Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies.

Commitments and Contingencies

Note 20 — Commitments and Contingencies

Hospira is involved in various claims and legal proceedings, as well as product liability claims, regulatory matters and proceedings related to Hospira’s business, including in some instances when Hospira operated as part of Abbott Laboratories.

Hospira has been named as a defendant in a lawsuit alleging generally that the spin-off of Hospira from Abbott resulted in a mass termination of employees so as to interfere with the future attainment of benefits in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”). The lawsuit was filed on November 8, 2004 in the U.S. District Court for the Northern District of Illinois, and is captioned: Myla Nauman, Jane Roller and Michael Loughery v. Abbott Laboratories and Hospira, Inc. Plaintiffs generally seek reinstatement in Abbott benefit plans, disgorgement of profits and attorneys fees. On November 18, 2005, the complaint was amended to assert an additional claim against Abbott and Hospira for breach of fiduciary duty under ERISA. Hospira has been dismissed as a defendant with respect to the fiduciary duty claim. By Order dated December 30, 2005, the Court granted class action status to the lawsuit. As to the sole claim against Hospira, the court certified a class defined as: “all employees of Abbott who were participants in the Abbott Benefit Plans and whose employment with Abbott was terminated between August 22, 2003 and April 30, 2004, as a result of the spin-off of the HPD [Hospital Products Division] /creation of Hospira announced by Abbott on August 22, 2003, and who were eligible for retirement under the Abbott Benefit Plans on the date of their terminations.” Trial of this matter has concluded. On April 22, 2010, the court issued a ruling in favor of Hospira and Abbott on all counts. Plaintiffs have appealed that verdict. On June 6, 2011 the appeal was argued before the United States Court of Appeals for the Seventh Circuit.  Hospira is awaiting a decision on the appeal.  In 2008, Hospira received notice from Abbott requesting that Hospira indemnify Abbott for all liabilities that Abbott may incur in connection with this litigation. Hospira denies any obligation to indemnify Abbott for the claims asserted against Abbott in this litigation.

Hospira is involved in patent litigation in the U.S. and elsewhere concerning Hospira’s attempts to market, and the marketing of, the generic oncology drug gemcitabine.  In September 2006, in the United States, Mayne Pharma Limited (now Hospira Australia Pty Ltd.) and Mayne Pharma (USA) Inc. (now Hospira Boulder, Inc.) were sued for patent infringement in the United States District Court for the Southern District of Indiana: Eli Lilly and Co. v. Mayne Pharma Ltd. et al., No. 06-cv-1558 (S.D. Ind. 2006). A second suit was filed in January 2008:  Eli Lilly and Co. v. Mayne Pharma Ltd. et al., No. 08-cv-0037 (S.D. Ind. 2008).  In March 2010, a third case was filed:  Eli Lilly and Co. v. Hospira, Inc., No. 10-cv-0346 (S.D. Ind. 2010). In each of the suits, plaintiffs alleged that Hospira’s gemcitabine drug products, if marketed in the U.S., would infringe U.S. patents 4,808,614 and 5,464,826. Plaintiff’s sought injunctive relief to prevent approval and marketing of Hospira’s products. On August 17, 2009, the United States District Court for the Eastern District of Michigan invalidated the ‘826 patent in Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co., No. 07-cv-15087 (E.D. Mich. Aug. 17, 2009). That decision was upheld on appeal in July 28, 2010 (Sun Pharms. Indus. Ltd. v. Eli Lilly & Co., No. 2010-1105 (Fed. Cir. July 28, 2010)), and the matter is now concluded.  The ‘614 patent expired on May 15, 2010, and the additional six-month period of pediatric exclusivity ran out on November 15, 2010.  Hospira launched its 2 gram gemcitabine drug product that day. On September 30, 2010, Hospira filed an action in the Northern District of Illinois against Eli Lilly and Company, seeking a judicial declaration that the process used to manufacture Hospira’s gemcitabine drug products would not (and does not) infringe Lilly’s U.S. Patent No. 5,606,048.  Lilly did not assert infringement counterclaims in the Illinois action.  However, on January 20, 2011, Lilly filed a Complaint with the U.S. International Trade Commission (“ITC”) under Section 227 of the Tariff Act of 1930, 19 U.S.C. § 1337, alleging that the importation into the United States, the sale for importation, or sale within the United States after importation of Hospira’s gemcitabine drug product would infringe one or more claims of the ‘048 patent. The Complaint sought an order excluding Hospira’s products from being imported into the United States.   Lilly dismissed the ITC matter on August 16, 2011.  Hospira dismissed the action in the Northern District of Illinois on August 10, 2011.  The matters are now concluded and Hospira will not include these matters in future filings.

