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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI ) HOICHI CHEONG, Individually and On Behalf of ) All Others Similarly Situated, ) ) CIVIL ACTION NO. 11-1905 Plaintiff, ) ) vs. ) ) CLASS ACTION COMPLAINT K-V PHARMACEUTICAL COMPANY, ) GREGORY J. DIVIS, JR. and SCOTT GOEDEKE, ) ) Defendants. ) JURY TRIAL DEMANDED ) Plaintiff, Hoichi Cheong (Plaintiff), alleges the following based upon the investigation of Plaintiffs counsel, which included, among other things, a review of defendants public documents, conference calls and announcements, United States Securities and Exchange Commission (SEC) filings, wire and press releases published by and regarding K-V Pharmaceutical Company (K-V or the Company) and securities analysts reports and advisories about the Company. Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION AND OVERVIEW 1. This is a federal class action on behalf of purchasers of the securities of K-V, who

purchased or otherwise acquired K-V securities between February 14, 2011 and April 4, 2011, inclusive (the Class Period), seeking to pursue remedies under the Securities Exchange Act of 1934 (the Exchange Act). 2. K-V is a specialty branded pharmaceutical company with a primary focus in the

area of womens healthcare. The Companys three operating segments are branded products, specialty generics and specialty raw materials. The Companys branded pharmaceutical

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operations are conducted through its subsidiary Ther-Rx Corporation (Ther-Rx), while generic, non-braded operations are conducted through its subsidiary ETHEX Corporation (ETHEX). 3. The Company and its subsidiaries have a history of illicit conduct. For example,

in 2009, K-V, Ther-Rx and ETHEX entered into a consent decree for producing and distributing adulterated and unapproved drugs. Under this decree, K-V was prohibited from making or shipping drugs until the Company received approval to do so from the U.S. Food and Drug Administration (FDA). The following year, ETHEX pleaded guilty to two felony counts of criminal fraud for failing to report to the FDA that it was producing oversized tablets that had the potential to harm patients. As a result, former K-V Chairman Marc Hermelin (Hermelin) was banned from participating in federal health programs, including Medicaid and Medicare. Hermelin was also ordered to serve a 30-day jail sentence, to pay a $1 million fine and to forfeit $900,000. Nonetheless, Hermelin was still a significant director and shareholder of K-V, thus creating the possibility that K-V could also be banned from participating in federal health programs. At the same time, K-V was running low on cash and had started to lay off workers. 4. During this time, the defendants started to focus on the drug Makena

(hydroxyprogesterone caproate, 17P in generic form), a prescription hormone (progestin) injection intended for pregnant women who have delivered a preterm child in the past (in other words, an early delivery). Makena is utilized by pregnant women to lower the risk of having another preterm childbirth. For reference, 17P was initially approved by the FDA in 1956, and was manufactured by Bristol-Myers Squibb until 2000 (who at that time ceased production for commercial reasons). After the production cessation in 2000, the only producers of 17P were pharmacies that would custom make the drug in small quantities (known as compounding pharmacies). Generally, women were charged between $10 and $20 per injection of 17P, or

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about $200 to $400 for the 20-week recommended course of treatment. Meanwhile, a 2003 study confirming the effectiveness of 17P caused demand for the drug to skyrocket. 5. The Orphan Drug Act (ODA) allows for seven years of exclusive sales rights to

manufacturers who obtain FDA approval for drugs that treat a disorder affecting fewer than 200,000 people in the U.S. The purpose of the ODA is to encourage pharmaceutical companies to develop drugs for diseases and conditions that have a relatively small market. 6. 17P, due to its age, did not have patent protection. As such, K-V requested that

the FDA grant 17P (rebranded as Makena) orphan drug status under the ODA. K-V was successful with this request, and thereafter conducted a clinical trial of Makena. Subsequently, K-V received FDA approval on February 4, 2011 to manufacture and sell the drug. At that point, it was clear that K-V had the exclusive right to market Makena, but there was ambiguity as to whether compounding pharmacies would be allowed to continue to make and sell 17P. Almost immediately after receiving FDA approval to sell and market Makena, the defendants increased the price of the drug from $10-$20 per injection to an astounding $1,500 per injection. Whereas patients had become accustomed to paying between $200 and $400 for a 20 week course of treatment, following K-Vs price increase that same course of treatment now cost between $15,000 and $30,000. 7. Throughout the Class Period, the defendants assured investors that the Company

had programs in place to ensure that every eligible patient would have access to Makena, including financial assistance for both insured and uninsured patients. Further, the defendants assured investors that compounding pharmacies would be prohibited from making 17P, meaning that every dose of 17P would have to be purchased from K-V. The implication was that this would prove to be a financial windfall for the Company.

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8.

However, on March 17, 2011, things began to unravel. On that day, two U.S.

