May 8, 2012, cannot be determined at 

this time. Your firm revised procedure 502-95004-006, Mechanism Assembly 

Instructions PLUM A+, to delete the instruction to install the regulator closure 

with a screw driver. However, no details of the consideration of a systemic 
- 77 - 

corrective action for all manufacturing procedures were provided. Your firm also 

provided training documentation for the visual inspection required during 

regulator closure installation. However, your firm did not provide documented 

evidence that the visual inspection is being performed in the manufacturing 

process. 

3. Failure to evaluate suppliers, contractors, and consultants on the basis of 

their ability to meet specified requirements, including quality requirements. 

The evaluation shall be documented, as required by 21 CFR 820.50(a)(1). 

For example: 

a) Your firm initiated a recall in February 2011 due to the failure of audible 

alarms on Plum branded infusion pumps. The source of the failure was due to 

faulty components on the piezoelectric assembly. A supplier corrective action was 

initiated with PUI, the supplier of the piezoelectric assembly. PUI was classified 

as a Tier 2 supplier per Hospira's Supplier Quality Program Management 

document, 972-93069-002. In your firm's Supplier Evaluations Procedure, 

QSM.10.007, issue date August 31, 2011, Tier 2 suppliers require a For Cause 

Audit to identify root or probable causes of an identified issue. A 

Routine/Qualification Audit, performed on September 21, 2011, was the only 

supplier audit performed by Hospira for PUI. 

The adequacy of your firm's response dated May 8, 2012, cannot be determined at 

this time. Your firm planned a For Cause audit of PUI; however, completion of 

the audit was not scheduled until June 30, 2012. Your firm also changed PUI's 

status from Tier 2 to Tier 1, increasing the risk-level classification, which would 

require an annual evaluation of the supplier. Additionally, your firm intends to 

conduct retrospective reviews of supplier-related adverse quality trends and 

reclassify all suppliers based on risk level. Your firm also indicated that it will 

evaluate Quality System metrics and determine if additional actions should be 

implemented to monitor suppliers. The Corporate Supplier Evaluation Procedure, 

QSM.10.007, was updated to establish performance of For Cause audits and to 

reclassify suppliers to Tier 1 if they have negative/significant quality trends. 

However, your firm did not address employee training on the new Supplier 

Evaluation procedure. Lastly, evidence of implementation of corrective actions 

and systemic corrective actions was not provided. 

b) Exception Report Record, PR ID: 41660, detailed a complaint of over-delivery 

by a Plum XLD pump. Your firm determined that the supplier, Benchmark 

Electronics, had installed the incorrect Y2 crystal board component, which had a 

frequency rating of 12 MHz instead of 16 MHz. The Y2 crystal sends signals to 

drive motors on the pump. In the exception report, the pump was programmed to 

deliver 1497 ml at a rate of 62 ml/hr. The device infused the entire dose 4 hours 

and 30 minutes early due to the incorrect Y2 crystal. Benchmark Electronics was 

classified as a Tier 2 supplier per Hospira's Supplier Quality Program 

Management document, 972-93069-002. In your firm's Supplier Evaluations 
- 78 - 

Procedure, QSM.10.007, issue date August 31, 2011, Tier 2 suppliers require a 

For Cause Audit to identify root or probable causes of an identified issue. Hospira 

performed only three Routine Audits on May 9, 2011, February 20, 2009, and 

June 19-20, 2008, for Benchmark Electronics. There was no evidence that a 

For Cause Audit was conducted.

Your firm did not respond specifically to this citation because it was not listed on 

the FDA 483 issued. 

4. Failure to establish adequate procedures for acceptance of incoming 

product, as required by 820.80(b). 

For example, your firm initiated a change to the piezo alarm, part number: 830-

03329-005, due to a recall resulting from the failure of the audible alarm on the 

Plum branded infusion pumps. The corrective action was to implement changes to 

the printed circuit board and piezo alarm and have the supplier, PUI, perform 

Highly Accelerated Stress Surveillance (HASS) testing. Since implementation of 

the corrective actions, 50 lots of the redesigned piezo alarm were received by 

your firm; however there was no documented inspection or testing of this 

critical component. Additionally, Hospira did not have any records of HASS 

testing results. 

The adequacy of your firm's response cannot be determined at this time. Your 

firm established a new requirement to include HASS testing results on the 

Certificates of Analysis (COA) for PUI. Your firm also indicated that it will 

determine if any other requirements are needed on PUI COAs. These actions are 

not scheduled for completion until July 30, 2012. Additionally, your firm 

indicated that it will assess all critical suppliers to assure compliance with COA 

requirements. Your firm also indicated that it will develop a process to ensure that 

all COAs and Certificates of Compliance are reviewed and approved prior to 

product acceptance and use. These actions are not scheduled for completion until 

August 30, 2012. To date, no evidence of implementation of any completed 

corrective action or systemic corrective action was provided to FDA.

5. Failure to maintain device history records (DHRs). The DHR shall include, 

or refer to the location of, acceptance records that demonstrate that the device is 

manufactured in accordance with the Device Master Record, as required by 21 

CFRP 820.184(d). 

For example, during the observation of the regulator closure installation for Plum 

A+Infusion Pump, serial numbers 4510593 and 4510594, the investigator 

identified that the associated DHRs did not include documentation of the visual 

inspection for successful installation. This observation was confirmed in a 

discussion with the Quality Manager of Hospira's Regulatory Compliance and 

Service Center. The visual inspection was identified as a corrective action for 

recall Z-3284-2011. 
- 79 - 

We reviewed your firm's response and conclude that it is not adequate. Your 

firm stated that local change management procedures will be revised to ensure 

that all necessary inspectional activities for the manufacturing process will be 

appropriately documented in the DHR. This activity, however, was not scheduled 

for completion until July 15, 2012. Additionally, your firm did not address plans 

for DHR training. Finally, no documentation of implemented corrective actions 

for Plum A+ Infusion Pump DHRs or systemic corrective actions for other 

infusion pump models was provided. 

A follow-up inspection will be required to assure that corrections and/or 

corrective actions are adequate. 

117. The August 2012 Warning Letter details how, among other things, Hospira's 

initial responses to the FDA inspections were inadequate and that the Company has yet to make 

changes to correct its ongoing problems. 

118. The August 2012 Warning Letter further demonstrates that even after being 

apprised and having knowledge of the problems identified by the FDA concerning the 

Company's Costa Rica facility, as well as the two previous Warning Letters regarding the 

Company's other facilities, the Individual Defendants continue to fail to take appropriate steps to 

rectify the Company's serious internal control issues and ongoing FDA violations. 

INSIDER SELLING 

119. The Individual Defendants' knowledge of the true health of Hospira's business and 

the extent of the manufacturing defects and deficiencies is also shown in certain Hospira officers' 

and directors' sales of personally-held stock. The Insider Selling Defendants, Werner, Begley, 

Kearney, Ramachandra, and Smith were privy to adverse, non-public information which they 

exploited for their own benefit, to the exclusion of other shareholders, by selling their Company 

stockholdings before the truth came to light. While continuously making or causing the 

Company to make improper statements touting Hospira's purported manufacturing efficiency and 

positive growth, and effectively concealing the extent of remediation efforts needed to respond to 
- 80 - 

the FDA investigations, certain officers and directors sold massive amounts of Company stock in 

order to capitalize on the Company's inflated stock price they had helped create.14

120. Hospira's susceptibility to insider trading stems from its compensation policies 

and lax insider trading restrictions. Like many companies, Hospira grants incentive stock 

options to executives as part of its basic compensation package. As stated in Hospira's Form 

DEF 14A filed on March 23, 2012, top executives are accorded annual salaries, but these are set 

"at or below" the median numbers paid by similar companies. More compensation may be 

gained through the exercise of options issued at low strike prices, and the sale of acquired stock 

at higher prices, but this creates an incentive for insiders to artificially inflate the stock. Most 

corporations attempt to prevent insider selling by imposing regularly scheduled "blackout 

periods," event-specific blackout periods, or "preclearance policies" (i.e., an insider must seek 

advance permission for sales from a compliance officer, who will determine if there is a peculiar 

risk of insider trading). Experts in this area recommended that there be a time delay of at least 

one quarter between the initiation of a selling plan and actual selling, in order to prevent 

opportunism. 

