Philips will have to undergo “an incredible undertaking” to meet requirements set out by the Food and Drug Administration in a consent decree last week, attorneys told MedTech Dive.
The U.S. Department of Justice filed the document on behalf of the FDA on April 9, barring Philips from selling certain sleep and respiratory products in the U.S. for years until it proves compliance. The action came as Philips continues to work through a recall of more than 15 million sleep apnea machines and ventilators that started in June 2021 due to soundproofing foam breaking down and being inhaled by patients.
The consent decree includes new provisions and actions rarely taken by the agency to help patients affected by the recall, the FDA said in an emailed statement. That includes the agency taking the unusual step of requiring a manufacturer to repair, replace or refund the purchase price of devices.
“When you look back at how many consent decrees FDA enters into, and what the scope of them are, this would be on the more stringent side than I've seen in a while,” said Jamie Ravitz, a partner at the McDermott Will & Emery law firm.
Here are five takeaways from the legal documents filed last week:
1. The FDA uses its authority for the first time to require repairs, replacements or refunds
The agency has used its authority in the past to require a recall, but it is “very rare,” said Beth Weinman, an attorney with Ropes & Gray.
Now, the FDA is using its authority to require a company to submit a plan for the repair, replacement or refund of the recalled devices, which Weinman couldn’t find any instance of the agency doing ever before.
In its statement on the consent decree, the FDA said Philips must come up with a recall remediation plan, agreed to by the agency, that includes the repair, replacement or refund of the purchase price of recalled devices manufactured after November 2015. Philips won’t be able to manufacture or sell certain devices from its Respironics facilities in Pennsylvania or California until it meets this requirement. The agency declined to provide a copy of the remediation plan.
“My guess about why that is the case here is that you’re dealing with consumer products at the end of the day. A lot of consent decrees in the past have dealt with medical equipment that’s first and foremost being used in hospitals,” said Jennifer Bragg, a partner at Skadden who specializes in healthcare issues. “I think the FDA is trying to create a situation where there will be some opportunity for consumers to, if not be made whole, to be really taken into account when it comes to replacing these devices.”
2. Philips must pay a percentage of profits on devices it can sell
Philips will still be able to manufacture and sell certain devices deemed medically necessary, including bilevel positive airway pressure machines for patients between 40 and 66 pounds, and ventilators and associated accessories, FDA spokesperson Kristina Wieghmink wrote in an email.
However, the company will have to pay a portion of revenue from those sales to the U.S. Treasury. That amount starts at 10% from now through December, and gradually increases to 25% by 2026.
Bragg said that the FDA has taken this approach when a company is out of compliance but is selling products that are important to the market, such as where a total ban would create a shortage. The payments are designed to keep the company from “getting too comfortable” because it’s selling products.
“What I see from that is the government trying to give a very strong incentive to Philips to really expeditiously try to move through and get to compliance under the decree,” Bragg said. She added that being able to sell some devices might seem like a boon, but it can also be a challenge because the company is “fixing the plane while it’s flying.”
3. Philips is required to hire several inspectors and demonstrate compliance for at least 5 years
Philips must bring in three different quality systems experts to monitor its facilities. The company must hire a design expert to check if changes made to the replacement or reworked devices would require Philips to submit a new premarket notification to the FDA.
Philips must also hire an auditor to inspect the covered facilities for five years. If problems are reported, the FDA can require the auditing cycle to be extended or start over for up to two years.
“It’s an incredible undertaking. I couldn't tell you how much it costs, but it is a massive investment of resources.”
Beth Weinman
Attorney with Ropes & Gray
Weinman said it’s standard in consent decrees for the covered facility to have to demonstrate five years of continuous compliance.
“It can take many, many more years,” she said. “That means that every audit, you come out clean for a period of five years.”
Requiring all of these reports also means that there is a lot of work for Philips and the FDA to do going forward.
“It’s an incredible undertaking,” Weinman said. “I couldn't tell you how much it costs, but it is a massive investment of resources.”
4. Philips received two warning letters before the consent decree
Two warning letters were sent to Philips years before the consent decree was filed and the recall began. Both were related to inspections at its Murrysville, Pennsylvania, facility, according to a complaint filed by the DOJ on April 4. A 2011 warning letter was sent to the company regarding an inspection where FDA investigators documented Philips Respironics’ failure to submit medical device reports related to malfunctions with its Trilogy ventilators. In 2014, a separate letter found that Philips failed to monitor and control production to ensure devices conformed to their specifications.
The complaint said the FDA’s most recent inspections ”documented significant violations, many of which are the same as or similar to violations that have been previously observed at the Defendants’ facilities.”
Typically, the FDA will issue warning letters and take other actions before it escalates to a consent decree, Ravitz said.
“They'll go this route, when they feel like there's extenuating circumstances, like a pattern of non-compliance,” he said.
5. Philips was the subject of another consent decree in 2017
In 2017, Philips was the subject of a consent decree related to quality control problems with Philips North America’s automatic external defibrillators. Some of those facilities were part of Philips’ connected care business segment, which its sleep and respiratory care unit falls under, according to the FDA’s complaint.
"One of the things that I think it's important to know first is how unusual it is for CDRH to go down the path of seeking a consent decree."
Jennifer Bragg
Partner at Skadden
“One of the things that I think it's important to know first is how unusual it is for CDRH to go down the path of seeking a consent decree,” Bragg said. “To me, it's an indication that this was a very important issue from the government's point of view.”
Weinman said the consent decree and invocation of a rarely used authority reflects “a significant lack of trust.”
“FDA wants companies to do what they need to do and voluntarily come into compliance,” Weinman said. “I don’t think the agency relishes having to do the work to come up with a plan and a consent decree like this.”
Correction: This article has been updated to note that Weinman has not ever seen an instance of the FDA using its repair, replace and refund authority.
