Philips has ‘finality’ 

AMSTERDAM – Philips has a renewed focus, says CEO Roy Jakobs, now that the company has resolved additional settlements and finalized a consent decree related to a large recall of certain devices in its Sleep and Respiratory Care business unit. 

The company recently announced that it has agreed to pay $1.1 billion from its cash flow generation to resolve personal injury litigation and medical monitoring class action in the U.S. This follows an economic loss settlement finalized last year.  

“We are actually very confident that this will really put an end to this,” Jakobs said during a recent conference call to discuss the company’s financial results for the first quarter 2024. “And that's very important because then with ending economic loss, economic personal injury and medical monitoring, we really have put the vast majority of these cases behind us with finality and clarity, and therefore, we can focus on really running the business and growing Philips and bringing it back to where it belongs.”  

Philips says the most recent settlement, which followed mediation with a judge, addresses all the known 60,000 know claimants, including 700 filed cases that were active. 

Jakobs acknowledged that there is a six-month period during which “people can still come forward,” but Philips believes, as well as the leadership for the plaintiffs believes, that the majority have already done so over the past three years. 

“Any individual that comes after (the close of the settlement) will have to come on individual terms,” he said. “They will be subject to a Lone Pine order. A Lone Pine order means that there are certain criteria that you need to fulfill before you even can be taken into the case. You will not have access to any of the expert reports that were made, so you need to do it yourself. Finally, if you look at the trending of the census registry, it has been stable for months already.” 

Philips also announced an agreement whereby insurers will pay the company EUR 540 million to cover recall-related product liability claims, income that it expects to be recognized in the second quarter of this year. 

When asked whether the payout will affect the company’s insurance premium, CFO Abhijit Bhattacharya said, “It’s a bit of a speculation whether they will go up or not. We will have to see how those discussions go, but also the actions we are taking to improve quality will be part of those discussions.” 

The million-dollar question now is, when will the Sleep and Respiratory Care business unit return to the market in the U.S.? In the U.S., the company is permanently restrained and enjoined from directly or indirectly manufacturing, holding and/or distributing any device at or from covered facilities until the provisions of the consent decree are met. It may, however, continue to sell a select group of "medical necessary" devices in the U.S. and it may continue to export devices to other countries. 

“We have a very clear road map,” Jakobs said. “As you know, we are already providing patients in the U.S. with patient interfaces and also some of the respiratory devices. So, it's not that we are fully out of that market. But to get fully back, of course, we need to comply with the remediation requirements as set in the consent decree, including the recall plan. Now, we haven't put a timeline out. We also will not speculate on that. We will, of course, work very hard to get there. We are not starting now. We have been (taking action) already on that.”