It has taken a long time, but Royal Philips finally did the right thing with regard to its troubled machines for sleep apnea and other respiratory problems: the company has stopped selling the devices in the United States.
The Dutch company took the step as part of a settlement it has been negotiating with the Justice Department and the Food and Drug Administration, which pressed the company to deal more aggressively with a longstanding defect in its continuous positive airway pressure (CPAP) machines. The problem stemmed from an industrial foam used in the devices to reduce noise but which could break apart and cause users to inhale potentially dangerous particles.
This issue has been known for years. In 2021 Philips voluntarily recalled several million devices, but it appears the company was aware of the foam problem long before taking that action. An investigation by ProPublica and the Pittsburgh Post-Gazette found that the company was receiving complaints as early as 2010, yet it failed to make the FDA aware of the magnitude of the problem as the volume of those complaints reached into the thousands: “Again and again, previously undisclosed records and interviews with company insiders show, Philips suppressed mounting evidence that its profitable breathing machines threatened the health of the people relying on them, in some cases to stay alive.”
Philips is likely to end up paying billions of dollars in legal settlements. It has already agreed to a $479 million settlement with plaintiffs claiming economic damages from having to replace defective machines affected by the recall. Tens of thousands of personal injury cases have been filed and will probably get aggregated. The monetary penalties in the settlement with the Justice Department are not yet known.
This scandal is a major blow to the reputation of a company once known for benign products such as electric shavers and video cassette recorders. Yet in recent years the company has had other problems as well. As documented in Violation Tracker, it has paid over $450 million in fines and settlements over the past two decades.
About half of this total comes from cases involving alleged price-fixing of electronic equipment, and $62 million comes from a Foreign Corrupt Practices Act case stemming from allegations of making improper payments to officials in China to promote sales of medical equipment.
Another $151 million in penalties stems from False Claim Act cases in which the company was accused of defrauding the federal government. Half a dozen of these cases involved the Respironics business Philips acquired in 2008 as its way into the CPAP field. Philips paid over $50 million to settle allegations that it gave illegal kickbacks to medical equipment suppliers to induce them to order its products.
Given this track record, the accusation that Philips tried to cover up the magnitude of the foam problem does not come as a surprise. What is surprising is that it has taken the Justice Department so long to resolve its case against Philips, while it remains unclear whether the company will face criminal charges. Many of its customers would like to see that happen.