Philips will pay $1.1 billion to settle Respironics lawsuits
by Gus Iversen, Editor in Chief | May 01, 2024
Business Affairs
Philips' global headquarters in Amsterdam (via Philips)
Philips and its subsidiary, Philips Respironics, have reached a settlement agreement totaling $1.1 billion to conclude ongoing personal injury litigation in the U.S.
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 (PE-PUR) 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.
The settlement addresses claims that have been filed and potential future claims registered through a census registry. The money is expected to be disbursed in 2025 and will be financed through Philips' cash flow. The payout also includes medical monitoring claims from patients who used the company's devices and could be exposed to future risks.
Philips shares jumped more than 30% to a one-year high when news of the settlement broke on Monday.
Earlier this month, the company was issued a consent decree restricting the production and distribution of new sleep apnea systems at Philips Respironics facilities in the U.S., with limited exceptions, until compliance with regulatory requirements is verified. The decree also necessitates Philips Respironics to implement a Recall Remediation Plan, collaboratively formulated with the FDA, to facilitate relief for affected patients through device replacement, rework, or partial refunds.
Philips has secured an agreement with insurers, who will compensate the company $577 million (EUR 540 million) to cover liabilities related to the recall of Respironics products. That compensation is expected to be recognized as income in the second quarter of 2024, with payment anticipated within the same year.
"Following the remediation of sleep therapy devices and the reassuring test results to date, these important milestones on litigation, the consent decree and insurance provide Philips with a clear path forward for sustainable value creation," the company said in a statement.
The agreement, facilitated by mediation with Judge Diane M. Welsh, does not include an admission of fault, liability, or causation of injuries by Respironics' devices.
Read more about Philips Respironics field action here.
Back to HCB News
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 (PE-PUR) 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.
The settlement addresses claims that have been filed and potential future claims registered through a census registry. The money is expected to be disbursed in 2025 and will be financed through Philips' cash flow. The payout also includes medical monitoring claims from patients who used the company's devices and could be exposed to future risks.
Philips shares jumped more than 30% to a one-year high when news of the settlement broke on Monday.
Earlier this month, the company was issued a consent decree restricting the production and distribution of new sleep apnea systems at Philips Respironics facilities in the U.S., with limited exceptions, until compliance with regulatory requirements is verified. The decree also necessitates Philips Respironics to implement a Recall Remediation Plan, collaboratively formulated with the FDA, to facilitate relief for affected patients through device replacement, rework, or partial refunds.
Philips has secured an agreement with insurers, who will compensate the company $577 million (EUR 540 million) to cover liabilities related to the recall of Respironics products. That compensation is expected to be recognized as income in the second quarter of 2024, with payment anticipated within the same year.
"Following the remediation of sleep therapy devices and the reassuring test results to date, these important milestones on litigation, the consent decree and insurance provide Philips with a clear path forward for sustainable value creation," the company said in a statement.
The agreement, facilitated by mediation with Judge Diane M. Welsh, does not include an admission of fault, liability, or causation of injuries by Respironics' devices.
Read more about Philips Respironics field action here.
Back to HCB News
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