On September 5, 2007 the judge entered a Final Order and Judgment approving the settlement and dismissing all claims against the defendants with prejudice. According to the firm's quarterly report dated February 2007, insurance will provide complete coverage for the settlement. Plaintiffs' attorneys were awarded fees and expenses totaling $2,246,042. Shortly thereafter, the United States Court of Appeals entered their order voluntarily dismissing a previous appeal to class certification in light of the settlement.

According to a press release dated May 29, 2007, a settlement in the amount of $5,500,000 has been submitted for approval to the United States District Court for the District of Massachusetts in a class action lawsuit alleging violations of section 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. All persons who purchased or otherwise acquired the common stock of PolyMedica Corp. ("PolyMedica") during the period between October 26, 1998, and December 31, 2000, may be eligible to participate in the settlement. A hearing will be held before the Honorable William G. Young, John Joseph Moakley United States Courthouse, 1 Courthouse Way, Boston, MA 02210, at 2:00 p.m., on September 5, 2007, to determine whether the proposed settlement should be approved by the Court as fair, reasonable, and adequate, and to consider the application of Lead Counsel for attorneys' fees and reimbursement of expenses.

According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2006, on or about October 24, 2006, the parties reached an agreement in principle to settle the matter. The settlement covers the class as certified, is expected to be paid by insurance, and is subject to court approval and potential appeal. Defendants have not yet filed an opposition to the motion for reconsideration as a result of the agreement regarding settlement. On or about October 31, 2006, the parties filed a joint motion to stay proceedings in the First Circuit Court of Appeals.

In a press release dated October 5, 2006, on 28 September 2006, the Honorable Judge Young denied class certification for a proposed shareholder class during a "disputed period" in the PolyMedica Securities Litigation. This case was closely watched by the securities bar, as it had previously been sent to the First Circuit Court of Appeals, which issued a ruling differentiating "informational efficiency" from "fundamental efficiency" and remanding the case to the district court. In applying the new standards, the district court agreed with the conclusion presented by NERA Senior Vice President Dr. Frederick Dunbar that one of the key arguments by the plaintiffs' expert in favor of information efficiency -- that the stock price responded to news -- was fundamentally flawed because the plaintiffs' expert only looked at selected days with large stock price movements rather than making a comparison of price movements on days with news and days without news. The district court further credited Dr. Dunbar's testimony that the high cost of short selling, violations of put-call parity, and serial correlation in PolyMedica's stock price returns weighed strongly against a finding of market efficiency.

According to the Company’s FORM 10-K for the fiscal year ended March 31, 2006, on February 23, 2006, plaintiffs filed a motion in the District Court to re-certify the class for the period from January 2001 through August 2001, which the defendants opposed. On March 23, 2006, the Court held an evidentiary hearing relating to class certification and on March 31, 2006 the Court heard oral argument regarding class certification. The Court took the motion under advisement. Discovery is ongoing in the underlying suit. The case is currently scheduled for trial in April 2007.

As summarized by the same SEC filing, on July 30, 2001, the Court granted the plaintiffs’ motion to consolidate the complaints under the caption In re: PolyMedica Corp. Securities Litigation, Civ. Action No. 00-12426-REK. Plaintiffs filed a consolidated amended complaint on October 9, 2001. The consolidated amended complaint extended the class period to October 26, 1998 through August 21, 2001, and named as defendants PolyMedica, Liberty, and certain former officers of PolyMedica. Defendants moved to dismiss the consolidated amended complaint on December 10, 2001. Plaintiffs filed their opposition to this motion on February 11, 2002, and defendants filed a reply memorandum on March 11, 2002. The Court denied the motion without a hearing on May 10, 2002. On June 20, 2002, defendants filed answers to the consolidated amended complaint. On January 28, 2004, plaintiffs filed a motion for class certification to which defendants filed an opposition on February 27, 2004. Plaintiffs filed a reply memorandum on April 12, 2004 followed by additional briefing by the parties. The Court heard oral argument on the motion on June 2, 2004. On September 8, 2004, the court allowed the plaintiffs’ motion and certified the class. On September 21, 2004, the defendants filed a petition requesting that they be permitted to appeal the decision to the First Circuit Court of Appeals. The plaintiffs filed a response to the defendants’ petition on October 7, 2004 opposing defendants’ request to appeal the class certification. Also on October 7, 2004, the Court stayed sending notice of the class action pending a ruling on defendants’ appeal of class certification. On February 15, 2005, the First Circuit Court of Appeals granted defendants’ petition for leave to appeal the class certification decision. Defendants-appellants filed their brief on March 15, 2005, and plaintiffs-appellees filed an opposition on April 15, 2005. Defendants-appellants filed a reply brief on April 25, 2005. The First Circuit Court of Appeals heard oral argument on May 4, 2005 and took the matter under advisement. On December 13, 2005, the First Circuit Court of Appeals rendered a decision in defendants-appellants’ favor and entered an order vacating the District Court’s order certifying the class for the period from January 2001 through August 2001 and remanded the matter for further proceedings in the District Court consistent with its opinion.

The original complaint alleges that the defendants violated section 10(b) of the Securities Exchange Act of 1934 (the Exchange Act), and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act, by issuing materially false or misleading statements concerning PolyMedica’s billing and marketing practices. The complaint alleges that these statements were false and misleading because defendants knew, or recklessly disregarded, that PolyMedica, through its Liberty Medical Supply division, was engaging in billing and marketing practices that do not comply with federal Medicare reimbursement regulations, including shipping diabetes testing supplies to customers without prior authorization or proper supporting documentation, in direct contradiction of a 1998 regulation banning such practices. The complaint further alleges that defendants’ actions artificially inflated the price of PolyMedica common stock during the Class Period.