Philips waited in inordinate time to recall millions of the sleep apnea devices—another case of “fraud, waste and abuse” like COVID-19 ventilators? And Philips has been hit with a securities class action lawsuit.
Newark, NJA proposed class action filed in a New Jersey federal court accuses Dutch manufacturer Royal Philips of knowing for months that its CPAP sleep machines posed a serious health hazard but “unreasonably delayed” the recall. Philips also faces a securities class action lawsuit—and remember the COVID-19 ventilator debacle? That too was Philips.
In April 2021, Philips publicly announced risks of its sleep devices. Specifically, the CPAP, Bi-Level PAP and mechanical ventilator devices containing polyester-based polyurethane sound abatement foam, or PE-PUR foam, could “degrade or off-gas under certain circumstances”, according to the complaint. But the company waited until June to issue a recall of up to 4 million sleep devices. Before the recall, Philips had received untold complaints from users reporting "headaches, upper airway irritation, cough, chest pressure and sinus infection,” according to the complaint. And users say they would never have purchased the CPAP devices had they known about the health risks – so serious to include “toxic carcinogenic “ effects that could potentially lead to cancer, kidney and liver organ failure.
Consumer Law Violations
Because CPAP consumers have suffered economic loss to replace the devices, they are seeking damages based on alleged warranty breaches and purported consumer law violations regarding Philips’ sales and marketing of the DreamStation CPAP machine and other recalled devices.
Recall Warning
The FDA warning on June 30, 2021 advised users to stop using the devices unless their health care provider determines that the benefits outweigh the risks identified in the recall notification. The agency explained that the health risks of the sound abatement foam, which is used to reduce sound and vibration in these affected devices, may break down and potentially enter the device’s air pathway. If this occurs, black debris from the foam or certain chemicals released into the device’s air pathway may be inhaled or swallowed by the person using the device.
According to the complaint, "these issues can result in serious injury which can be life-threatening, cause permanent impairment, and/or require medical intervention to preclude permanent impairment.”
Philips Securities Class Action Lawsuit
Philips has also been hit with a class action lawsuit claiming investors suffered damages, specifically “all persons and entities other than Defendants that purchased or otherwise acquired Philips securities between February 25, 2020 and June 11, 2021.”
The class action is seeking to recover damages caused by Defendants' violations of the federal securities laws. The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies.
Specifically, Defendants made false and/or misleading statements and/or failed to disclose that Philips
had deficient product manufacturing controls or procedures;
Bi-Level PAP and CPAP devices and mechanical ventilators were manufactured using hazardous materials;
Sales revenues from the foregoing products were unsustainable; the foregoing also subjected the Company to a substantial risk of a product recall, in addition to potential legal and/or regulatory action;
Public statements were materially false and misleading at all relevant times.
Philips Finances
Remember the Trump Administration’s mishandling of ventilators at the beginning of the COVID-19 pandemic?
According to Wikipedia, in April 2020, the United States Department of Health & Human Services entered into a contract with Philips Respironics for 43,000 bundled Trilogy Evo Universal ventilator (EV300) hospital ventilators.
In March 2020ProPublica published a series of articles on the Philips ventilator contract. It reported that The White House paid up to $500 Million Too Much for These Ventilators, as per Congressional Investigators, and a house panel asked the Department of Health and Human Services Office of Inspector General to investigate evidence of fraud in the deal negotiated by trade adviser Peter Navarro.
In response to ProPublica, a congressional investigation into the acquisition of the Philips ventilators found "evidence of fraud, waste and abuse. The deal negotiated by Navarro had resulted in an over-payment to Philips by the US government of "hundreds of millions."
The Dutch multinational conglomerate has deep pockets. CNBC reported that White House officials agreed to pay Philips five times the asking price for 43,000 of its Trilogy ventilators. A report by the U.S. House Oversight Committee said “the Trump Administration’s efforts constitute over half-a-billion dollars of waste, fraud, or abuse. Philips should return the excess so that it may aid the nation’s response to the coronavirus pandemic."
Philips was once one of the largest electronics companies in the world and is now focused on health technology, with acquisitions including Signetics and Magnavox.
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