Philips Respironics reaches agreement with U.S. government on consent decree

Following the FDA’s inspection of Philips Respironics’ facility in Murrysville in 2021 and the subsequent inspectional observations, the U.S. Department of Justice, or DOJ, representing the FDA, began discussions with Royal Philips in July 2022 regarding the terms of a proposed consent decree. On January 29, Philips announced that it agreed with the DOJ and FDA on the terms of the proposed consent decree. Philips’ subsidiaries Philips Holding USA and Philips Respironics have now reached final agreement on the consent decree with the DOJ and FDA, that primarily focuses on Philips Respironics’ business operations in the U.S., including its manufacturing facilities in Murrysville and New Kensington, its service center in Mount Pleasant and its Respironics headquarters in Pittsburgh in Pennsylvania. The consent decree provides Philips Respironics with a roadmap of defined actions, milestones, and deliverables to meet relevant regulatory requirements, as previously communicated by Philips on January 29, including: Philips Respironics will continue to prioritize completing the remediation of the sleep and respiratory care devices under Respironics’ voluntary June 2021 recall. More than 99% of the actionable registered CPAP and BiPAP sleep therapy devices have been remediated globally, while the remediation of the ventilators is ongoing in coordination with the relevant competent authorities. Philips Respironics will retain independent experts to review various aspects of the recall remediation. Philips Respironics’ business operations must demonstrate continued compliance with the FDA’s Quality System Regulation. Philips Respironics will retain independent experts to supervise the compliance improvement program. In the U.S., millions of patients are currently using Philips Respironics sleep and respiratory care devices. Philips Respironics will be permitted to continue servicing these sleep and respiratory care devices that are already with healthcare providers and patients, and to sell accessories, consumables, and replacement parts. In 2021, Philips Respironics voluntarily stopped selling CPAP and BiPAP sleep therapy devices and other respiratory care devices in the U.S., as it prioritized the production for the remediation of the affected devices under the June 2021 recall. Until the relevant requirements of the consent decree are met, Philips Respironics will not resume selling new CPAP or BiPAP devices or other respiratory care devices in the U.S. The consent decree includes provisions to allow for exports. Outside the U.S., Philips Respironics will continue to provide new sleep and respiratory care devices, accessories, consumables, replacement parts and services, subject to certain requirements that Philips Respironics will meet. Philips Respironics’ devices with the new silicone sound abatement foam have been subject to extensive testing in accordance with the applicable industry testing standards, and Philips Respironics has not identified any safety issues. These devices may continue to be used in accordance with the instructions for use. As previously stated on January 29, as a consequence of addressing this consent decree, which is a multi-year plan, Philips expects costs of around 100 basis points in 2024 that relate to remediation activities and profit disgorgement payments for Philips Respironics sales in the U.S. The previously stated 2023-2025 Group financial outlook of mid-single-digit comparable sales growth, low-teens Adjusted EBITA margin, and EUR 1.4-1.6 billion free cash flow now takes the consent decree into account and remains unchanged. It excludes the investigation by the U.S. DOJ related to the Respironics field action and the impact of the ongoing litigation.