Sleep-Apnea Machine Recall Costs Grow, Hitting Philips Shares

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Dutch healthcare giant now expects to recall about 5.2 million devices, says supply-chain crisis has hit sales

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The expansion is the latest twist in an elaborate recall that has sowed anxiety and despair among sleep apnea sufferers, many of whom have been forced to seek treatment or continue to use a device that could harm them.

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“It is difficult to refuse repairs to a patient with an older unit if they are still using it,” chief executive Frans van Houten said on a call with investors. “So we felt that we needed to be more generous in accepting all the registrations that were coming in our database on all of their units.” Insurers in the US typically pay for a replacement device every five years, but some customers continue to use equipment that is older than that.

most of Equipment affected by the recall There are so-called CPAP and BiPAP machines, which control breathing by gently pushing air into the lungs through a mask. They are primarily used to treat sleep apnea, a condition that causes sufferers to stop breathing for short periods of time while they are asleep. The recall, first announced in June, also affects some ventilators.

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Philips began shipping replacement equipment in September, and the company said Wednesday that about 700,000 replacement or repaired devices have now reached customers. It said it expects to complete the process in the fourth quarter of 2022.

The concern centers on sound-damping foam made from a material called polyester-based polyurethane, or PE-PUR, which can be degraded and inhaled by the user, Philips said. The company was also concerned that the foam could emit harmful gases, which could be particulates as well as carcinogenic. The company has since said that laboratory tests by an outside expert found that the gases emitted by the PE-Pur foam in the first-generation DreamStation devices, which it says represent most of the affected devices, are not at those levels. Which leads to long-term health problems for patients. It is still conducting tests relating to the foam particles, and also on other affected devices, it said.

Patients faced fresh concern in November when the Food and Drug Administration raised concerns that silicone foam used in repaired or replaced devices could also release harmful gases. The FDA asked Philips to hire an independent lab to run further tests on devices that use the new foam to identify any potential safety risks. The agency recommends that patients continue to use devices containing silicone-based foam because stopping treatment altogether would be more harmful.

Philips also said on Wednesday that it would increase the financial provision related to the recall to €725 million, which equates to approximately $824 million, which is €225 million more than the amount already set aside. This primarily relates to the cost of the repair and replacement program. This does not include any costs of potential legal action arising from the recall.

The update on the recall came as the company cautioned that it now expects sales of €4.9 billion in the fourth quarter of 2021, down about 10% from the same period a year ago and about €350 million compared to the prior year. is less. ,

Philips attributed the weak data to supply-chain tensions, which include reduced capacity for electronic components and freight as well as equipment-installation postponements. The company, whose other products include MRI machines, said those delays stemmed from staff shortages related to COVID-19, pushing back deadlines on installation of hospital equipment. Mr van Houten said that while the company expected some delays related to the Covid, the situation was worsened by the rapid increase in Omicron variants.

Write Denise Roland at [email protected]

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