Hospira is involved in patent litigation in the U.S. and elsewhere concerning Hospira’s attempts to market, and the marketing of, the generic oncolytic drug docetaxel. In the United States, Hospira was sued for patent infringement in the United States District Court for the District of Delaware: Aventis Pharma, S.A., et al. v. Hospira, Inc. (D. Del. 2008). The plaintiffs alleged that Hospira’s docetaxel products, if marketed in the U.S., would infringe U.S. patents 5,714,512 and 5,750,561. Plaintiff’s sought injunctive relief to prevent approval and marketing of Hospira’s products. A trial was held in this matter and on September 27, 2010, the U.S. District Court issued its decision in favor of Hospira, finding that the asserted claims of the patents were both invalid and unenforceable. Plaintiffs have appealed that decision to the United States Court of Appeals for the Federal Circuit.  Hospira is currently marketing and selling its docetaxel products. If the trial court decision is reversed and Hospira was ultimately found liable for patent infringement, the damages would generally be based on a reasonable royalty or the plaintiffs’ lost profits based on lost sales of the branded product. In the event of a reversal, Hospira could also be enjoined from further sales of its docetaxel products until expiration of one or both of the patents if they are held valid and enforceable.

Hospira is involved in two patent lawsuits concerning Hospira’s PrecedexTM (dexmedetomidine hydrochloride), a proprietary sedation agent. On September 4, 2009, Hospira brought suit against Sandoz International GmbH and Sandoz, Inc. for patent infringement. The lawsuit, which alleges infringement of U.S. Patents 4,910,214 (expires July 15, 2013) and 6,716,867 (expires March 31, 2019), is pending in the U.S. District Court for the District of New Jersey: Hospira, Inc. and Orion Corp. v. Sandoz International GmbH and Sandoz, Inc. (D. N.J. 2009). The lawsuit is based on Sandoz’s “Paragraph IV” notice indicating that Sandoz has filed an abbreviated new drug application (“ANDA”) with the FDA for a generic version of PrecedexTM. Hospira seeks a judgment of infringement, injunctive relief and costs. Sandoz’s ANDA has received tentative approval from the FDA. Pursuant to this litigation, a thirty-month stay of final approval is in place through January 28, 2012. The expiration of the stay does not prevent Hospira from seeking an injunction to block the launch of a generic product pending the resolution of the underlying litigation. On November 12, 2010, Hospira brought suit against Caraco Pharmaceutical Laboratories, Ltd. for patent infringement. The lawsuit, which alleges infringement of U.S. Patent No. 6,716,867 (referred to above) is pending in the U.S. District Court for the Eastern District of Michigan: Hospira, Inc. and Orion Corporation v. Caraco Pharmaceutical Laboratories, Ltd., No. 10-cv-14514 (E.D. Mich. 2010). The lawsuit is based on Caraco’s “Paragraph IV” notice indicating that Caraco has filed an ANDA with the FDA for a generic version of PrecedexTM.  Hospira seeks a judgment of infringement, injunctive relief and costs.

Hospira is subject to certain regulatory matters. Regulatory matters may lead to inspection observations (commonly referred to as Form 483 observations), warning letters, voluntary or involuntary product recalls, consent decrees, injunctions to halt manufacture and distribution of products, monetary sanctions, delays in product approvals and other restrictions on operations.

Hospira’s litigation exposure, including product liability claims, is evaluated each reporting period. Hospira’s reserves, which are not significant at September 30, 2011 and December 31, 2010, are the best estimate of loss, as defined by ASC Topic 450, “Contingencies” (“ASC 450”). Based upon information that is currently available, management believes that the likelihood of a material loss in excess of recorded amounts is remote.

Additional legal proceedings may occur that may result in a change in the estimated reserves recorded by Hospira. It is not feasible to predict the outcome of such proceedings with certainty and there can be no assurance that their ultimate disposition will not have a material adverse effect on Hospira’s financial position, cash flows, or results of operations.