Philips has filed its Annual Report 2022, in which it characterizes the year as “very disappointing” for the company and its stakeholders, in large part due to the ongoing Philips Respironics sleep and respiratory device recalls.
But Royal Philips CEO Roy Jakobs also provides updates on rebuilding Philips’ reputation around patient safety and quality, which he identifies in the 2022 report as “our first priority.”
“The recall of specific Respironics sleep therapy devices and ventilators let down the
patients who depended on them, and the doctors caring for those patients,” Jakobs states in the Philips 2022 report. “We apologize deeply for that and are working hard to restore trust with all stakeholders.”
By the end of 2022, Philips Respironics completed around 90% of the production required for the delivery of replacement devices to patients. Jakobs adds, “We are fully committed to completing the Respironics recall and testing program in 2023.”
With regard to the testing program, Philips, in consultation with regulators around the world, has been conducting a test and research program to better understand the potential health risks
associated with the use of affected devices. “I am very conscious that 18 months is long, but
this work had to be done thoroughly,” Jakobs states, adding “I am encouraged by the test results for the first-generation DreamStation devices, that account for over two-thirds of the registered
affected devices: the prevalence of visible foam degradation is low, and the emission of
the detected volatile organic compounds and particulates are within the applicable safety
limits and not expected to result in appreciable harm to health in patients.”
Philips will also implement all measures agreed with the US Food & Drug Administration
(FDA) and US Department of Justice, including a consent decree, and rebuild ties with
the FDA and other national regulators, according to Philips 2022 report. “We have put the leadership and end-to-end organization in place and have invested significantly in doing so,” Jakobs states in his CEO letter.
Philips is also taking action to make its supply chain more reliable, including by securing near-term supply, redesigning and pruning its portfolio, and moving from a “one-size-fits-all” supply chain structure to a more agile, tailored value chain model per business, with dedicated and upgraded domain expertise. “This will secure more deliveries, drive faster order-book conversion, and build down inventory,” states the 2022 report CEO letter.
Still, Philips’ CEO notes that the company remains cautious “in light of the subdued economic outlook for the year, staffing and inflationary pressures facing our customers, geopolitical risks, supply and demand volatility, and uncertainties around ongoing consent decree negotiations, litigation, and Department of Justice investigations.
“Nevertheless, we expect that, by prioritizing patient safety and quality, tightening our focus on innovation, and strengthening our category leadership areas, while at the same time improving execution and taking a disciplined approach to capital, we will be able to progressively create value with sustainable impact….
“I am realistic about the challenges we face, but have full confidence in our plan of action and am firm in my resolve to lead Philips back to a position of strength in a world that needs meaningful innovation.”