121. In the spring of 2010, the Individual Defendants were aware that the Company 

had received two Warning Letters from the FDA discussing the Company's severe compliance 

and safety issues. The receipt of such letters was unprecedented for Hospira — in its history as 

an independent Company it had never received a Warning Letter — and the Individual 

Defendants knew that these warnings coincided with the implementation of the aggressive 

Project Fuel cost-cutting program. Instead of halting all insider sales pending an evaluation of 

 

14 The period during which improper insider sales were made (the "Insider Selling Period") 

extends from the first insider sale on April 13, 2010 (a sale by defendant Smith) through the final 

sales on March 8, 2011 (sales by defendants Werner and Ramachandra). This Insider Selling 

Period falls within the Securities Action Class Period alleged in the Federal Securities Action. 
- 81 - 

the impact of this serious situation, the Insider Selling Defendants went on a post-Warning Letter 

selling spree, all while touting the purported efficiencies that Project Fuel was supposed to 

generate. For example, CEO defendant Begley filed a "Rule 10b5-1" selling plan on June 4, 

2010, scant weeks after the Company's receipt of the second Warning Letter, and soon thereafter 

sold over $22 million worth of stock on June 21-22, 2010, his only sales during the Relevant 

Period. The insider selling spree abruptly ended in March 2011, roughly six months before 

revelation that Project Fuel had failed, and that Hospira faced staggering remediation costs. 

Commentators and regulators have identified short-lived 10b5-1 plans as a potential red flag for 

illicit trading. 

122. As the CEO and a director of Hospira, defendant Begley was a member of the 

Company's management and Board. He was privy to material, non-public information about the 

extent of remediation efforts needed to respond to the FDA investigations. Begley was 

responsible for his statements in SEC financial statements, which included disclosures 

concerning Hospira's purported manufacturing efficiency and positive growth. Begley engaged 

in insider trading activity at a time when he knew adverse material, non-public information about 

the Company's impending costly remediation efforts. 

123. While in possession of this knowledge, defendant Begley sold 386,112 shares of 

his personally held Hospira stock for proceeds of $22,008,384.15 Begley's sales were timed to 

maximize profit from Hospira's then artificially inflated stock price. Begley's sales are 

suspicious given that his stock sales represented 58.50% of his holdings as demonstrated by the 

chart below. Further adding to the suspicion, Begley did not sell any of his stock in the prior 

 

15 The cost basis of the shares sold by defendant Begley in June 2010 – based on the strike price 

of the stock options he exercised to obtain those shares – was $14,927,596.70; the total value 

Begley realized on the exercise of those options was $17,889,469.30. 
- 82 - 

two-and-a-half years before the wrongdoing and the resulting inflated stock price. Begley's 

stock sales are detailed below: 

124. As the Company's CFO and COO, defendant Kearney was a member of Company 

management. He was privy to material, non-public information about the extent of remediation 

efforts needed to respond to the FDA investigations. Kearney engaged in insider trading activity 

at a time when he knew adverse material, non-public information about the Company's 

impending costly remediation efforts. 

125. While in possession of this knowledge, defendant Kearney sold 300,640 shares of 

his personally held Hospira stock for proceeds of $17,197,411.42.16 Kearney's sales were timed 

to maximize profit from Hospira's then artificially inflated stock price. Kearney's sales are 

suspicious given that his stock sales represented 85.44% of his holdings as demonstrated by the 

chart below. Further adding to the suspicion, Kearney only sold 11% of his stock in the prior 

 

16 The cost basis of the shares sold by defendant Kearney in November 2009 – based on the 

strike price of the stock options he exercised to obtain those shares – was $99,907.80; the total 

value Kearney realized on the exercise of those options was $5,018.20. The cost basis of the 

shares sold by Kearney in September 2010 – based on the strike price of the stock options he 

exercised to obtain those shares – was $3,523,116.57; the total value Kearney realized on the 

exercise of those options was $4,234,412.43. The cost basis of the shares sold by Kearney in 

October 2010 – based on the strike price of the stock options he exercised to obtain those shares 

– was $4,142,333.90; the total value Kearney realized on the exercise of those options was 

$730,389.17. The cost basis of 70,000 shares sold by Kearney in December 2010 – based on the 

strike price of the stock options he exercised to obtain those shares – was $2,272,900; the total 

value Kearney realized on the exercise of those options was $1,717,100. Kearney sold 

approximately 110,000 additional shares in December 2010, but the cost basis for those shares is 

not publicly available. 
- 83 - 

two-and-a-half years before the wrongdoing and the resulting inflated stock price. Kearney's 

stock sales are detailed below: 

Shares Sold During SP 300,640 

Shares Remaining After Sales 51,228 

Total Shares Before Sales 351,868 

Total Proceeds from Sales $17,197,411.42 

% of Total Ownership Sold During SP 85.44% 

126. As the Chief Scientific Officer and Senior Vice President, defendant 

Ramachandra was a member of Company management. He was privy to material, non-public 

information about the extent of remediation efforts needed to respond to the FDA investigations. 

Ramachandra engaged in insider trading activity at a time when he knew adverse material, nonpublic information about the Company's impending costly remediation efforts. 

127. While in possession of this knowledge, defendant Ramachandra sold 99,462 

shares of his personally held Hospira stock for proceeds of $5,334,912.92.17 Ramachandra's 

sales were timed to maximize profit from Hospira's then artificially inflated stock price. 

Ramachandra's sales are suspicious given that his stock sales represented 91.66% of his holdings 

as demonstrated by the chart below. Further adding to the suspicion, Ramachandra did not sell 

any of his stock in the prior two-and-a-half-years before the wrongdoing and the resulting 

inflated stock price. Ramachandra's stock sales are detailed below: 

 

17 The cost basis of 79,433 shares sold by defendant Ramachandra in March 2011 – based on the 

strike price of the stock options he exercised to obtain those shares – was $1,759,440.95; the 

total value Ramachandra realized on the exercise of those options was $2,501,162.47. 

Ramachandra sold approximately 20,029 additional shares in March 2011, but the cost basis for 

those shares is not publicly available. 
- 84 - 

128. As the CFO, defendant Werner was a member of Company management. He was 

privy to material, non-public information about the extent of remediation efforts needed to 

respond to the FDA investigations. Werner was responsible for his statements in SEC financial 

statements, which included disclosures concerning Hospira's purported manufacturing efficiency 

and positive growth. Werner engaged in insider trading activity at a time when he knew adverse 

material, non-public information about the Company's impending costly remediation efforts. 

129. While in possession of this knowledge, defendant Werner sold 85,849 shares of 

his personally held Hospira stock for proceeds of $4,901,269.76.18 Werner's sales were timed to 

maximize profit from Hospira's then artificially inflated stock price. Werner's sales are 

suspicious given that his stock sales represented 86.66% of his holdings as demonstrated by the 

chart below. Further adding to the suspicion, Werner did not sell any of his stock in the prior 

two and a half years before the wrongdoing and the resulting inflated stock price. Werner's sales 

are detailed below: 

130. As the Company's General Counsel, defendant Smith was privy to material, nonpublic information about the extent of remediation efforts needed to respond to the FDA 

 

18 The cost basis of the shares sold by defendant Werner in June 2009 – based on the strike price 

of the stock options he exercised to obtain those shares – was $659,715.60; the total value 

Werner realized on the exercise of those options was $1,001,692.81. The cost basis of the shares 

sold by Werner in September 2010 – based on the strike price of the stock options he exercised 

to obtain those shares – was $381,300; the total value Werner realized on the exercise of those 

options was $171,700. The cost basis of the shares sold by Werner in November 2010 – based 

on the strike price of the stock options he exercised to obtain those shares – was $1,598,800; the 

total value Werner realized on the exercise of those options was $781,000. Werner also sold 

approximately 15,181 shares in March 2011, but the cost basis for those shares is not publicly 

available. 
- 85 - 

investigations. Smith engaged in insider trading activity at a time when he knew adverse 

material, non-public information about the Company's impending costly remediation efforts. 

131. While in possession of this knowledge, Defendant Smith sold 80,000 shares of his 

personally held Hospira stock for proceeds of $4.6 million.19 Smith's sales were timed to 

maximize profit from Hospira's then artificially inflated stock price. Smith's sales are suspicious 

given that his stock sales represented 68.82% of his holdings as demonstrated by the chart below. 