Senators announced that they had sent a letter to the Federal Trade Commission (FTC) requesting a formal investigation into potential anticompetitive conduct arising out of the FDA granting Makena orphan drug status and K-Vs subsequent decision to increase the price of Makena by 150-fold. The Senators also stated that the Companys actions would result in diminished access to appropriate health care for women, and would result in increased preterm births due to patients inability to afford treatment. 9. K-V has a dual share structure of common stock, and both the Class A common

stock and the Class B common stock (also referred to as series A stock and series B stock) are listed and traded on the NYSE. Upon the release of the above news, shares of the Companys series A stock fell $1.14 per share, or over 11 percent, to close on March 18, 2011 at $8.50 per share, on heavy trading volume. Similarly, the Companys series B stock declined

approximately $1.15 per share, or over 11 percent, to close on March 18, 2011 at $8.58 per share. 10. Approximately one week later, the March of Dimes Foundation (March of

Dimes) sent a letter to the defendants requesting that K-V significantly reduce the price of Makena, adjust the patient assistance program to ensure adequate coverage of all patients, and establish a method for reporting to stakeholders on the Companys patient assistance program to ensure that it was meeting needs. Additionally, the March of Dimes asked for a justification from K-V for the drugs price increase based upon the Companys investment in Makena, savings to the health care system, or other appropriate methodology. 11. On March 30, 2011, the FDA announced that, in spite of defendants assertions to

the contrary, the agency did not intend to take enforcement action against pharmacies that compound 17P. 4

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12.

On this news, shares of the Companys series A stock fell $1.46 per share, or over

20 percent, to close on March 30, 2011 at $5.65 per share, on unusually heavy trading volume. Similarly, the Companys series B stock fell $1.46 per share, or over 20 percent, to close on March 30, 2011 at $5.70 per share, on heavy trading volume. 13. On April 1, 2011, the defendants announced that, among other things, they were

reducing the price of Makena by nearly 55 percent, to $690 per injection. 14. On this news, shares of the Companys series A stock fell an additional $0.60 per

share, or over 10 percent, to close on April 1, 2011 at $5.39 per share, on heavy trading volume. Similarly, shares of the Companys series B stock fell approximately $0.56 per share, or over 9 percent, to close on April 1, 2011 at $5.37 per share, on heavy trading volume. 15. On April 4, 2011, an article published in Bloomberg revealed that even with the

price reduction, many physicians would still not recommend Makena to their patients, believing the cost of the drug to be too high. One physician spoke of the hostility generated by K-Vs initial pricing of the drug, as well as the fact there was no guarantee that a patient or an insurance company would pay for Makena (meaning that a physician would have to assume financial responsibility for inventory if they bought the drug from K-V). 16. Upon these revelations, shares of the Companys series A stock fell an additional

$0.39 per share, or over 7 percent, to close on April 4, 2011 at $5.00 per share, on heavy trading volume. Similarly, shares of the Companys series B stock declined approximately $0.34 per share, or over 6 percent, to close on April 4, 2011 at $5.03 per share. 17. The Complaint alleges that, throughout the Class Period, defendants failed to

disclose material adverse facts about the Companys financial well-being, business operations, and prospects. Specifically, defendants failed to disclose or indicate the following: (1) that the FDA had not in fact granted K-V exclusive distribution rights over hydroxyprogesterone 5

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caproate; (2) that the Company had not expanded access of Makena in any meaningful way to low-income and at-risk groups; (3) that the exorbitant $1,500 per injection price of Makena would reduce the availability of the drug to physicians and patients and decrease meaningful demand; (4) that the Company lacked adequate internal and financial controls; and (5) that, as a result of the foregoing, the Companys statements about Makenas price, distribution program and the likelihood of financial success for the Company were lacking in any reasonable basis when made. 18. As a result of defendants wrongful acts and omissions, and the precipitous

decline in the market value of the Companys securities, Plaintiff and other Class Members suffered damages. JURISDICTION AND VENUE 19. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, (15 U.S.C. 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17 C.F.R. 240.10b-5). 20. This Court has jurisdiction over the subject matter of this action pursuant to

Section 27 of the Exchange Act (15 U.S.C. 78aa) and 28 U.S.C. 1331. 21. Venue is proper in this District pursuant to Section 27 of the Exchange Act, 15

U.S.C. 78aa and 28 U.S.C. 1391(b). Many of the acts and transactions alleged herein, including the preparation and dissemination of materially false and misleading information, occurred in substantial part in this District. Additionally, K-Vs principal executive offices are located within this District. 22. In connection with the acts, conduct and other wrongs alleged in this Complaint,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce.

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PARTIES 23. Plaintiff, Hoichi Cheong, as set forth in the accompanying certification,

incorporated by reference herein, purchased K-V securities at artificially inflated prices during the Class Period and has been damaged thereby. Exhibit A. 24. Defendant K-V is a Delaware corporation with its principal executive offices

located at One Corporate Woods Drive, Bridgeton, Missouri. 25. Defendant Gregory J. Divis, Jr. (Divis) was, at all relevant times, the

Companys President and Chief Executive Officer (CEO), as well as President of Ther-Rx. 26. Defendant Scott Goedeke (Goedeke) was, at all relevant times, the Senior Vice

President of Marketing and Market Access at Ther-Rx. 27. Defendants Divis and Goedeke are collectively referred to hereinafter as the The Individual Defendants, because of their positions with the

Individual Defendants.

