Philips books €288 million provision for US Justice Department recall settlement

Philips said on Tuesday 3 November it had agreed in principle with the US Department of Justice over its Respironics recall. It booked a €288 million provision. Third-quarter net income fell to €28 million from €187 million.

For US patients and buyers, nothing changes yet. A consent decree the FDA struck with Philips in 2024 still bars sales of certain Respironics devices in the country. Philips says it does not control the timing of any return. The company has not said whether the deal includes an admission of wrongdoing. It has not said what a separate investigation by state attorneys general will cost.

A charge booked now, paid later

The provision is an accounting charge. It hits reported profit when it is booked, not when the cash leaves the company. Payment is expected in the first quarter of 2027, subject to final documentation.

The charge shows up immediately in the reported numbers. Revenue rose 2% to €4.4 billion. Patient monitoring equipment and personal care products such as electric toothbrushes and shavers helped that rise. Strip out the provision and the picture changes: the adjusted profit margin improved on cost cuts and higher sales.

Roy Jakobs, the chief executive, said Philips clinched the deal "in the last few days". He declined to give details while the paperwork was finalised.

He called it "an important milestone" for Philips. The shares rose on optimism that the long-running scandal is nearing an end, Bloomberg reported.

Fifteen million devices and a foam problem

Philips began recalling more than 15 million devices in 2021. It found that soundproofing foam could break down and users could inhale it. The recall covered CPAP and bilevel machines, plus ventilators. The recall also included millions of DreamStation machines, with fears the foam could potentially cause cancer. The company had first noted problems with the foam in 2018. It added foam replacement to its maintenance schedule, after complaints dating back to 2014. It did not disclose the change to the FDA. The FDA found the issue during a 2021 inspection, MedTech Dive reported.

NL Times reported that costs from the recall have run into billions of euros. They cover settlements, repairs, asset write-downs and other expenses. Before the DOJ provision came a $1.1 billion personal injury and medical monitoring settlement and a €575 million economic loss settlement.

The FDA still controls the return

A consent decree the FDA struck with Philips in 2024 bars the company from making or selling certain Respironics devices in the US. Philips must meet the agency's requirements before that changes.

"We are not in control of any timing around the return to market," Jakobs said.

He said Philips keeps working with the agency so that it is ready. The FDA ultimately has to grant a return, he said.

He described an eventual US return as "a bonus" while Philips drives orders, sales and margin across all its businesses, including sleep and respiratory care. Growth outside the US has picked up. Sleep and respiratory care sales growth accelerated to the mid-single digits in the third quarter. Japan and Europe led that growth, with double-digit margins. Philips returned to selling in every country except the US in early 2025, after clearance in France.

Paperwork, then payment

Philips reiterated its 2026 forecast of revenue growth of 3 to 4.5 percent. It said it remains on track for €1.5 billion in savings between 2026 and 2028. Those targets do not include other Respironics matters, including the state attorneys general investigation.

The FDA has given no date for a decision on US sales.