Further adding to the suspicion, Smith did not sell any of his stock in the prior two-and-a-half 

years before the wrongdoing and the resulting inflated stock price. Smith's sales are detailed 

below: 

132. Defendants Werner, Begley, Kearney, Ramachandra, and Smith combined, sold 

over $55 million worth of their Company stock from the time the first improper statement was 

made by the Individual Defendants on March 24, 2009 to October 17, 2011, when the truth was 

fully revealed. The following is a table showing the total insider sales that occurred during the 

Insider Selling Period: 

Insider Last Name

Transaction 

Date Shares Price Proceeds 

BEGLEY 6/21/2010 26,200 $57.00 $1,493,400.00 

 6/22/2010 359,912 $57.00 $20,514,984.00

 386,112 $22,008,384.00

 

KEARNEY 9/27/2010 91,334 $57.00 $5,206,038.00 

 

19 The cost basis of the shares sold by defendant Smith in April 2010 – based on the strike price 

of the stock options he exercised to obtain those shares – was $2,120,000; the total value Smith 

realized on the exercise of those options was $2,480,000. 
- 86 - 

 10/21/2010 29,306 $59.00 $1,729,054.00 

 12/15/2010 70,000 $57.00 $3,990,000.00 

 12/15/2010 35,357 $57.07 $2,017,668.42 

 12/16/2010 74,643 $57.00 $4,254,651.00 

 300,640 $17,197,411.42

 

RAMACHANDRA 3/8/2011 79,433 $53.64 $4,260,603.42 

 3/8/2011 20,029 $53.64 $1,074,309.49 

 99,462 $5,334,912.92 

 

SMITH 4/13/2010 80,000 $57.50 $4,600,000.00 

 80,000 $4,600,000.00 

 

WERNER 6/16/2010 14,853 $55.79 $828,669.66 

 6/16/2010 6,431 $55.75 $358,523.75 

 9/15/2010 9,384 $55.30 $518,935.20 

 11/2/2010 40,000 $59.50 $2,379,800.00 

 3/8/2011 15,181 $53.71 $815,341.15 

 85,849 $4,901,269.76 

 

TOTAL 985,019 $54,041,978.10 

133. While defendants Werner, Begley, Kearney, Ramachandra, and Smith sold their 

personally-held Company stock pursuant to 10b5-1 plans, these plans were adopted after the 

misconduct had already begun. As such, Werner, Begley, Kearney, Ramachandra, and Smith 

knew that Hospira's stock was artificially inflated due to their improper statements when 

adopting the 10b5-1 plans and cannot avail themselves of any inference that they did not trade on 

the adverse material, non-public information. 

134. The insider selling coincided with the inflation in quarterly net operating income 

created by Project Fuel. The effects of Project Fuel on operating profits (in millions) are shown 

below: 
- 87 - 

Quarterly Net Operating Income by Year 

YEAR Q1 Q2 Q3 Q4 TOTAL

2008 $145 $152 $162 $188 $647 

2009 $150 $177 $207 $204 $738 

2010 $240 $213 $189 $142 $864 

2011 $203 $212 $142 $111 $668 

135. Astoundingly, as late as the March 9, 2012 Proxy Statement, the Board asserted 

that Hospira's compensation policies, which allow for short bursts of unrestrained selling during 

periods of uncertainty, "do not encourage excessive risk taking and, thus, do not create risks that 

are reasonably likely to have a material adverse effect on the company." It is unclear how the 

Board could credibly assert this in light of the Project Fuel debacle, and its attendant insider 

selling. Tellingly, the Board has not announced the adoption of any policy which allows for a 

recoupment or "clawback" of profits made through insider sales, even if such sales were tainted 

by fraud. 

THE IMPROPER REPURCHASES 

136. While the Individual Defendants authorized improper statements that had the 

effect of inflating the Company stock, defendants Begley, Ball, Staley, Bailey, Curran, Sokolov, 

Hale, Wheeler, Bowles and von Prondzynski authorized and implemented multiple repurchases 

of the Company's stock at these artificially inflated rates. Despite knowingly or recklessly 

disregarding the fact that the value of the Company was inflated due to false, misleading, and 

improper statements regarding the Company's health and remediation efforts, these defendants 

either directed or permitted the Company to materially overpay for its own stock through the 

repurchases detailed herein. 
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- 89 - 

DAMAGES TO HOSPIRA CAUSED BY THE INDIVIDUAL DEFENDANTS 

139. As a result of the Individual Defendants' mismanagement and improprieties, 

Hospira engaged in inadequate manufacturing practices and was forced to deceive the market in 

order to protect the Individual Defendants who caused the Company harm in the first place. As a 

direct and proximate result of the Individual Defendants' actions, Hospira has expended and will 

continue to expend significant sums of money which include, but are not limited to: 

(a) costs incurred in defending itself in the Federal Securities Action filed in 

the United States District Court for the Northern District of Illinois; 

(b) costs incurred in cooperating and responding to the FDA investigations; 

(c) financial losses from certain of Hospira's products not being produced due 

to the Company's obligations to remediate the flaws in its manufacturing practices; 

(d) costs incurred from repurchasing over $300 million worth of artificially 

inflated stock; and 

(e) costs incurred from compensation and benefits paid to the defendants who 

have breached their duties to the Company. 

140. Hospira's business, and its goodwill and reputation have been severely damaged 

by the Company's scheme to conceal the truth about its financial health and business prospects. 

For at least the foreseeable future, Hospira will suffer from what is known as the "liar's 

discount," a term applied to the stocks of companies who have been implicated in illegal 

behavior and have misled the public, such that Hospira's ability to raise equity capital or debt on 

favorable terms in the future is now impaired. 

DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS 

141. Plaintiffs bring this action derivatively in the right and for the benefit of Hospira 

to redress injuries suffered, and to be suffered, by Hospira as a direct result of violations of the 
- 90 - 

securities laws, breaches of fiduciary duty, waste of corporate assets, and unjust enrichment by 

the Individual Defendants. Hospira is named as a nominal defendant solely in a derivative 

capacity. This is not a collusive action to confer jurisdiction on this Court that it would not 

otherwise have. 

142. Plaintiffs will fairly and adequately represent the interests of Hospira in enforcing 

and prosecuting its rights, and have retained competent counsel experienced in this type of 

litigation to prosecute this action. 

143. Plaintiffs were shareholders of Hospira at the time of the wrongdoing complained 

of, have continuously been shareholders since that time, and are current Hospira shareholders. 

144. The current Board of Hospira consists of the following eleven individuals: 

defendants Ball, Staley, Bailey, Curran, Wheeler, Sokolov, Bowles, Hale, von Prondzynski, and 

non-defendants William G. Dempsey ("Dempsey") and Dennis M. Fenton. Plaintiffs have not 

made any demand on the Board because such a demand would be a futile and useless act, 

particularly for the reasons stated below. 

Demand Is Excused Because the Board's Conduct Is Not a Valid Exercise of Business 

Judgment 

145. The Director Defendants knew that the existence of quality controls and systems 

to ensure legal compliance were crucial. Investors would not trust a company that did not have 

such controls in place. Indeed, in Hospira's annual report on Form 10-K filed on February 25, 

2009 (just prior to the announcement of Project Fuel), the Company and its Board affirmatively 

assured the investing public that: 

Hospira has developed and implemented quality systems and concepts throughout 

its organization. Hospira is actively involved in setting quality policies and 

managing internal and external quality performance. Its quality assurance 

department provides quality leadership and supervises its quality systems. An 

active audit program, utilizing both internal and external auditors, monitors 

compliance with applicable regulations, standards and internal policies. 
- 91 - 

* * * 

Hospira believes that it is in material compliance with applicable laws and 

regulations, including those described below. 

146. As shown above in great detail, Hospira and its directors lacked a basis to state 

that Hospira was "in material compliance with applicable laws and regulations," or that it had 

"quality systems" and an "active audit program." Indeed, Hospira was not even doing particulate 

testing on a scheduled basis; was manufacturing adulterated product; and had failed to document 

measures needed to ensure legal compliance. Further, the Board failed to ensure that the 

Company conducted a sufficient review of its quality control systems, and whether these systems 

were adequate given Project Fuel's severe cost-cutting initiatives, and therefore had no reason to 

believe that these statements were true. And by no later than 2009, when the FDA began its 

investigation and issued its August 2009 Warning Letter, the Director Defendants had every 

reason to know these statements were false. Additional evidence that these statements were 

false, if any were needed, was provided by the April 2010 Warning Letter. Nonetheless, the 

Board: (i) adopted Project Fuel without sufficient information; (ii) consciously disregarded their 

fiduciary obligations and stubbornly pressed ahead with Project Fuel despite red flags of its 

adverse effect on legal compliance and adverse effect on public health and safety; and (iii) made 

or caused the Company to make misleading public statements that concealed the true nature and 

extent of the compliance issues or, at best, consciously disregarded whether the public statements 

made were true or false. 