Company, possessed the power and authority to control the contents of K-Vs reports to the SEC, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. Each defendant was provided with copies of the

Companys reports and press releases alleged herein to be misleading prior to, or shortly after, their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material non-public information available to them, each of these defendants knew that the adverse facts specified herein had not been disclosed to, and were being concealed from, the public, and that the positive representations which were being made were then materially false and misleading. The Individual Defendants are liable for the false statements pleaded herein, as those statements were each grouppublished information, the result of the collective actions of the Individual Defendants.

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SUBSTANTIVE ALLEGATIONS Background 28. K-V is a specialty branded pharmaceutical company with a primary focus in the

area of womens healthcare. The Companys three operating segments are branded products, specialty generics and specialty raw materials. The Companys branded pharmaceutical

operations are conducted through its subsidiary Ther-Rx, while generic, non-braded operations are conducted through its subsidiary ETHEX. 29. The Company and its subsidiaries have a history of illicit conduct. For example,

in 2009, K-V, Ther-Rx and ETHEX entered into a consent decree for producing and distributing adulterated and unapproved drugs. Under this decree, K-V was prohibited from making or shipping drugs until the Company received approval to do so from the FDA. The following year, ETHEX pleaded guilty to two felony counts of criminal fraud for failing to report to the FDA that it was producing oversized tablets that had the potential to harm patients. As a result, former K-V Chairman Hermelin was banned from participating in federal health programs, including Medicaid and Medicare. Hermelin was also ordered to serve a 30-day jail sentence, to pay a $1 million fine and to forfeit $900,000. Nonetheless, Hermelin was still a significant director and shareholder of K-V, thus creating the possibility that K-V could also be banned from participating in federal health programs. At the same time, K-V was running low on cash and had started to lay off workers. 30. During this time, the defendants started to focus on the drug Makena

(hydroxyprogesterone caproate, 17P in generic form), a prescription hormone (progestin) injection intended for pregnant women who have delivered a preterm child in the past (in other words, an early delivery). Makena is utilized by pregnant women to lower the risk of having another preterm childbirth. For reference, 17P was initially approved by the FDA in 1956, and 8

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was manufactured by Bristol-Myers Squibb until 2000 (who at that time ceased production for commercial reasons). After the production cessation in 2000, the only producers of 17P were pharmacies that would custom make the drug in small quantities (known as compounding pharmacies). Generally, women were charged between $10 and $20 per injection of 17P, or about $200 to $400 for the 20-week recommended course of treatment. Meanwhile, a 2003 study confirming the effectiveness of 17P caused demand for the drug to skyrocket. 31. The ODA allows for seven years of exclusive sales rights to manufacturers who

obtain FDA approval for drugs that treat a disorder affecting fewer than 200,000 people in the U.S. The purpose of the ODA is to encourage pharmaceutical companies to develop drugs for diseases and conditions that have a relatively small market. 32. 17P, due to its age, did not have patent protection. As such, K-V requested that

the FDA grant 17P (rebranded as Makena) orphan drug status under the ODA. K-V was successful with this request, and thereafter conducted a clinical trial of Makena. Subsequently, K-V received FDA approval on February 4, 2011 to manufacture and sell the drug. At that point, it was clear that K-V had the exclusive right to market Makena, but there was ambiguity as to whether compounding pharmacies would be allowed to continue to make and sell 17P. Almost immediately after receiving FDA approval to sell and market Makena, the defendants increased the price of the drug from $10-$20 per injection to an astounding $1,500 per injection. Whereas patients had become accustomed to paying between $200 and $400 for a 20 week course of treatment, following K-Vs price increase that same course of treatment now cost between $15,000 and $30,000.

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Materially False and Misleading Statements Issued During the Class Period 33. The Class Period begins on February 14, 2011. On this day, the Company held a

conference call with analysts and investors. During the call, the Individual Defendants spoke of expanded patient access to Makena, and touched upon the FDA regulation of compounding pharmacies that would potentially compete with the Company with respect to Makena. The Individual Defendants stated, in relevant part: [Goedeke]: Our Companys commercial team has spent years preparing for this moment; and we, too, are ready to join the fight against pre-term births. Prior to FDA approval of Makena, mothers who could benefit from therapy faced significant barriers to accessing treatment due to the absence of a commercially available FDA-approved product. Our Company has carefully studied how to best remove these barriers and built our go-to-market strategy to ensure that we are in position to help fulfill the promise of Makena by facilitating access to this crucially important medication for every eligible patient. * * * [Divis]: In fact, its not unusual for a pre-term birth to cost several hundred thousands of dollars or more. FDA-approved Makena helps fulfill critical unmet needs for the high-risk population of women who have experienced a singleton spontaneous pre-term birth. As noted earlier, prior to FDA approval of Makena, women who could benefit from therapy that may reduce the risk of pre-term birth face significant barriers to access due to the absence of a commercially available, FDA-approved product. Because of these barriers, many eligible moms have been on the sidelines. As we have outlined, our Company recognizes the importance of addressing these barriers and is committed to helping fulfill the promise of Makena by ensuring access for every eligible patient. Makena has been designated orphan drug status by FDA; and, as an orphan drug, the Makena-eligible population of women is relatively small but very important. Makena is used for a relatively short and well-defined period during pregnancy to help give babies the time they need to develop in the womb. The list price of Makena will be $1500 per injection; injections are administered weekly starting between 16 and 20 weeks of gestation and continuing until 37 weeks of gestation or delivery, whichever comes first. We believe that, on average, patients will receive approximately 15 to 20 injections. Based on the eligible patient population, which has been estimated in the literature to be approximately 140,000 patients annually and given that preterm birth can be very costly to a health plan, we anticipate that commercial payers and state Medicaid programs will cover and reimburse Makena. We do 10

