Philips apnea affair continues: company settles lawsuits in US for billion euros

“We have taken a number of very important steps today,” Philip CEO Roy Jacobs said in a telephone statement on Monday morning. “These are important milestones that make it clear that Philips can now continue working on recovery.”

In 2021, tests showed that Philips breathing equipment, the Dreamstation, used by patients with sleep apnea, could potentially cause health damage. In some cases, insulation foam came loose and could be inhaled by users. The material may be carcinogenic.

The problems affected millions of patients worldwide, including thousands in the Netherlands, who used the devices at home or in hospitals and care homes.

5.5 million devices

Philips has spent years replacing and repairing the 5.5 million Dream stations. That operation was completed last year. According to Philips, independent studies show that the health of users was not or hardly at risk.

Philips has so far spent 1.3 billion euros on adapting and replacing Dreamstations alone. Including further costs, fines and damage claims, the group expects to spend between four and five billion euros on the apnea affair.

At the beginning of this year, Philips already signed an agreement with the American health regulator FDA. It promised not to supply any new apnea devices in the US in the coming years and to implement major changes at the responsible subsidiary, Respironics.

Claims

In the US, Philips has now also settled the most important claim cases after mediation by a judge. More than 58,000 patients are involved. Philips will pay them, probably in 2025, the equivalent of more than a billion euros.

It is expected that at least 95 percent of claimants will accept the compensation offer. “This settlement ends uncertainty about legal claims (of victims – HS) in the US,” says Jacobs.

The amount is a maximum. “This agreement is final for all American victims, including the 700 who had already filed a case.”

As usual in such matters, the company acknowledges no guilt or responsibility.

Breakthrough

Jacobs does not expect any new claims. “Anyone who still reports in the US must join this or individually submit a completely new case with new evidence. People have six months to do that, but the barriers are very high. Afterwards these matters will be completed. We are confident that we have put this behind us. This is really a breakthrough.”

In the meantime, the company is still waiting for the outcome of an investigation by the US Department of Justice, which could lead to a mega fine, and from patients or groups of patients, both in the US and abroad. Claims lawyers in the Netherlands are also struggling with a case. “We will also close business outside the US in the long term,” says Jacobs. “The legal system in the US is different than in many parts of the world.”

It is still unclear whether this also applies to the Netherlands, where rules for mass claims were expanded in 2020.

Mega fine

Jacobs does not want to comment on a possible mega fine from the American Department of Justice. “We continue to work on other matters, including the U.S. Department of Justice investigation.”

The CEO does not want to speculate about the amount of a possible fine. Philips has not made any provision for this either. The company does not expect to receive clarity on this issue before 2025.

The company did announce an agreement with insurers on Monday morning, who will pay out a total of 540 million euros to Philips later this year due to the apnea claims.

Quarterly loss

Philips will charge the largest part of the now agreed claim amount, 982 million euros, to the quarterly result presented on Monday. As a result, Philips suffered a loss of EUR 998 million in the first quarter of 2024 (first quarter 2023: EUR 665 million loss) with virtually unchanged turnover of EUR 4.1 billion.

Because the settlement was lower than stock market analysts had expected, Philips shares rose 35 percent in value on the Amsterdam stock exchange on Monday morning.