Philips agrees to FDA consent decree halting US sales of CPAP respiratory care devices

A year and a half after Philips first disclosed that it had entered into discussions with the U.S. Department of Justice—working on behalf of the FDA—about a possible consent decree, the parties have agreed on the terms of the order.

Philips outlined the basic parameters of the decree in a company release Monday, alongside its full-year 2023 financial results.

Though both Philips and the FDA have agreed to the terms, the decree still is in the process of being finalized, after which it’ll be sent off for court approval.

The proposal focuses mainly on the U.S. operations of Philips’ Respironics respiratory device division, which is responsible for producing the CPAP and BiPAP machines and ventilators at the heart of the wide-ranging (and still-ongoing) 2021 Class I recall that sparked the consent decree talks.

Once the order is approved, Philips will have “a roadmap of defined actions, milestones, and deliverables to demonstrate compliance with regulatory requirements and to restore the business,” according to the release. Though Philips didn’t spell out the exact requirements it’ll need to meet, it did note that the plan is a “multi-year” one.

Until it meets all of the requirements, the company will not be allowed to sell its respiratory care devices in the U.S.—though it may continue to provide customers with new and replacement components and support services to help maintain already-sold machines. Outside of the U.S., meanwhile, where sales of CPAP and BiPAP machines have recently restarted in the wake of the 2021 recall, the company will be able to continue selling its respiratory devices, albeit “subject to certain requirements,” it said.

“Patient safety and quality remain Philips’ highest priority across the company. 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,” CEO Roy Jakobs said in the company release.

To prepare to carry out the terms of the consent decree, Philips took a provision of 363 million euros in the fourth quarter of 2023, which it said will cover “remediation activities, inventory write-downs and onerous contract provisions.”

Those costs—plus the 575 million euros that Philips set aside earlier this year to cover litigation costs tied to the recall, nearly 400 million euros spent on remediation efforts for those and other devices and another 285 million euros to cover its ongoing workforce reduction and restructuring—piled up to create a net loss of 463 million euros for the company for all of 2023, offsetting its nearly 18.2 billion euros in annual sales and its two straight quarters of positive profits in the middle of the year.

Those results were still an improvement over the previous year when Philips tallied around 17.8 billion euros in sales and ended up with a net loss of more than 1.6 billion euros, thanks in large part to the 1.5-billion-euro charge it took in 2022 to cover goodwill and R&D impairments.

Despite that uptick—which included year-over-year sales growth of 7% in 2023, sans the provisionary charges—Philips’ share price still took a dip on Monday, likely attributed to the consent decree’s indefinite pause on U.S. respiratory device sales. Shares opened around $21 Monday morning, about 7% below Friday’s closing price.