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note that many of our payer partners have a distinguished history in working toward prevention of pre-term birth as part of their ongoing corporate social responsibility and quality improvement initiatives, and the cost of prematurity can be very high. Makena can help offset some of those costs. Our Company understands that pre-term birth is a complex, multi-factorial issue, and we are committed to working in concert with stakeholders to help ensure that all eligible patients have access to this crucially important medication. We anticipate that some patients may need financial assistance, and we have established a comprehensive patient assistance program to help facilitate access to Makena through the Makena Care Connection. Exemplifying our commitment to patient access, our comprehensive financial assistance program covers both uninsured and insured patients based on income eligibility requirements. Specifically, women with household incomes up to $100,000 will be eligible for financial assistance. And notably, this income level includes approximately 85% of US households. In summary, Makena represents a significant advance for a very important group of women, moms with a singleton pregnancy who have a history of a singleton spontaneous pre-term birth. For the first time, their healthcare providers have an FDA-approved treatment supported by a comprehensive access program to help revive hope for their next pregnancy. * * * [Analyst]: [C]ould you talk a little bit more about what the strategy is to get the off-label compounding pharmacies off the market? Is that something you have to do, or is that something the FDA will help you in doing? How many patients, also, do you think you can target in 2011 with this expanded sales force? Do you have an internal goal? Is there anything you could share with us about that internal goal? [Divis]: Thanks for your question, Tim. Ill take the latter question briefly, and then Ill let one of our colleagues address the compounding question. We certainly believe, in terms of how we are structuring our go-to-market strategy with our sales force and whatnot puts us in a position to reach out to a requisite number of healthcare professionals to surround the major majority of the business opportunities that exist. We have done a lot of research to understand who they are and where they are, and obviously we have been in many of these offices for the last 10-plus years as a company in womens healthcare. So we believe we have a good handle of the physician audience and the target audience and who are the treaters for the Makena-eligible patient population. We are not in a position right now to give guidance in terms of patients that we expect to have initiated and initiate therapy in the coming year. However, we have established a clear objective strategically that we believe that this product, Makena, this treatment, is so important that we need to do everything we can to 11

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ensure every eligible mom has access and an opportunity to be treated, should they decide with their healthcare professional to be treated. With regards to compounding, I will let Scott Goedeke make a few comments on that. [Goedeke]: Thanks, Greg. Hello, Tim, appreciate your question. Tim, we believe that the regulations and laws are very clear. I think its fair to say that compounding pharmacies are not FDA-approved manufacturing facilities and that FDA regulations and state pharmacy laws generally prohibit the distribution of compounded products that are the same or essentially the same as FDA-approved products. We also believe that compounded pharmacies are aware of these laws and regulations, and our expectation is that they will adhere to them. I think its also fair to say that, despite the availability of compounded product, there have been moms on the sidelines because of significant logistical and financial barriers to access that are typically associated with non-FDA-approved products. And Ill just close by saying that everything we have designed around Makena is to remove these barriers and to make sure that we fulfill our corporate commitment, which is to make Makena accessible to all eligible patients. [Emphasis added.] 34. This news caused the price of K-V shares to skyrocket. On February 14, 2011,

after the above statement, K-V series A stock closed at $6.53 per share, an increase from the previous trading day of $2.15 per share, or over 49%. Similarly, K-V series B stock closed at $6.40 per share, an increase of $1.98 per share, or nearly 45% 35. On February 17, 2011, the Company sent a letter to compounding pharmacists.

The letter was noted by the market, and stated the following, in relevant part: It is our understanding that your pharmacy compounds human prescription drugs, including hydroxyprogesterone caproate injection. Now that Makena is commercially available as the first and only FDA-approved hydroxyprogesterone caproate injection manufactured at a cGMP-facility, compounded, unapproved formulations of hydroxyprogesterone caproate injection should no longer be made by compounding pharmacies. Indeed, as articulated by the FDA in numerous enforcement actions, FDA has stated that it views compounded drugs to be new drugs within the meaning of 21 U.S.C. 321 (p), and as such, they may not be introduced into interstate commerce without FDA approval. Although FDA will exercise its enforcement discretion with respect to certain pharmacy compounding practices, this discretion does not extend to compounding of 12

