Philips and Justice Department draw up terms for consent decree over respiration recalls
por John R. Fischer, Senior Reporter | January 31, 2024
Philips and the Justice Department have agreed on terms for a consent decree regarding its respiratory product recalls.
Philips and the U.S. Department of Justice have reached a consensus on the terms of the consent decree for restoring compliance over the next few years within the company’s U.S. Respironics business, following its recall of over five million respirators in 2021, followed by several others over the last two and a half years.
The company announced the news with the release of its 2023 full-year and Q4 earnings reports, which showed strong growth despite provisions made in anticipation of the costs associated with the remedial actions expected under the consent decree.
In June 2021, the company recalled 5.5 million bilevel positive airway pressure (BiPAP) and continuous positive airway pressure (CPAP) machines after discovering that the polyester-based polyurethane sound abatement foam within them could break down and release particles that could enter a device’s air pathway and become toxic, possibly causing cancer. It has since been subject to additional recalls, including for sleep masks used with its BiPAP and CPAP machines in 2022, and for certain Trilogy ventilators in 2023.
The decree is a multiyear plan that lays out actions, milestones, and deliverable items and results that the company must fulfill to meet compliance, at which point it can then resume producing and selling new CPAP or BiPAP sleep therapy devices and other respiratory care solutions in the U.S.
Currently, it is only servicing sleep and respiratory care devices already in use by U.S. healthcare providers and patients and supplying accessories, consumables, and replacement parts. This includes patient interfaces, patient circuits, and repair kits. It is still selling these solutions outside the U.S.
“Resolving the consequences of the Respironics recall for our patients and customers is a key focus area and I acknowledge and apologize for the distress and concern caused. We are fully committed to complying with the consent decree, which is an important step and provides a clear path forward,” said Philips CEO Roy Jakobs.
In preparation for costs associated with restoring compliance, the company set aside €363 million (over $392,000) in Q4 to cover remediation activities, inventory write-downs, and onerous contract provisions. It expects remediation activities and disgorgement payments for sales of its Respironics devices in the U.S. to make up 1% of its costs.
The company announced the news with the release of its 2023 full-year and Q4 earnings reports, which showed strong growth despite provisions made in anticipation of the costs associated with the remedial actions expected under the consent decree.
In June 2021, the company recalled 5.5 million bilevel positive airway pressure (BiPAP) and continuous positive airway pressure (CPAP) machines after discovering that the polyester-based polyurethane sound abatement foam within them could break down and release particles that could enter a device’s air pathway and become toxic, possibly causing cancer. It has since been subject to additional recalls, including for sleep masks used with its BiPAP and CPAP machines in 2022, and for certain Trilogy ventilators in 2023.
The decree is a multiyear plan that lays out actions, milestones, and deliverable items and results that the company must fulfill to meet compliance, at which point it can then resume producing and selling new CPAP or BiPAP sleep therapy devices and other respiratory care solutions in the U.S.
Currently, it is only servicing sleep and respiratory care devices already in use by U.S. healthcare providers and patients and supplying accessories, consumables, and replacement parts. This includes patient interfaces, patient circuits, and repair kits. It is still selling these solutions outside the U.S.
“Resolving the consequences of the Respironics recall for our patients and customers is a key focus area and I acknowledge and apologize for the distress and concern caused. We are fully committed to complying with the consent decree, which is an important step and provides a clear path forward,” said Philips CEO Roy Jakobs.
In preparation for costs associated with restoring compliance, the company set aside €363 million (over $392,000) in Q4 to cover remediation activities, inventory write-downs, and onerous contract provisions. It expects remediation activities and disgorgement payments for sales of its Respironics devices in the U.S. to make up 1% of its costs.
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