Recalls continue at Philips' Cleveland facility despite $100M+ improvement plan

Philips' Ingenuity line of CT scanners is made at its Cleveland manufacturing facility and has been the subject of numerous Class II recalls--Courtesy of Philips

Philips' ($PHG) troubled manufacturing facility in Cleveland has been subject to a startling 491 Class II recalls (and 8 minor Class III recalls), since December 2004, the FDA's recall database shows. The company last year initiated a €100 million ($112 million) quality improvement plan in an attempt to ramp up production of its imaging devices after it suspended production in Cleveland in 2014 due to FDA concerns.

It has since resumed production of some devices at the site, such as its iCT and Ingenuity CT Scanners.

"Our commitment to quality remains very, very strong. And quality and regulatory compliance is our top priority. We have and we will continue to significantly upgrade processes and people at Cleveland as well as other key sites, taking best practices from leading medical companies as well as automotive and aerospace industries into account. And we have lifted the quality control oversight to the highest level within the company," said Philips CEO Frans van Houten in April during the company's Q1 earnings call.

There have been 142 recalls of devices manufactured at the Cleveland facility since then, the database shows. An optimist can say that the facility has avoided Class I recalls, but those are rare for all imaging devices.

Most recently, the FDA in August said that the firm has become an aware of a problem with the Ingenuity TF PET/MR PET Reconstruction Server (PRS) database, "which may lock up after an MR acquisition is completed and before a PET acquisition is begun."

Prior to that, the FDA recall database warned of 5 issues with more than 400 units of the Brilliance iCT and Ingenuity CT scanners. The list goes on.

Notably, in March Philips recalled 918 Vertex Plus Gamma Cameras made in Cleveland. And in early February, Philips informed customers worldwide that more than 400 of the plant's Brilliance CT and Ingenuity CT systems had faulty software that inverts the data on the longitudinal position on some type of scans, according to the FDA database.

Improving product quality at the Cleveland facility is important not only for patient safety, but also for the company's overall strategy, as evidenced by the numbers of mentions "Cleveland" receives during quarterly earnings calls.

"The remediation of the Cleveland facility is progressing well, but there is still more to do. The production volume of all Cleveland-related products is now at around 70% to 80%. We are, therefore, on track to deliver on our profit improvement plan for our diagnostic imaging business relative to 2014 and continue to expect Cleveland to positively contribute to EBITA for the full year," van Houten said during the most recent call in July.

Imaging system order intake posted a double-digit decline year over year at constant currencies, while healthcare informatics and patient care & monitoring solutions grew in the high-single-digits.

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Recalls continue at Philips' Cleveland facility despite $100M+ improvement plan
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