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copies or essentially copies of commercially available FDA-approved products. Therefore, although compounding of hydroxyprogesterone caproate injection may have, in the past, been subject to FDA enforcement discretion, continuing to compound this products after FDA-approval of Makena renders the compounded product subject to FDA enforcement for violating certain provisions of the Federal Food, Drug and Cosmetic Act, as well as FDA guidance. [Emphasis added.] 36. The price of K-V shares continued to rise. On February 18, 2011, K-V series A

stock closed at $9.86 per share, an increase from the previous trading day of $1.28 per share, or nearly 15%. Similarly, K-V series B stock closed at $9.87 per share, an increase of $1.29 per share, or over 15%. 37. On March 1, 2011, the Company issued a press release entitled K-V Therein, the

Pharmaceutical Company Announces $200 Million Private Debt Offering. Company stated, in relevant part:

K-V Pharmaceutical Company (NYSE: KVa/KVb) (the Company) announced today that it intends to offer $200 million of senior secured notes due 2015 (the Notes) in a private placement, subject to market conditions. The Notes will be offered only to accredited investors pursuant to Regulation D under the Securities Act of 1933, as amended (the Securities Act). The Notes have not been registered under the Securities Act or any state or other securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements of the Securities Act and applicable state securities laws. The Company intends to use the net proceeds from the offering of the Notes to repay in full the Companys outstanding obligations under its credit agreement with U.S. Healthcare I, L.L.C. and U.S. Healthcare II, L.L.C. (including the payment of related premiums) and terminate the related future loan commitments, to establish an escrow reserve for one year of interest payments on the Notes and for general corporate purposes. 38. The statements contained in 33 and 35 were materially false and misleading

when made because defendants failed to disclose or indicate the following: (1) that the FDA had not in fact granted K-V exclusive distribution rights over hydroxyprogesterone caproate; (2) that

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the Company had not expanded access of Makena in any meaningful way to low-income and atrisk groups; (3) that the exorbitant $1,500 per injection price of Makena would reduce the availability of the drug to physicians and patients and decrease meaningful demand; (4) that the Company lacked adequate internal and financial controls; and (5) that, as a result of the foregoing, the Companys statements about Makenas price, distribution program and the likelihood of financial success for the Company were lacking in any reasonable basis when made. The Truth Begins to Emerge 39. On March 17, 2011, U.S. Senators Amy Klobuchar and Sherrod Brown issued a

press release pertaining to a letter they had sent to the FTC concerning K-V and Makena. The letter set forth, in relevant part: U.S. Senators Amy Klobuchar (D-MN) and Sherrod Brown (D-OH) today sent Federal Trade Commission Chairman Jon Leibowitz a letter urging the agency to launch an investigation into potentially anti-competitive behavior after a drug treatment used for high-risk pregnancies dramatically increased in cost. The drug, commonly known as Makena, is a weekly injection of progesterone meant to prevent pre-term labor in pregnant women and has been safely administered by U.S. pharmacies in the past at a cost of between $10 and $20 per injection. After the Missouri-based drug company KV Pharmaceutical was granted orphan status for its version of the drug, the cost reportedly rose to $1,500 per injection 150 times the original cost. This is a proven and affordable drug that has been around for over 50 years. Its critical that we make sure this company isnt taking advantage of its orphan-drug determination to monopolize the market and engage in price gouging at the expense of pregnant women, Klobuchar said. At a time when rising prices for prescription drugs are stretching the budgets of middle-class families, we must be vigilant in stopping practices that would limit access to vital medicines. KV created an overnight monopoly for this lifesaving drug and then proposed raising the price by 14,900 percent, Brown said. Last week, I called on KV Pharmaceuticals to immediately reconsider their decision, but to this date the company continues to defend this astronomical price increase. Pricegouging is never acceptable, particularly not when it undermines public health and fleeces taxpayers. Families deserve an investigation.

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Last week, Brown sent a letter to KV Pharmaceutical urging the company to reverse course on the price increase for Makena. Brown called on the company to maintain access to the critical drug to stem an increase in premature births. The drug first came to the market over 50 years ago and it has recently been used to help prevent early births in women who have a history of spontaneous pre-term deliveries. The price increase not only threatens to restrict individual access to the drug, it also places a heavy burden on state Medicaid programs, which cover a majority of high-risk pregnancies in this country. The full text of the letter is pasted below: * Dear Chairman: I am writing to request that the Federal Trade Commission initiate a formal investigation into any potential anticompetitive conduct arising out of KV Pharmaceuticals actions regarding a dramatic 150-fold increase in price that the company has applied to a proven progesterone treatment. 17-hydroxyprogesterone caproate, sold by KV Pharmaceutical under the name Makena, is a weekly injection of a form of progesterone meant to prevent preterm labor in high-risk pregnant women. This drug, which first came to market over 50 years ago, has recently been used to help prevent early births to women who had a history of spontaneous preterm deliveries. Prior to KV Pharmaceuticals actions, this product was mixed by compound pharmacies and administered safely for $10 to $20 per injection. Due to the product being given orphan drug status, KV Pharmaceutical has potentially created an anticompetitive market and has indicated they will dramatically increase the cost per injection to $1,500. While I understand the Food and Drug Administration (FDA) is working to ensure that drugs marketed and sold in the United States are safe and effective, I am concerned that KV Pharmaceutical is taking advantage of FDAs approval of Makena and orphan drug determination to achieve rights as the sole source for this limited use of progesterone, leading to a monopolization of treatments to address preterm labors. I appreciate KV Pharmaceuticals attempt to provide financial assistance to help purchase Makena. However, the financial assistance is not sufficient and does not extend to certain groups of women. In additional to significant costs to individuals, this price increase will place a heavy burden on state Medicaid programs, which cover a majority of high-risk pregnancies. I am extremely concerned that KV Pharmaceuticals actions will result in diminished access to appropriate health care for women and result in increased preterm births. [Emphasis added.] * *

