Philips Agrees to $1.1 Billion Settlement in U.S. Over Sleep Apnea Ventilator Recall

Philips, a Dutch medical devices maker, has agreed to pay $1.1 billion to settle personal injury cases in the United States related to the global recall of ventilators used to treat sleep apnea. The settlement, announced on April 29, 2024, will end the uncertainty over the U.S. litigation, although Philips did not admit any fault or liability.

The recall of millions of breathing devices and ventilators was first announced in June 2021 due to potential health risks associated with the foam used in the devices. Concerns were raised that the foam could degrade and become toxic, posing potential cancer risks to users. The fallout from the recall has significantly impacted Philips' market value over the past three years.

Why this matters: The settlement marks a significant step for Philips in resolving the legal challenges stemming from the global recall of its sleep apnea devices. The recall has affected millions of patients worldwide who rely on these ventilators for treatment of sleep disorders.

As part of the settlement, Philips has reached an agreement with insurers to receive €540 million (approximately $580 million) in compensation for product liability costs. The company has booked a provision of €982 million in its first-quarter results for the settlement payments, which it expects to fund from cash flow in 2025.

Despite the ongoing challenges related to the recall, Philips reported better-than-expected first-quarter earnings. The company's core profit jumped 8% to €388 million, beating analyst expectations. However, order intake continued to fall due to slower sales in China.

"We are pleased to have reached this agreement, which we believe is a good outcome for patients and Philips," said Roy Jakobs, CEO of Philips. "We deeply regret the concern experienced by patients who relied on the affected devices for their health and wellbeing." Philips has been working to repair and replace the recalled devices and has set aside funds to cover the costs associated with the settlement and remediation efforts.

Key Takeaways

• Philips to pay $1.1B to settle US personal injury cases over ventilator recall
• Recall due to potential cancer risks from foam degradation in sleep apnea devices
• Settlement marks significant step in resolving legal challenges from global recall
• Philips to receive €540M from insurers to cover product liability costs
• Philips reports better-than-expected Q1 earnings despite ongoing recall challenges