Philips Respironics: The Recall Fix Needed Independent Checks

The Philips Respironics 2024 consent decree stopped most production and distribution at specified facilities after the foam recall of its CPAP machines, BiPAP machines and mechanical ventilators. It required independent checks on the company’s recall repairs, replacement devices and manufacturing controls. Patients depended on these machines to help them breathe. The question reached beyond what went wrong with the original foam to whether the fix was ready to reach them.

The Department of Justice announced the court order on April 9, 2024. The government alleged that Philips had failed to meet manufacturing requirements, report device corrections and removals, and validate work on recalled ventilators. The order put manufacturing and recall work under continuing Food and Drug Administration supervision.

The Foam Recall and the Work of Repair

Millions of machines were recalled in June 2021 over potential health risks from polyester-based polyurethane foam, known as PE-PUR, used to reduce sound. According to the government’s account of the recall notices, the foam could break down into particles entering the air pathway or release chemicals. The Food and Drug Administration classified the recalls as Class I, its most serious recall category.

Some repaired devices were then recalled again, according to the Justice Department. The fix for a recalled machine needed its own recall. The government also alleged that Philips had failed to validate and approve its repair process for certain ventilators.

The complaint described repeat problems. According to the Justice Department, the alleged violations resembled those found in earlier inspections that led to warning letters for the Murrysville and Carlsbad facilities. The recall work was happening at a company already warned about its manufacturing practices.

The decree distinguished replacing a machine from reworking one. A replacement device permanently takes the place of the recalled device. Rework removes the PE-PUR foam from the recalled machine and, where applicable, replaces it with new foam. The repair kits used to carry out that work were themselves within the order’s scope.

That distinction matters on the production floor. A new machine has a design and manufacturing history. A returned machine also has the process used to remove its old foam and carry out the rework. The order required separate examination of the design, the new foam and the controls over the rework process.

Is a Consent Decree a Final Judgment?

Yes. In this case, once the court entered the decree, Philips’s agreement became a binding court order. It controlled manufacturing, recall work and compliance oversight.

What the Philips Respironics Consent Decree Required

The consent decree tied the resumption of covered operations to recall repairs, corrected manufacturing and reporting systems, independent review, and written notification from the Food and Drug Administration. Philips had to complete the repair, rework, replacement and refund activities required by its approved plan, meeting that plan’s effectiveness targets. Changes to the plan needed written agency approval.

The order covered Philips RS North America LLC, known as Philips Respironics, its parent Philips Holding USA Inc., and Respironics California LLC. It defined covered facilities in Murrysville, New Kensington, Mount Pleasant and Pittsburgh, Pennsylvania, and Carlsbad, California. Philips represented that manufacturing at Carlsbad had already stopped; the order also controlled any restart there.

Moving work within the corporate group also came under the order. Transferring covered manufacturing to a facility owned by an affiliated entity required that facility’s owner to join the decree for those operations. Manufacturing included design, labeling, specification development and rework, as well as making and assembling the machines.

The order reached management by responsibility, including corporate leadership and the executives responsible for patient safety and quality. When an executive left, the decree provided for a replacement with equivalent responsibilities. Moving the work or replacing the manager did not make the oversight disappear.

The other-facility category extended to sites in China, Costa Rica and Germany. The German site’s inspection and audit requirements depended on its supplying devices to the U.S. market. The decree’s Sleep and Respiratory Care device list included DreamStation CPAP and BiPAP machines and Trilogy ventilators.

Which Devices Could Still Be Supplied?

The decree allowed specified devices and activities to continue, including medically necessary devices designated by the Food and Drug Administration and support for machines already in use. Those exceptions had conditions attached to the product, its purpose and its destination.

The agency controlled the medically necessary device list. The service provisions allowed routine maintenance, service replacements and loaners, and specified consumables, accessories and replacement parts for existing users. The order also permitted defined laboratory testing, clinical investigations, nonclinical research and correction or removal work.

Exports of a replacement model depended on Philips meeting the decree’s conditions for serving registered U.S. patients and keeping enough stock for projected U.S. repair and replacement demand. Export-only devices needed identifying codes, serial and lot numbers, and tracking controls. For a distribution employee, why a machine was being shipped and where it was going were part of the permission to move it.

Independent Experts Had Different Jobs

The decree divided oversight among specialists examining the factory, the foam, the design, the rework and other facilities.