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40.

On this news, shares of the Companys series A stock fell $1.14 per share, or over

11 percent, to close on March 18, 2011 at $8.50 per share, on heavy trading volume. Similarly, the Companys series B stock declined approximately $1.15 per share, or over 11 percent, to close on March 18, 2011 at $8.58 per share. 41. On March 23, 2011, the March of Dimes sent a letter to Defendant Divis, which

was also published and disseminated to the market. The letter stated, in relevant part: Dear Mr. Divis: Thank you for your letter of March 17th. I am pleased to learn that you are listening carefully to stakeholder concerns about list price, patient access, and cost to payers. Thank you for considering additional steps to ensure that Makena is available to all eligible women, and for convening stakeholders from the March of Dimes, the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, and the Society for Maternal Fetal Medicine next week. In advance of that meeting, I want to go on record that March of Dimes expects Ther-Rx to come to the table with substantive commitments including: 1) A significant reduction in the list price of Makena.

2) Adjustments to the patient assistance program to ensure adequate coverage of all patients, insured, uninsured and underinsured. 3) A method for reporting on a regular basis to stakeholders on the patient assistance program to ensure that it is meeting needs in a timely and adequate way. 4) A justification or rationale for your pricing based on your investment in the product, savings to the health care system, or other appropriate methodology, which you are prepared to make public. Without these elements, I do not believe that Makena can succeed in the current marketplace environment, and as a result, at-risk women will be denied access to a safe and effective treatment to reduce preterm delivery. Therefore if you are unable to make a clear commitment to significantly address the above issues at the meeting, the March of Dimes will need to pursue alternative strategies for ensuring that this proven intervention to prevent preterm birth is made available to all medically eligible pregnant women, and we will step away from our longstanding and productive corporate relationship with Ther-Rx. Thank you for your consideration of this critical matter. [Emphasis added.] 16

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42.

Then, on March 30, 2011, the Company issued a press release entitled Ther-Rx

Corporation Commits to Take Action Regarding Makena Pricing. The press release revealed, in relevant part: Ther-Rx Corporation takes very seriously the public concerns raised regarding the list price of Makena. We are committed to ensuring that this significant, FDAapproved medication is covered at an affordable cost and accessible to all women who are prescribed Makena. We are finalizing solutions to the concerns, and will announce them by the end of the week. * * * To remove financial barriers to access, Ther-Rx established and has activated a patient financial assistance program (PAP) that not only reduces the total outof-pocket costs for qualified patients, but eliminates out-of-pocket costs entirely for patients whose financial need is greatest. The level of assistance already exceeds many federal program guidelines for healthcare subsidies. Based on the feedback the company has received, we are currently exploring additional ways to help provide affordable access for all patients who are prescribed Makena. This includes the expansion of the existing patient assistance program. Specialty injectable products like Makena are not typically carried by retail pharmacies. To make the process of prescribing and obtaining Makena as easy as possible for healthcare providers and patients, Ther-Rx established the Makena Care Connection, a comprehensive program for patients and healthcare providers that provides administrative, financial, and treatment support for Makena patients in one single point of contact. The Makena Care Connection is actively processing prescriptions for Makena, and is already facilitating access to the financial assistance program for patients in financial need. It is our commitment that every woman who is prescribed Makena will have affordable access to this FDA-approved and FDA-monitored therapy. [Emphasis added.] 43. That same day, the FDA issued a press release entitled FDA Statement on

Makena. This press release set forth, in relevant part: FDA understands that the manufacturer of Makena, KV Pharmaceuticals, has sent letters to pharmacists indicating that FDA will no longer exercise enforcement discretion with regard to compounded versions of Makena. This is not correct. In order to support access to this important drug, at this time and under this unique situation, FDA does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient unless the compounded 17

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products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products. As always, FDA may at any time revisit a decision to exercise enforcement discretion. [Emphasis added.] 44. On this news, shares of the Companys series A stock fell $1.46 per share, or over

20 percent, to close on March 30, 2011 at $5.65 per share, on unusually heavy trading volume. Similarly, the Companys series B stock fell $1.46 per share, or over 20 percent, to close on March 30, 2011 at $5.70 per share, on heavy trading volume. 45. On April 1, 2011, the Company issued a press release entitled Ther-Rx