147. A director is not reasonably exercising business judgment and acts recklessly and 

in bad faith when the director: knowingly makes a harmful decision; consciously makes 

decisions based on partial or incomplete information where such information could be obtained 

with reasonable time and effort; or makes a decision or adopts a plan and refuses to reverse it 
- 92 - 

once it becomes known to the director that: (i) the decision was a wrong one that is harming the 

Company, or (ii) alternatively, that the decision or plan was reasonable when adopted, but has 

since become harmful due to changed circumstances or newly-discovered facts, and (due to these 

factors) the directors knew the decision or plan should have been reversed. 

148. Here, the Director Defendants acted recklessly and in bad faith with regard to the 

adoption of Project Fuel, and in continuing to pursue Project Fuel once Hospira's severe 

compliance issues were identified by the FDA in its Warning Letters, and made known to them. 

It had become clear that Project Fuel and compliance with the law were in "conflict," a conflict 

which the directors recklessly allowed. As one Hospira executive, Senior Vice President of 

Operations Hardy, frankly conceded in September 2011: 

We're trying to drive remediation at the same time we're trying to drive very 

robust cost-savings programs. And we found those things competing with each 

other. 

149. Very robust cost savings operations may be needed at times but here: (i) no 

financial emergency required the Board to adopt Project Fuel when it did; and (ii) no time 

deadline prevented the Board from fully assessing the Company's quality controls and legal 

compliance prior to implementing Project Fuel and the affect such budget slashing would have 

on legal compliance and public safety. The Board knew, even when adopting Project Fuel, that 

it was acting without all the necessary facts. Despite Project Fuel's cost-cutting initiatives, no 

sufficient independent review of the Company's controls over product quality and safety or legal 

compliance had been done prior to the implementation of Project Fuel, or during the Relevant 

Period, as is evident from the extensive remediation efforts the Company has been forced to 

endure, including the hiring of more than 150 consultants to assist with remediation efforts. 
- 93 - 

150. Rather than fulfilling their fiduciary duties, the Director Defendants made a 

conscious decision to allow the Company and its various manufacturing facilities to violate FDA 

regulations. 

151. The Director Defendants were aware, since at least the April 2009 FDA 

investigation, and because of the Warning Letters, that, among other things: (i) there was 

adulteration in the facilities that produced the Company's infusion pumps and that this 

adulteration, in the form of steel filings, could cause embolisms or immune diseases in patients 

using these infusion products; (ii) there was adulteration in the replacement of AC power cords 

used by certain of the infusion products, particularly in the Morgan Hill facility; (iii) the 

appropriate measures were not taken to update the Company's risk assessment in light of reports 

of injuries from the adulterated power cords; (iv) the processes for the manufacture, packing, 

storage, and installation of certain of the Company's infusion pumps (including the Plum Family 

and Symbiq lines) did not comport with and violated then CGMP requirements of the Quality 

System regulation at Title 21, Code of Federal Regulations, Part 820; (v) appropriate steps were 

not taken in response to the FDA's warnings, which placed the Company in the position of 

potentially being fined, penalized, or enjoined, and jeopardized the Company's applications for 

Class III devices; (vi) the Clayton facility failed to maintain adequate written internal controls 

over Liposyn, Propofol, and Clevipex emulsion products, and certain lots of these drugs were 

seriously contaminated; (vii) the FDA did not believe that the Company had uncovered the root 

cause of this adulteration; (viii) the Clayton facility lacked quality controls since at least April 

2009, and efforts to remedy these problems were insufficient; (ix) an adequate investigation was 

not conducted to determine whether any batches of Liposyn, Propofol or Clevipex were 

adulterated and failed to provide the FDA with certain required revised procedures; (x) the 
- 94 - 

Company's Rocky Mount facility suffered from similar quality control deficiencies, including a 

lack of written procedures; (xi) the Company's Rocky Mount and Clayton facilities had failed to 

adopt procedures which would provide a sufficiently high degree of assurance that the process 

used to produce the Company's heparin lock flush solutions were sufficient; and (xii) the 

Company failed to sufficiently track and report adverse events with regard to the heparin lock 

flush. 

152. The Director Defendants were also aware that their efforts to implement global 

corrective actions in response to past regulatory actions by the FDA were inadequate, including 

failing to undertake a comprehensive evaluation of global manufacturing operations to ensure 

compliance with Good Manufacturing Practices and Quality System regulations, despite repeated 

warnings by the FDA. 

153. In the face of this knowledge, however, the Director Defendants, among other 

things: (i) failed to ensure that the Company manufactured safe, quality drugs with integrity; (ii) 

consciously disregarded the systematic and sustained FDA violations occurring in at least three 

of its facilities, including one of its main facilities at Rocky Mount; and (iii) failed to undertake 

appropriate steps to remedy the Company's severe quality control deficiencies. Even worse, 

instead of actively trying to solve the problems that they had a duty to avoid in the first place, the 

Individual Defendants caused the Company to issue improper statements regarding the 

Company's health and remediation efforts. Then, despite the fact that the Director Defendants 

knew the value of the Company was inflated due to these improper statements, they authorized 

the repurchase of 5.4 million shares from August 2010 through September 2011 at a cost of over 

$300 million to the Company. These actions were in conscious disregard of the Director 
- 95 - 

Defendants' duties and responsibilities and were not the product of the valid exercise of business 

judgment. 

154. Had the Board acted rationally and with reasonable business judgment, it would 

have abandoned or severely curtailed Project Fuel in response to repeated red flags and the 

Company's systematic and sustained violations of FDA regulations. For instance, the April 

2010 Warning Letter's message was, in essence: your systems have broken down; they broke 

down even prior to Project Fuel; you have no plan in place to fix them; public health and 

safety are in danger; written protocols do not exist; and complete and immediate action is 

required. These warnings would have been treated by any Board, acting in good faith, as an 

emergency situation, requiring the highest level of attention. 

155. Because the Board's decisions were not reasonable and rational, and were not 

taken on a fully informed basis, they are not protected under the business judgment rule and 

demand is accordingly futile. 

Demand Is Excused Because the Director Defendants Face a Substantial Likelihood of 

Liability for Their Misconduct 

156. As alleged above, the Director Defendants breached their fiduciary duties of 

loyalty by: (i) failing to ensure that the Company took adequate steps to rectify its violations of 

FDA regulations and Good Manufacturing Standards, in light of repeated red flags and the 

Company's systematic and sustained violations of FDA regulations over the course of over two 

years; (ii) making improper statements concerning the Company's health and remediation efforts 

in financial statements; (iii) failing to provide adequate internal and quality controls over the 

Company's manufacturing practices; (iv) concealing the consequences of their mismanagement, 

the true extent of the FDA's investigation, and the remediation necessary to bring Hospira's 

business up to CGMP standards; (v) selling their personally held Hospira stock on the basis of 
- 96 - 

non–public information; and (vi) authorizing the Company's repurchase of hundreds of millions 

of dollars' worth of Hospira stock at artificially inflated prices. The following is a summary of 

certain current directors' positions and the duties they failed to meet, exposing each of them to a 

substantial likelihood of liability: 

(a) Defendant Ball made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in multiple quarterly 

statements, including those filed on April 26, 2011 and July 27, 2011. Ball is on the Science, 

Technology and Quality Committee and has been since March 2011, and thus is subject to the 

Science, Technology and Quality Committee Charter. Importantly, Ball is responsible for 

reviewing "the Company's overall quality strategy and internal quality processes; ... the results 

of, and responses to, product quality and quality system assessments by the Company and 

external regulators (including the [FDA] and other national and international regulatory bodies); 

and ... important product quality issues and field actions." Ball either knew or was reckless in 

not knowing of the true nature and extent of the FDA's investigation over the Company's 

manufacturing deficiencies when he made improper statements downplaying the Company's 

remediation efforts in public filings. The Science, Technology and Quality Committee's Charter 

also requires its members to ensure the Company's "product quality and safety." The production 

breakdowns show a lack of internal controls by this committee and Ball, and as such, Ball faces a 

substantial likelihood of liability for his breach of fiduciary duty. 

