Philips CPAP Settlement: What to Know

During its first-quarter earnings report this week, Philips, the health technology company, announced it agreed to pay $1.1 billion in a settlement over respiration and sleep apnea machines. This is the latest action over the machines, which were recalled in 2021. 

The 2021 recall was mostly around DreamStation CPAP machines due to problems with "sound abatement foam" used in them, per the company's recall letter. The foam "may degrade into particles which may enter the device's air pathway and be ingested or inhaled by the user," and "may off-gas certain chemicals," according to the letter. 

Now, the company has taken the step of agreeing to a settlement, in the wake of the recall and consumer lawsuits. The company says: "Philips and Philips Respironics do not admit any fault or liability, or that any injuries were caused by Respironics' devices." 

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Here's what you need to know about it, whether you're a product user or an investor.

What CPAP users should know about the settlement

The Philips settlement money will be for "users of the now-recalled CPAP and other respiratory devices who suffer from significant physical injuries," attorneys told NPR, as well as towards funding research to treat those injuries. 

Since the massive 2021 recall, many people have already come forward as part of the litigation. Philips said about 58,000 people have already filed claims or registered, and the company does not expect many more people to join since the litigation has been ongoing widely for some time now. 

People eligible to be part of the settlement, though, will still have to sign up for it, even if they were part of a case already. Philips said people will have six months from the date of the settlement to sign up for it, and the payment amount "is capped regardless of number of participants" — so how much you would get depends on how many people sign up.  

If you are one of those eligible individuals, it will take some time for the payout. Philips expects to make payments in 2025.

There are still some logistical hurdles in this process, as the agreement has to be filed with a federal court in Pennsylvania, NPR reported. 

There is also another related class-action lawsuit Philips settled. That one was for about $445 million over economic loss, for people who bought certain machines. You can join that at the settlement website, for $100 for each recalled device if its returned by August 9, 2024. 

What's next for Philips

Philips already agreed to stop selling sleep apnea machines in the U.S., as USA Today reported, until it meets a set of standards, in a settlement with the Food and Drug Administration (FDA). 

With this latest settlement, Philips says it will be funded from cash flow generation and that a 982 million Euro provision was recognized in the first quarter of 2024. 

The announcement appeared to bring relief to investors that the threat of costly litigation is now in the company's past, as the stock price (ticker PHG) shot up about 30% on April 29. The $1.1 billion price tag was well below expectations, CNBC reported, which also likely contributed to the investor response. 

In the Monday earnings report, Philips reiterated an expected 3-5% sales growth for full year 2024 and announced an increased expected free cash flow to 0.9-1.1 billion Euros in 2024. 

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