Corporation Takes Action to Further Ensure High-Risk Women Are Able to Access FDAApproved Makena. Therein, the Company revealed, in relevant part: As part of its ongoing efforts to ensure that high-risk women have access to FDAapproved Makena instead of unapproved, unregulated compounded drugs, TherRx Corporation, a subsidiary of K-V Pharmaceutical Company (NYSE: KVa/KVb) (the Company), announced today important initiatives to reduce the cost of Makena (hydroxyprogesterone caproate injection) and encourage stakeholders to provide timely access to this important FDA-approved medication. Effective immediately, Ther-Rx has: Reduced the list price of Makena by nearly 55 percent, to $690 per injection; Will offer supplemental rebates that, in conjunction with the list price reduction and the standard Medicaid rebate of 23.1 percent, will result in a substantially reduced cost per injection for state Medicaid agencies compared to list price. This will help ensure that every woman who is prescribed Makena regardless of her ability to pay has the comfort of knowing a medication that has been rigorously reviewed by FDA for safety and efficacy is available to her; Capped the costs for a full course of therapy to a maximum of three vials (15 injections) for contracted health insurance plans and state Medicaid agencies; and Expanded the Companys patient assistance program for patients who are prescribed this important medication by removing income caps to qualify for financial assistance. 85 percent of patients will pay $20 or less per injection for FDA-approved Makena, and patients whose financial need is greatest would receive FDA-approved Makena at no out-of-pocket cost.

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Under the new pricing structure, the Company believes that the use of Makena by eligible patients will deliver net cost savings to Medicaid programs and private insurance plans in year one, based on third-party economic modeling of costs associated with the condition. Ensuring access to an FDA-approved sterile, injectable medication, manufactured under mandatory strict quality controls, is in the best interests of all high-risk women, said Greg Divis, Chief Executive Officer, K-V Pharmaceutical Company and President, Ther-Rx Corporation. We understand the concerns that key stakeholders raised under our original pricing structure. We also recognize the current budget challenges facing state Medicaid programs and other payers. In conjunction with our substantial reduction in price, it is our sincere hope that all committed stakeholders will take appropriate action to provide timely access to this important FDA-approved medication. [Emphasis added.] 46. On this news, shares of the Companys series A stock fell an additional $0.60 per

share, or over 10 percent, to close on April 1, 2011 at $5.39 per share, on heavy trading volume. Similarly, shares of the Companys series B stock fell approximately $0.56 per share, or over 9 percent, to close on April 1, 2011 at $5.37 per share, on heavy trading volume. 47. On April 4, 2011, Bloomberg published an article entitled KV Pharmas Reduced

Makena Price Wont Sway Some Physicians. The article quoted University of Texas professor and division chief of maternal-fetal medicine George Saad as stating that the Company lowered the price but it is still too high. He pointed out that capped at fifteen doses a pregnancy, Makena could cost up to $7,000 after discounts. Arnold Cohen, professor and chairman of the

department of OBGYN at Albert Einstein Medical Center in Philadelphia, stated that there was hostility towards K-V as a result of the Companys initial pricing of Makena, along with a barrier to using Makena as there is already a cheaper alternative that the FDA stands behind (i.e. 17P from compounding pharmacies). He further stated, If I have a choice, lets say this [$1,500 pricing] never happened and [K-V] came out and said Makena is going to be priced at $50 for an injection, I think most of us would have been ok with that. Baha Sibail, professor of clinical obstetrics and gynecology at the University of Cincinnati, similarly pointed out that at current

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prices, if a physician were to buy Makena, the physician would have to assume the responsibility for that inventory, as there is no guarantee a patient or insurance company will pay for it. 48. On these revelations, shares of the Companys series A stock fell an additional

$0.39 per share, or over 7 percent, to close on April 4, 2011 at $5.00 per share, on heavy trading volume. Similarly, shares of the Companys series B stock declined approximately $0.34 per share, or over 6 percent, to close on April 4, 2011 at $5.03 per share. PLAINTIFFS CLASS ACTION ALLEGATIONS 49. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure on behalf of all persons who purchased K-V securities during the Class Period (the Class). Excluded from the Class are defendants, directors and officers of K-V and their families and affiliates. 50. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial benefits to the parties and the Court. According to the Companys Form 10-Q filed with the SEC on August 9, 2011, K-V had over 48 million shares of series A stock and over 11 million shares of and series B stock outstanding, owned by thousands of persons. 51. There is a well-defined community of interest in the questions of law and fact

involved in this case. Questions of law and fact common to the members of the Class which predominate over questions which may affect individual Class members include: (a) (b) (c) Whether the Securities Exchange Act was violated by defendants; Whether defendants omitted and/or misrepresented material facts; Whether defendants statements omitted material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; 20

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(d)

Whether defendants knew or recklessly disregarded that their statements were false and misleading;

(e) (f)

Whether the prices of K-V securities were artificially inflated; and The extent of damage sustained by Class members and the appropriate measure of damages.

52.