(b) Defendant Staley made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Staley was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising him of the previously 
- 97 - 

mentioned inadequate internal controls. Staley is on the Science, Technology and Quality 

Committee and has been since March 2011, and thus is subject to the Science, Technology and 

Quality Committee Charter. Importantly, Staley is responsible for reviewing "the Company's 

overall quality strategy and internal quality processes; ... the results of, and responses to, product 

quality and quality system assessments by the Company and external regulators (including the 

[FDA] and other national and international regulatory bodies); and ... important product quality 

issues and field actions." Staley either knew or was reckless in not knowing of the true nature 

and extent of the FDA's investigation over the Company's manufacturing deficiencies when he 

made improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 

controls by this committee and Staley, and as such, Staley faces a substantial likelihood of 

liability for his breach of fiduciary duty. Staley was a member of Hospira's Audit Committee 

from at least March 2008 to March 2011 and was Chairman of that committee from at least 

March 2008 to at least March 2010. As a member of the Audit Committee, Staley had additional 

and heightened responsibility under its Charter to review "the integrity of the Company's 

financial statements" and "the Company's compliance with legal and regulatory requirements." 

Thus, Staley violated the Audit Committee's Charter by knowingly, recklessly, or in conscious 

disregard of his duties reviewed and approved improper statements regarding the Company's 

business health and remediation efforts in response to the FDA investigation. Accordingly, 

Staley breached his fiduciary duty of loyalty because he participated in the wrongdoing 

described herein. 
- 98 - 

(c) Defendant Bailey made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Bailey was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising him of the previously 

mentioned inadequate internal controls. Bailey is on the Science, Technology and Quality 

Committee and has been since March 2011, and thus is subject to the Science, Technology and 

Quality Committee Charter. Importantly, Bailey is responsible for reviewing "the Company's 

overall quality strategy and internal quality processes; ... the results of, and responses to, product 

quality and quality system assessments by the Company and external regulators (including the 

[FDA] and other national and international regulatory bodies); and ... important product quality 

issues and field actions." Bailey either knew or was reckless in not knowing of the true nature 

and extent of the FDA's investigation over the Company's manufacturing deficiencies when he 

made improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 

controls by this committee and Bailey, and as such, Bailey faces a substantial likelihood of 

liability for his breach of fiduciary duty. Bailey was also on the Governance and Public Policy 

Committee between March 2008 and March 2011, and thus was subject to its Charter. The 

Governance and Public Policy Committee was required to assist the Board with "compliance and 

government affairs matters that affect the Company." Bailey failed in implementing the 

adequate internal controls and necessary supervision to maintain the Company's manufacturing 

operations at CGMP standard and avoid manufacturing flaws. 
- 99 - 

(d) Defendant Curran made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Curran was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising her of the previously 

mentioned inadequate internal controls. Curran is on the Science, Technology and Quality 

Committee and has been since March 2008, and thus is subject to the Science, Technology and 

Quality Committee Charter. Importantly, Curran is responsible for reviewing "the Company's 

overall quality strategy and internal quality processes; ... the results of, and responses to, product 

quality and quality system assessments by the Company and external regulators (including the 

[FDA] and other national and international regulatory bodies); and ... important product quality 

issues field actions." Curran either knew or was reckless in not knowing of the true nature and 

extent of the FDA's investigation over the Company's manufacturing deficiencies when she made 

improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 

controls by this committee and Curran, and as such, Curran faces a substantial likelihood of 

liability for her breach of fiduciary duty. Curran was also on the Audit Committee from at least 

March 2008 to at least March 2011. As a member of the Audit Committee, Curran had 

additional and heightened responsibility under its Charter to review "the integrity of the 

Company's financial statements" and "the Company's compliance with legal and regulatory 

requirements." Thus, Curran violated the Audit Committee Charter by knowingly, recklessly, or 

in conscious disregard of her duties reviewed and approved improper statements regarding the 

Company's business health and remediation efforts in response to the FDA investigation. 
- 100 - 

Accordingly, Curran breached her fiduciary duty of loyalty because she participated in the 

wrongdoing described herein. Curran is also Chair of the Governance and Public Policy 

Committee and has been since March 2008. The Governance and Public Policy Committee is 

required to assist the Board with "compliance and government affairs matters that affect the 

Company." Curran failed in implementing the adequate internal controls and necessary 

supervision to maintain the Company's manufacturing operations at CGMP standard and avoid 

manufacturing flaws. 

(e) Defendant Wheeler made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Wheeler was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising him of the previously 

mentioned inadequate internal controls. Wheeler is Chairman of Hospira's Science, Technology 

and Quality Committee and has been since at least March 2011 and a member of that committee 

and has been since at least March 2008, and thus is subject to the Science, Technology and 

Quality Committee Charter. Importantly, Wheeler is responsible for reviewing "the Company's 

overall quality strategy and internal quality processes; ... the results of, and responses to, product 

quality and quality system assessments by the Company and external regulators (including the 

[FDA] and other national and international regulatory bodies); and ... important product quality 

issues and field actions." Wheeler either knew or was reckless in not knowing of the true nature 

and extent of the FDA's investigation over the Company's manufacturing deficiencies when he 

made improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 
- 101 - 

controls by this committee and Wheeler, and as such, Wheeler faces a substantial likelihood of 

liability for his breach of fiduciary duty. Wheeler is also on the Audit Committee and has been 

since March 2008, and thus is subject to its Charter. As a member of the Audit Committee, 

Wheeler had additional and heightened responsibility under its Charter to review "the integrity of 

the Company's financial statements" and "the Company's compliance with legal and regulatory 

requirements." Thus, Wheeler violated the Audit Committee's Charter by knowingly or in 

conscious disregard of his duties reviewed and approved improper statements regarding the 

Company's business health and remediation efforts in response to the FDA investigation. 

Accordingly, Wheeler breached his fiduciary duty of loyalty because he participated in the 

wrongdoing described herein. 

(f) Defendant Sokolov made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Sokolov was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising him of the previously 

mentioned inadequate internal controls. Sokolov is on the Science, Technology and Quality 

Committee and has been since March 2008 and was Chairman of that committee from at least 

March 2008 to at least March 2010, and thus is subject to the Science, Technology and Quality 

Committee Charter. Importantly, Sokolov is responsible for reviewing "the Company's overall 

quality strategy and internal quality processes; ... the results of, and responses to, product quality 

and quality system assessments by the Company and external regulators (including the [FDA] 

and other national and international regulatory bodies); and ... important product quality issues 

and field actions." Sokolov either knew or was reckless in not knowing of the true nature and 

extent of the FDA's investigation over the Company's manufacturing deficiencies when he made 
- 102 - 

improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 

controls by this committee and Sokolov, and as such, Sokolov faces a substantial likelihood of 

liability for his breach of fiduciary duty. 

(g) Defendant Bowles made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Bowles was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising her of the previously 

mentioned inadequate internal controls. Bowles is on the Science, Technology and Quality 

Committee and has been since March 2011, and thus is subject to the Science, Technology and 

Quality Committee Charter. Importantly, Bowles is responsible for reviewing "the Company's 

overall quality strategy and internal quality processes; ... the results of, and responses to, product 

quality and quality system assessments by the Company and external regulators (including the 

[FDA] and other national and international regulatory bodies); and ... important product quality 

issues and field actions." Bowles either knew or was reckless in not knowing of the true nature 

and extent of the FDA's investigation over the Company's manufacturing deficiencies when she 

made improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 

controls by this committee and Bowles, and as such, Bowles faces a substantial likelihood of 

liability for her breach of fiduciary duty. Bowles is also Chair of Hospira's Audit Committee and 

has been since at least March 2011 and a member of that committee since at least March 2009. 
- 103 - 

As a member of the Audit Committee, Bowles has additional and heightened responsibility under 

its Charter to review "the integrity of the Company's financial statements" and "the Company's 

compliance with legal and regulatory requirements." Thus, Bowles violated the Audit Committee 

Charter by knowingly, recklessly, or in conscious disregard of her duties reviewed and approved 

improper statements regarding the Company's business health and remediation efforts in 

response to the FDA investigation. Accordingly, Bowles breached her fiduciary duty of loyalty 

because she participated in the wrongdoing described herein. Bowles is also on the Governance 

and Public Policy Committee and has been since March 2011, and thus is subject to its Charter. 

