K-V Pharmaceutical Files for Bankruptcy Protection
K-V Pharmaceutical Co. (KV/A), a provider of women’s health-care products, filed for bankruptcy after it said lax federal enforcement and state Medicaid restrictions prevented it from attaining the “full value” of a medicine intended to help pregnant women avoid premature births.
The drug company, which sought court protection along with several subsidiaries, listed debt of $728 million and assets of $237 million in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan. Based in Bridgeton, Missouri, K-V said it will keep operating as it seeks to reorganize.
“The company has been unable to realize the full value of its most important product, Makena, because of a lack of enforcement of the orphan drug marketing exclusivity granted to K-V for Makena by the Food and Drug Administration,” Greg Divis, chief executive officer of K-V, said in a statement. “The lack of enforcement has also led certain state Medicaid agencies to impose barriers to access to Makena on low-income pregnant women at high risk for recurrent preterm birth, despite those states’ legal obligation to cover FDA-approved drugs.”
Divis also cited restrictions on reimbursement imposed by state agencies, and limits on manufacturing and marketing of other K-V products imposed by a previous FDA consent decree.
Curtis Allen, a spokesman for the FDA, didn’t immediately return an e-mail seeking comment on the claims sent outside regular business hours.
Other K-V units that sought court protection include DrugTech Corp., FP1096 Inc., K-V Discovery Solutions Inc., K-V Generic Pharmaceuticals Inc., K-V Solutions USA Inc., Ther-Rx Corp. and Zeratech Technologies USA Inc.
K-V listed a unit of Deutsche Bank AG, serving as indenture trustee, as its largest unsecured creditor with $231 million. The company said it hired law firms Willkie Farr & Gallagher LLP, Williams & Connolly LLP and SNR Denton, and financial adviser Jefferies & Co. All are subject to court approval.
In June, a federal appeals court in St. Louis ruled K-V must face an investor lawsuit claiming the company and its executives made misleading statements about its compliance with federal quality-control standards.
In an amended complaint filed in 2009 by public employee pension plans of Boston and Norfolk County, Massachusetts, K-V and its officers were accused of making misleading statements between June 2004 and January 2009 in reports filed with the U.S. Securities and Exchange Commission. During that time, FDA inspectors had observed manufacturing, packing and labeling without making express findings of violations, according to the June 4 ruling.
In December 2008, the company issued a statement stating it was suspending shipments of FDA-approved drugs in tablet form, after which shares fell from $5.39 on Dec. 22 to 51 cents on Jan. 26, 2009.
Former CEO Mark Hermelin in March 2011 pleaded guilty to violating drug labeling laws and was sentenced to 30 days in prison. A year earlier, KV’s Ethex unit pleaded guilty to failing to tell the FDA about pill manufacturing problems.
K-V rose 2 cents to 32 cents yesterday in New York Stock Exchange trading.
The bankruptcy case is In re K-V Pharmaceutical Co., 12- 13347, U.S. Bankruptcy Court for the Southern District of New York (Manhattan). The investor case is Public Pension Fund Group v. KV Pharmaceutical Co., 10-3402, U.S. Court of Appeals for the Eighth Circuit (St. Louis).
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