Plaintiffs claims are typical of those of the Class because plaintiff and the Class

sustained damages from defendants wrongful conduct. 53. Plaintiff will adequately protect the interests of the Class and has retained counsel

who are experienced in class action securities litigation. Plaintiff has no interests which conflict with those of the Class. 54. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy. LOSS CAUSATION/ECONOMIC LOSS 55. Defendants wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiff and the Class. The price of K-Vs securities significantly declined when the misrepresentations made to the market, and/or the information alleged herein to have been concealed from the market, and/or the effects thereof, were revealed, causing investors losses. As a result of their purchases of K-V securities during the Class Period, plaintiff and other members of the Class suffered economic loss, i.e., damages, under the federal securities laws. SCIENTER ALLEGATIONS 56. During the Class Period, the defendants had both the motive and opportunity to

commit fraud. They also had actual knowledge of the misleading nature of the statements they made or acted in reckless disregard of the true information known to them at the time. In so 21

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doing, the defendants participated in a scheme to defraud and committed acts, practices and participated in a course of business that operated as a fraud or deceit on purchasers of K-Vs securities during the Class Period. 57. Additionally, as set forth in 37, supra, during the Class Period, and with the

Companys securities trading at artificially inflated prices, the Company sold $200 million worth of senior secured notes, the proceeds of which were used in large part to pay K-Vs debts. Applicability of Presumption of Reliance: Fraud on the Market Doctrine 58. Plaintiff will rely upon the presumption of reliance established by the fraud-on-

the-market doctrine in that, among other things: (a) Defendants made public misrepresentations or failed to disclose material facts during the Class Period; (b) (c) (d) The omissions and misrepresentations were material; The Companys securities traded in an efficient market; The misrepresentations alleged would tend to induce a reasonable investor to misjudge the value of the Companys securities; and (e) Plaintiff and other members of the Class purchased K-V securities between the time defendants misrepresented or failed to disclose material facts and the time the true facts were disclosed, without knowledge of the misrepresented or omitted facts. 59. At all relevant times, the market for K-V securities was efficient for the following

reasons, among others: (a) as a regulated issuer, K-V filed periodic public reports with the SEC; and (b) K-V regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the

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major news wire services and through other wide-ranging public disclosures, such as communications with the financial press, securities analysts and other similar reporting services. NO SAFE HARBOR 60. Defendants verbal Safe Harbor warnings accompanying its oral forward-

looking statements (FLS) issued during the Class Period were ineffective to shield those statements from liability. 61. The defendants are also liable for any false or misleading FLS pleaded because, at

the time each FLS was made, the speaker knew the FLS was false or misleading and the FLS was authorized and/or approved by an executive officer of K-V who knew that the FLS was false. None of the historic or present tense statements made by defendants were assumptions underlying or relating to any plan, projection or statement of future economic performance, as they were not stated to be such assumptions underlying or relating to any projection or statement of future economic performance when made, nor were any of the projections or forecasts made by defendants expressly related to or stated to be dependent on those historic or present tense statements when made. FIRST CLAIM Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 62. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein. 63. During the Class Period, K-V and the Individual Defendants carried out a plan,

scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members of the Class to purchase K-V securities at artificially

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inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, these defendants, and each of them, took the actions set forth herein. 64. K-V and the Individual Defendants: (i) employed devices, schemes, and artifices

to defraud; (ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Companys securities in an effort to maintain artificially high market prices for K-V securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5. These defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons. SECOND CLAIM Violation of Section 20(a) of The Exchange Act Against the Individual Defendants 65. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein. 66. The Individual Defendants acted as controlling persons of K-V within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their ownership and contractual rights, participation in and/or awareness of the Companys operations and/or intimate knowledge of the false financial statements filed by the Company with the SEC and disseminated to the investing public, the Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which Plaintiff contends are false and misleading. The Individual Defendants were provided with or had unlimited access to copies of the Companys reports, press releases, public filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after

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these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 67. In particular, each of the Individual Defendants had direct and supervisory

involvement in the day-to-day operations of the Company and, therefore are presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same. 68. As set forth above, K-V and the Individual Defendants each violated

Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of these defendants wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their purchases of the Companys securities during the Class Period. WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure; (b) Awarding compensatory damages and equitable relief in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants wrongdoing, in an amount to be proven at trial, including interest thereon; (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (d) Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. 25

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Dated: November 2, 2011

Respectfully submitted, By: /s/ Don R. Lolli DYSART TAYLOR COTTER McMONIGLE & MONTEMORE, P.C. Don R. Lolli MOBar#56263MO Patrick J. Kaine MOBar#43959MO 4420 Madison Avenue Kansas City, MO 64111 (816) 931-2700 (816) 931-7377 FAX dlolli@dysarttaylor.com pkaine@dysarttaylor.com KESSLER TOPAZ MELTZER & CHECK, LLP D. Seamus Kaskela skaskela@ktmc.com David M. Promisloff dpromisloff@ktmc.com Adrienne O. Bell abell@ktmc.com 280 King of Prussia Road Radnor, PA 19087 (610) 667-7706 (610) 667-7056 (fax) Attorneys for Plaintiff

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