The Governance and Public Policy Committee is required to assist the Board with "compliance 

and government affairs matters that affect the Company." Bowles failed in implementing the 

adequate internal controls and necessary supervision to maintain the Company's manufacturing 

operations at CGMP standard and avoid manufacturing flaws. 

(h) Defendant Hale made improper statements regarding the nature of the 

Company's remediation efforts in response to the FDA investigation in the Company's 2009 and 

2010 Forms 10-K. Hale was a member of the Board when Hospira received both of its FDA 

Warning Letters, including the April 2010 Warning Letter apprising him of the previously 

mentioned inadequate internal controls. Hale is on the Science, Technology and Quality 

Committee and has been since March 2011, and thus is subject to the Science, Technology and 

Quality Committee Charter. Importantly, Hale is responsible for reviewing "the Company's 

overall quality strategy and internal quality processes; ... the results of, and responses to, product 

quality and quality system assessments by the Company and external regulators (including the 

[FDA] and other national and international regulatory bodies); and ... important product quality 

issues and field actions." Hale either knew or was reckless in not knowing of the true nature and 
- 104 - 

extent of the FDA's investigation over the Company's manufacturing deficiencies when he made 

improper statements downplaying the Company's remediation efforts in public filings. The 

Science, Technology and Quality Committee's Charter also requires its members to ensure the 

Company's "product quality and safety." The production breakdowns show a lack of internal 

controls by this committee and Hale, and as such, Hale faces a substantial likelihood of liability 

for his breach of fiduciary duty. Hale is also on the Governance and Public Policy Committee 

and has been since March 2008. The Governance and Public Policy Committee is required to 

assist the Board with "compliance and government affairs matters that affect the Company." 

Hale failed in implementing the adequate internal controls and necessary supervision to maintain 

the Company's manufacturing operations at CGMP standard and avoid manufacturing flaws. 

(i) Defendant von Prondzynski made improper statements regarding the 

nature of the Company's remediation efforts in response to the FDA investigation in the 

Company's 2009 and 2010 Forms 10-K. von Prondzynski was a member of the Board when 

Hospira received both of its FDA Warning Letters, including the April 2010 Warning Letter 

apprising him of the previously mentioned inadequate internal controls. von Prondzynski is on 

the Science, Technology and Quality Committee and has been since March 2009, and thus is 

subject to the Science, Technology and Quality Committee Charter. Importantly, von 

Prondzynski is responsible for reviewing "the Company's overall quality strategy and internal 

quality processes; ... the results of, and responses to, product quality and quality system 

assessments by the Company and external regulators (including the [FDA] and other national 

and international regulatory bodies); and ... important product quality issues and field actions." 

von Prondzynski either knew or was reckless in not knowing of the true nature and extent of the 

FDA's investigation over the Company's manufacturing deficiencies when he made improper 
- 105 - 

statements downplaying the Company's remediation efforts in public filings. The Science, 

Technology and Quality Committee's Charter also requires its members to ensure the Company's 

"product quality and safety." The production breakdowns show a lack of internal controls by this 

committee and von Prondzynski, and as such, von Prondzynski faces a substantial likelihood of 

liability for his breach of fiduciary duty. 

Demand Is Excused Because the Director Defendants Share Material Ties and 

Relationships that Hinder the Independence Necessary to Prosecute Suit 

157. Director Defendants Curran and Wheeler are not independent because their 

interrelated business, professional, and personal relations have developed to the point that they 

will not act to initiate litigation against one another or against the other Individual Defendants. 

For instance, Curran and Wheeler have a mutual interest in not bringing suit against each other 

as they served concurrently on the IDX Systems Corp. board of directors from December 2002 

until January 2006. Curran and Wheeler lack the independence necessary to adequately 

prosecute an action against each other due to their previous working relationship and mutual 

interest in protecting each other from substantial liability for their breach of fiduciary duties. 

158. Similarly, defendant Curran will not bring suit against defendant Matricaria 

because they served concurrently on the CardioDynamics International Corp. board of directors 

from May 2002 until July 2005 and on the Volcano Corp. board of directors from April 2007 

until May 2011. Curran lacks the adequate independence necessary to prosecute a suit against 

Matricaria due to their extensive relationship prior to joining Hospira. 

159. Hospira has been and will continue to be exposed to significant losses due to the 

wrongdoing complained of herein. Despite the Individual Defendants having knowledge of the 

claims and causes of action raised by Plaintiffs, the Individual Defendants and the current Board 

have not filed any lawsuits against themselves or others who were responsible for the wrongful 
- 106 - 

conduct to attempt to recover for Hospira any part of the damages Hospira suffered and will 

suffer thereby. The Board's stubborn failure to investigate, correct, and commence legal action 

against those responsible for the misconduct alleged herein in the face of heavy investor scrutiny 

on the matter, demonstrates that the Board is hopelessly incapable of independently addressing 

any legitimate demand. 

160. Each Individual Defendant, by virtue of his or her position as an officer and/or 

director, owed to the Company the fiduciary duty of loyalty and good faith and the exercise of 

due care and diligence in the implementation of internal controls over the Company's 

manufacturing practices and the truth of the Company's public disclosures. Certain of the 

Individual Defendants' failure to maintain honest public disclosures is especially damaging not 

only because it was illegal but also because it was specifically against the Company's own Code. 

The Code states that the Company expects these individuals to "provide full, accurate, fair, 

timely and understandable disclosures when making public communications or in reports and 

documents filed with government agencies, such as the [SEC] and the [FDA]." Thus, each 

Individual Defendant faces a substantial likelihood of liability for the breach of fiduciary duties 

so any demand upon any of them is futile. 

161. Each of the Director Defendants of Hospira authorized and/or permitted the 

improper statements to endure and is a principal beneficiary of the wrongdoing alleged herein 

and thus could not fairly and fully prosecute such a suit even if such suit was instituted. 

162. Plaintiffs have not made any demand on the other shareholders of Hospira to 

institute this action since such demand would be a futile and useless act for at least the following 

reasons: (i) Hospira is a publicly held company with over 165 million shares outstanding and 

thousands of shareholders; (ii) making demand on such a number of shareholders would be 
- 107 - 

impossible for Plaintiffs who have no way of finding out the names, addresses, or phone 

numbers of shareholders; and (iii) making demand on all shareholders would force Plaintiffs to 

incur excessive expenses, assuming all shareholders could be individually identified. 

COUNT I 

(Derivatively Against Defendants Ball, Begley, and Werner for Violations of Section 10(b) 

of the Exchange Act Relating to the Share Repurchases) 

163. Plaintiffs repeat and reallege all previous allegations, set forth above, as though 

fully set forth herein. 

164. During the Relevant Period, Class Action Individual Defendants Ball, Begley, and 

Werner at a minimum, knowingly and willfully made and caused the publication of misleading 

statements, and knowingly, willfully, and acting with scienter, caused Hospira to repurchase 

approximately 5,472,028 shares of its own stock at a weighted average price per share of $55.19, 

for a total cost to Hospira of over $300 million, when they knew that Hospira's stock price was 

substantially artificially inflated due to their misleading statements. 

165. These Class Action Individual Defendants violated section 10(b) of the Exchange 

Act and SEC Rule 10b-5 in that they: 

(a) employed devices, schemes, and artifices to defraud; 

(b) made untrue statements of material facts or omitted to state material facts 

necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading; and/or 

(c) engaged in acts, practices, and a course of business that operated as a 

fraud or deceit upon Hospira in connection with the purchases of Hospira common stock during 

the Relevant Period. 
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166. As a direct and proximate result of the wrongful conduct of the Class Action 

Individual Defendants, Hospira has and will suffer damages in connection with its Relevant 

Period purchases of Hospira common stock at prices that the Class Action Individual Defendants 

knew to be artificially inflated. 

167. But for the misconduct of the Class Action Individual Defendants, Hospira would 

not have repurchased its stock at artificially inflated prices. Hospira reasonably relied on the 

diligence, loyalty, and good faith of the Class Action Individual Defendants in repurchasing its 

stock. 