• Covered-facility quality review. The quality expert had to inspect the covered facilities under an agency-approved work plan. The review included complaint files, medical device reporting, corrections and removals, suppliers, design changes, and corrective and preventive actions. It reached failure investigations and the information sent to management.
• New-foam testing. The testing expert had to assess whether completed and planned testing could establish that the new foam would last through the device’s labeled service life and address the old foam’s risks without introducing new or similar health concerns. The order specified attention to temperature, humidity, extended use, particles and chemical emissions. Gaps required further testing.
• Replacement and rework designs. The design expert examined testing, risk analysis, verification and validation of the repair and replacement devices. The review also addressed whether changes since the last clearance required a new submission or had otherwise been authorized. Foam safety had its own review.
• Rework operations. The rework expert examined the facilities, methods and controls used to rework recalled devices, including controls over contractors doing that work. Corrective actions required verification, and progress findings went to Philips and the agency together.
• Other Sleep and Respiratory Care facilities. The other-facility quality expert reviewed design controls, corrective and preventive actions, suppliers and reporting at those sites.

These reviews made the underlying work visible to the Food and Drug Administration. For the foam review, the expert’s report had to travel with the protocols, reports, results and data examined. Design and rework reviews required the experts to verify corrective actions. A management statement that work was finished still had to survive an independent check.

Restart Required FDA Approval and Further Audits

Restart required written notification from the Food and Drug Administration after the required repairs and compliance work. An expert’s certification was part of that process, and the agency retained the ability to inspect operations.

After that notification, the covered facilities would face independent audits every six months for two years, followed by annual audits, for five years in total. Reports had to go to Philips and the agency at the same time. After the first audit, each report also had to assess whether earlier corrective actions were adequate.

For quality staff, that is a practical distinction between closing an item and correcting its cause. The next audit had to examine the earlier response, not simply begin a fresh list.

The order also gave the agency continuing power to stop production, distribution or servicing when it found violations or determined that further corrective action was needed. It could require recalls, repairs, replacements, refunds, safety alerts and additional reports, and inspect without prior notice.

The Payments Had Different Triggers

The decree set revenue-based payments for certain permitted sales and separate damages for failures to comply. Each obligation depended on its own trigger.

Medically necessary devices sold solely under that exception before the restart notification carried agreed payments to the U.S. Treasury of 10% of net revenue from entry of the decree through the end of 2024, 12% during 2025, and 25% thereafter. An independent financial auditor acceptable to Philips and the Food and Drug Administration had to determine the amounts.

A separate provision addressed missed corrective actions at the other Sleep and Respiratory Care facilities. Failure to complete an action on the approved timetable would trigger $10,000 per action per business day until completion to the agency’s satisfaction, subject to a $10 million annual cap under that provision. The decree also set general noncompliance damages, triggered by written government notice, with a separate $20 million annual cap.

Philips had to pay for the independent experts and reimburse the agency’s compliance inspection and review costs. A finance employee could therefore be looking at very different records: sales subject to the revenue payment, a missed corrective-action deadline, or the cost of the oversight itself.

What Evidence Is Needed to Prove Fraud?

We work with insiders to connect what the company knew about a device to what physicians, suppliers and payers were told, and how that information affected a government-payment claim. The Philips decree expressly preserved the government’s ability to pursue separate False Claims Act claims.

In durable medical equipment, a supplier can bill a separately identified item. Medicare coverage, the billing code and payment are separate decisions. That puts the supplier’s bill alongside the manufacturer’s product history in our examination of a possible case. For an engineer who knows how a device was tested and released, the health care payment records can supply another part of the story.

Manufacturers receive much of the adverse-event information from healthcare facilities and importers. They investigate events, assess reportability and analyze complaint trends. The decree put complaint files, reporting procedures and the circulation of quality information to management within the expert’s review.

For someone who worked on these machines, we would connect the complaint and test history with the design version, rework instructions, release decisions and what the customer received. If Medicare paid the supplier’s claim, we would examine the information supporting it and who knew of a discrepancy.

The 2020 Journal of Forensic and Investigative Accounting analysis A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud treats the payment claim, knowledge and causation as distinct parts of the inquiry. Applied here, that means connecting the internal account of a device with the account used to obtain payment. Your knowledge may explain why those accounts differ.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Repair Was Approved

If you saw a test result, complaint trend or rework problem that never reached the people relying on the device, speak with our whistleblower experts about how the repair was approved. We work with you to build your strongest medical device whistleblower case, bring in medical-device fraud whistleblower lawyers who understand manufacturing and reimbursement, and stay with you through the case.