July 25, 2022
Philips told investors on Monday that it is in confidential discussions with the U.S. Department of Justice regarding a possible agreement related to the company's massive recall of sleep apnea and ventilator machines.
Philips is recalling millions ventilators and sleep apnea devices because the foam used to dampen the machines' sound can degrade due to high heat and humidity and/or ozone-based cleaning, and emit small particles that irritate airways. Gases released by the degrading foam may also be toxic or carry cancer risks. Philips has said the recall includes specific continuous positive airway pressure (CPAP) devices, bi-level positive airway pressure (bi-level PAP) devices, and mechanical ventilators. The recall does not include the company's new DreamStation 2 CPAP device.
The Amsterdam, Netherlands-based company said it received a proposed consent decree from the DOJ on July 18, but the company cannot yet disclose the terms or other details. The DOJ subpoenaed Philips on April 8 seeking information related to the recall.
The company also noted that about 3 million of 5.5 million total devices requiring remediation have been repaired or replaced, and Philips expects to repair or replace about 90% of the recalled devices by the end of the year.
"Philips Respironics continues to make solid progress with the repair and replacement program for the CPAP, BiPAP and mechanical ventilator devices affected by the June 2021 field safety notice, and published encouraging results related to the comprehensive test and research program to assess the possible health risks," Philips CEO Frans van Houten told investors. We know how important the affected devices are to patients and are working very hard to get a resolution to them as fast as we can."
In May, FDA's Center for Devices and Radiological Health (CDRH) proposed that the agency issue an order to submit a plan for the repair, replacement, or refund of the purchase price of the recalled devices manufactured after November 2015. Philips has an opportunity for an informal hearing before FDA determines whether to issue such an order. That would have been in addition to FDA's previous action in March, which required Philips to notify customers of the recall and the health risks presented by the recalled devices.
"The consent decree could lead to production being stopped at [Philips] facilities while it resolves its quality issues, causing further delays in re-entering the market," Mike Matson, a medtech analyst at Needham & Co., wrote in a report Monday. "However, we think that the FDA/DOJ may try to avoid this given the severe flow generator shortage and patient backlog."
The analyst also pointed out that ResMed is likely to gain and retain additional market share over the next few years as Philips expects recovery in its flow generator sales to be gradual and take until 2025 to approach pre-recall levels.
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