168. The Class Action Individual Defendants' conduct proximately caused Hospira's 

loss. Hospira's stock price fell in a series of drops following the publication of disclosures that 

revealed the truth about Hospira's health and the extent of its remediation efforts. After the truth 

was revealed, Hospira's shares ultimately fell approximately 40%. 

169. The Class Action Individual Defendants are therefore liable to Hospira for 

damages in an amount to be determined at trial pursuant to section 10(b) of the Exchange Act 

and SEC Rule 10b-5 promulgated thereunder. 

COUNT II 

(Derivatively Against All Director Defendants for Violation of Section 20(a) of the 

Exchange Act and Against the Class Action Individual Defendants Under Sections 

10(b) and 21D of the Exchange Act) 

170. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

171. The Director Defendants, as directors and as members of the Audit Committee, 

Science, Technology and Compliance Committee, and/or Governance and Public Policy 

Committee, had the power and/or ability to, and did, directly or indirectly control or influence 

the Company's general affairs, including the content of public statements about Hospira and the 
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timing and amount of stock repurchases, and had the power and/or ability directly or indirectly to 

control or influence the Class Action Individual Defendants in connection with the specific 

corporate policies and conduct that violated section 10(b) of the Exchange Act and SEC Rule 

10b-5 as alleged above. 

172. Each of the Director Defendants is jointly and severally liable under section 20(a) 

of the Exchange Act to the same extent as the Class Action Individual Defendants for the 

primary violations of section 10(b) and Rule 10b-5 promulgated thereunder, as set forth herein. 

The Director Defendants did not act in good faith. In addition, the Class Action Individual 

Defendants are liable under 15 U.S.C. §78j(b), pursuant to which there is a private right of action 

for contribution, and Section 21D of the Exchange Act, 15 U.S.C. §78u-4, which governs the 

application of any private right of action for contribution asserted pursuant to the Exchange Act. 

COUNT III 

(Against the Individual Defendants for Breach of Fiduciary Duty) 

173. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

174. As alleged in detail herein, the Individual Defendants, by reason of their positions 

as officers and directors of Hospira and because of their ability to control the business and 

corporate affairs of Hospira, owed the Company fiduciary obligations of due care, good faith, 

and loyalty, and were and are required to use their utmost ability to control and manage Hospira 

in a fair, just, honest, and equitable manner. 

175. The Individual Defendants approved Project Fuel without first obtaining an 

adequate independent, and comprehensive report on the state of Hospira's compliance systems, 

and the adverse effect Project Fuel would have on legal compliance, quality assurance, and 

safety. The Individual Defendants also failed to ensure through the Relevant Period that Hospira 
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was in compliance with all applicable laws needed to protect the health and welfare of the public. 

In fact, the Individual Defendants caused the Company to continue Project Fuel, even after it 

became clear that Hospira was blatantly in violation of its legal obligations; did not understand 

the full and complete nature of all of its compliance issues; lacked appropriate written procedures 

needed to comply with the law; and had no idea of what remediation efforts would cost. 

Accordingly, the Individual Defendants breached their duty of care and loyalty to the Company. 

176. The Officer Defendants knowingly, recklessly, or with gross negligence caused or 

allowed the Company to engage in inadequate manufacturing practices and then made improper 

statements about the health of the Company and its remediation efforts. The Officer Defendants 

either knew, were reckless, or were grossly negligent in not knowing: (i) Hospira suffered from 

extensive quality control issues, which undermined both the viability of and the supposed 

financial savings that would be generated by Project Fuel; (ii) the extent of the Company's 

inability to comply with problems identified in FDA Warning Letters related to Hospira's 

infusion pumps, quality control deficiencies, and manufacturing weaknesses; and (iii) as a result 

of the foregoing, defendants' statements regarding the Company's financial performance and 

expected earnings were improper and lacked a reasonable basis when made. Accordingly, the 

Officer Defendants breached their duty of care and loyalty to the Company. 

177. The Director Defendants owed Hospira the highest duty of loyalty, and breached 

this duty when they made improper statements regarding the nature of the Company's 

remediation efforts in response to the FDA investigation in the Company's 2009 and 2010 Forms 

10-K. These defendants knowingly or in conscious disregard of their duties, caused, authorized, 

or allowed Hospira to have inadequate manufacturing practices and attempted to cover up their 

mismanagement by approving improper statements about the health of the Company and its 
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remediation efforts. The Director Defendants knew or were reckless in not knowing that: (i) 

Hospira suffered from extensive quality control issues, which undermined both the viability of 

and the supposed financial savings that would be generated by Project Fuel; (ii) the extent of the 

Company's inability to comply with problems identified in FDA Warning Letters related to 

Hospira's infusion pumps, quality control deficiencies, and manufacturing weaknesses; and (iii) 

as a result of the foregoing, defendants' statements regarding the Company's financial 

performance and expected earnings were improper and lacked a reasonable basis when made. 

Accordingly, the Director Defendants breached their duty of loyalty to the Company. 

178. The Science, Technology and Quality Committee Defendants breached their 

fiduciary duty of loyalty. Not only did they fail to implement adequate internal controls of the 

Company's "product quality and safety," they succeeded in concealing the extent of that 

mismanagement for ten financial quarters by knowingly or in conscious disregard of their duties 

allowing the Company to publicly disclose improper statements regarding the Company's 

business health and remediation efforts in response to the ongoing FDA investigation. 

179. The Audit Committee Defendants breached their fiduciary duty of loyalty by 

knowingly or in conscious disregard of their duties allowing the Company to publicly disclose 

improper statements regarding the Company's business health and remediation efforts in 

response to the FDA investigation. As such, the Company violated various federal securities 

laws, including the Exchange Act. Additionally, this constituted a violation of the heightened 

and specialized duties of the members of the Audit Committee under its Charter. 

180. The Governance and Public Policy Committee Defendants breached their 

fiduciary duty of loyalty by knowingly or in conscious disregard of their duties allowing the 

Company to publicly disclose improper statements regarding the Company's business health and 
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remediation efforts in response to the FDA investigation. The wrongdoing was extensive and 

widespread, and implicated the highest-levels of the Company's management. These defendants 

had heightened and specialized duties to identify and address regulatory and compliance risks 

present at the Company. This they did not do, as they failed to detect or prevent the continuous 

and pervasive misconduct for ten consecutive financial quarters. Additionally, this constituted a 

violation of the duties of the members of the Governance and Public Policy Committee. 

181. As a direct and proximate result of the Individual Defendants' foregoing breaches 

of fiduciary duties, the Company has suffered significant damages, as alleged herein. Such 

damages may be recovered derivatively for the benefit of Hospira. 

182. Plaintiffs, on behalf of Hospira, have no adequate remedy at law. 

COUNT IV 

(Against the Individual Defendants for Breach of 

Fiduciary Duty Relating to the Share Repurchases) 

183. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

184. An authorization by a Board to repurchase upwards of $300 million worth of 

stock must be made with due care, and by a Board that is thoroughly certain it is in possession of 

all material information regarding the Company's value. 

185. The Director Defendants authorized share repurchases while fully aware, post the 

April 2010 Warning Letter, that Hospira was concealing adverse facts or, alternatively, that they 

did not have full and complete information to determine the full extent of Hospira's regulatory 

issues, the costs to remediate the problems sure to be uncovered, and the effects this would have 

on manufacturing and distribution. 
- 113 - 

186. As a result of these actions, the Director Defendants breached their duties, caused 

Hospira to suffer damages, and wasted its assets. These Defendants are accordingly liable to the 

Company. 

187. Plaintiffs, on behalf of Hospira, have no adequate remedy at law. 

COUNT V 

(Against Defendants Begley, Werner, Kearney, Ramachandra, and Smith 

for Disgorgement of Insider Trading Profits) 

188. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

189. Corporate insiders, when in possession of material, non-public information, have 

a duty to disclose what they know, or abstain from trading. 

190. Here, following the receipt of non-public information regarding Hospira's true 

state of affairs, Insiders Selling Defendants Begley, Werner, Kearney, Ramachandra, and Smith 

seized the opportunity to sell of most of their shares at grossly inflated prices. To the extent any 

such sales were made under SEC Rule 10b5-1 automatic trading plans, such plans provide no 

safe harbor as they were adopted in bad faith and with advance knowledge of adverse, nonpublic information. Under the circumstances, these Insider Selling Defendants are not entitled to 

retain, and must disgorge, all trading profits to Hospira. 

191. Plaintiffs, on behalf of Hospira, have no adequate remedy at law. 

COUNT VI 

(Against the Individual Defendants for Waste of Corporate Assets) 

192. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

193. As a result of the misconduct described above, the Individual Defendants have 

wasted corporate assets by forcing the Company to expend valuable resources in purchasing 
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artificially inflated Hospira stock and defending itself in the Federal Securities Action that they 

brought on with their improper statements. In addition, due to the Individual Defendants' 

mismanagement, the Company has been forced to interrupt production and dedicate it resources 

and attention to the FDA-mandated remediation efforts to comply with proper manufacturing 

practices. Finally, by failing to conduct proper supervision, the Individual Defendants have 

caused Hospira to waste its assets by paying improper compensation to certain of its executive 

officers and directors that breached their fiduciary duty. 

194. As a result of the waste of corporate assets, the Individual Defendants are liable to 

the Company. 

195. Plaintiffs, on behalf of Hospira, have no adequate remedy at law. 

COUNT VII 

(Against the Individual Defendants for Unjust Enrichment) 

196. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

197. By their wrongful acts and omissions, the Individual Defendants were unjustly 

enriched at the expense of and to the detriment of Hospira. The Individual Defendants were 

unjustly enriched as a result of the compensation and director remuneration they received while 

breaching fiduciary duties owed to Hospira. 

198. The Insider Selling Defendants used their knowledge of Hospira's material, nonpublic information to sell their personal holdings while the Company's stock was artificially 

inflated. 

199. Plaintiffs, as shareholders and representatives of Hospira, seek restitution from 

these defendants, and each of them, and seek an order of this Court disgorging all profits, 
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benefits, and other compensation obtained by these defendants, and each of them, from their 

wrongful conduct and fiduciary breaches. 

200. Plaintiffs, on behalf of Hospira, have no adequate remedy at law. 

COUNT VIII 

(Against the Individual Defendants for Indemnification and Contribution) 

201. Plaintiffs repeat and reallege all previous allegations set forth above, as though 

fully set forth herein. 

202. The conduct of the Individual Defendants described above has exposed Hospira to 

significant liability under various federal and state laws by their disloyal acts. 

203. Hospira is alleged to be liable to private persons, entities, and/or classes by virtue 

of many of the same facts alleged herein. 

204. The Individual Defendants have caused Hospira to suffer substantial harm 

through their disloyal acts. 

205. Hospira is entitled to contribution and indemnification from the Individual 

Defendants in connection with all such claims that have been, are, or may be asserted against 

Hospira by virtue of the Class Action Individual Defendants' wrongdoing. 

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for judgment as follows: 

A. Against all of the Individual Defendants and in favor of the Company for the 

amount of damages sustained by the Company as a result of the Individual Defendants' breaches 

of fiduciary duties, waste of corporate assets, and unjust enrichment; 

B. Declaring that the Class Action Individual Defendants are liable under section 

10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and that the Director 
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Defendants are jointly and severally liable under section 20(a) of the Exchange Act, and 

awarding Hospira damages on these counts; 

C. Directing Hospira and the Board to take all necessary actions to reform and 

improve its corporate governance and internal procedures to comply with applicable laws and to 

protect Hospira and its shareholders from a repeat of the damaging events described herein, 

including, but not limited to, putting forward for shareholder vote the following proposals for 

amendments to the Company's By-Laws or Articles of Incorporation; and the following actions 

as may be necessary to ensure proper Corporate Governance Policies: 

1. a proposal to strengthen the Board's supervision of operations and develop 

and implement procedures for greater shareholder input into the policies and guidelines of the 

Board; 

2. a provision to permit the shareholders of Hospira to nominate at least three 

candidates for election to the Board; 

3. a proposal to control insider sales; 

4. a proposal to ensure the establishment, maintenance, and internal controls 

of the Company's compliance with applicable federal and state laws and regulations concerning 

the manufacture of its products; 

5. a proposal to form a committee with the sole goal of assuring compliance 

with CGMP; and 

6. a proposal to strengthen the Company's controls over the accuracy of its 

public disclosures; 

D. Extraordinary equitable and/or injunctive relief as permitted by law, equity, and 

state statutory provisions sued hereunder, including attaching, impounding, imposing a 
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constructive trust on, or otherwise restricting defendants' assets so as to assure that Plaintiffs on 

behalf of Hospira have an effective remedy; 

E. Awarding to Hospira restitution from defendants, and each of them, and ordering 

disgorgement of all profits, benefits, and other compensation obtained by defendants; 

F. Awarding to Plaintiffs the costs and disbursements of the action, including 

reasonable attorneys' fees, accountants' and experts' fees, costs, and expenses; and 

G. Granting such other and further relief as the Court deems just and proper. 

JURY DEMAND 

 Plaintiffs demand a trial by jury. 

Dated: Chicago, Illinois 

 September 21, 2012 

ROBBINS UMEDA LLP 

 

By: __/s/ George C. Aguilar_______ 

George C. Aguilar 

Brian J. Robbins 

Ashley R. Palmer 

600 B Street, Suite 1900 

San Diego, CA 92101 

Telephone: (619) 525-3990 

Facsimile: (619) 525-3991 

gaguilar@robbinsumeda.com 

brobbins@robbinsumeda.com 

apalmer@robbinsumeda.com 

 THE PASKOWITZ LAW FIRM, P.C. 

Laurence D. Paskowitz 

 208 East 51st Street, Suite 380 

 New York, New York 10022 

 Telephone: (212) 685-0969 

 Facsimile: (212) 685-2306 

 lpaskowitz@pasklaw.com 

Co-Lead Counsel for Plaintiffs 

--and-- 
- 118 - 

LASKY & RIFKIND, LTD. 

Norman Rifkind 

Leigh Lasky 

Amelia S. Newton 

351 West Hubbard Street, Suite 401 

Chicago, IL 60654 

Telephone: (312) 634-0057 

Facsimile: (312) 634-0059 

rifkind@laskyrifkind.com 

newton@laskyrifkind.com 

 Co-Liaison Counsel for Plaintiffs 

 

Additional Counsel: 

 THEGRANTLAWFIRM, PLLC 

 Lynda Grant 

 521 Fifth Avenue, 17th Floor 

 New York, NY 10175 

 Telephone: (212) 292-4441 

 Facsimile: (212) 292-4442 

 lgrant@grantfirm.com 

 

 ROY JACOBS & ASSOCIATES 

 Roy L. Jacobs 

 60 East 42nd Street 

 46th Floor 

 New York, New York 10165 

 Telephone: (212) 867-1156 

 Facsimile: (212) 504-8343 

 rljacobs@pipeline.com 

 Additional Counsel for Plaintiff Lori 

 Ravenscroft Geare 

THE LAW OFFICES OF EDWARD T. 

JOYCE & ASSOCIATES, PC 

Edward T. Joyce 

Rowena T. Parma 

135 South LaSalle Street 

Suite 2200 

Chicago, IL 60603 

Telephone: (312) 641-2600 

Facsimile: (312) 641-0360 

rparma@joycelaw.com 
- 119 - 

 Co-Liaison Counsel 

LAW OFFICE OF ALFRED 

G. YATES, JR., P.C. 

Alfred G. Yates, Jr. 

519 Allegheny Building 

429 Forbes Avenue 

Pittsburgh, PA 15219 

Telephone: (412) 391-5164 

Facsimile: (412) 471-1033 

yateslaw@aol.com 

Additional Counsel for Plaintiff Casey 

768698 

 


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CERTIFICATE OF SERVICE 

I hereby certify that on September 21, 2012, I electronically filed the foregoing with the 

Clerk of the Court using the CM/ECF system which will send notification of such filing to the email addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I 

have mailed the foregoing document or paper via the United States Postal Service to the nonCM/ECF participants indicated on the attached Manual Notice List. 

I certify under penalty of perjury under the laws of the United States of America that the 

foregoing is true and correct. Executed on September 21, 2012. 

 s/ George C. Aguilar 

GEORGE C. AGUILAR 

ROBBINS UMEDA LLP 

600 B Street, Suite 1900 

San Diego, CA 92101 

Telephone: (619) 525-3990 

Facsimile: (619) 525-3991 

gaguilar@robbinsumeda.com