Were Philips’ apnea devices “life-threatening”, as the company announced in the summer of 2021? Or were the health risks not too bad, as Philips later maintained? There was a heated conflict about this question at Philips in the second half of 2021 between members of the team that was involved in the recall of millions of apnea devices in the US and the company management in Amsterdam.
The discussion focused on whether Philips could downplay the risks of use by reporting that hardly any toxic gases or particles were released from the company’s apnea and ventilators. The conflict was settled in favor of the top management, the critics left the company or were transferred internally.
The apnea devices are at the center of Philips’ biggest crisis in recent decades. In the summer of 2021, the company announced a global recall of approximately fifteen million apnea and ventilator devices because patients could suffer “serious” or “life-threatening” injuries from inhaling foam pieces or chemicals from the sound-absorbing foam in the devices. These are produced in Pittsburgh by Philips Respironics. Philips took over this company, specialized in apnea and ventilators, in 2008.
In the months following the recall, the communication strategy about the risks of the apnea devices became the subject of a fierce internal discussion at Philips, according to research by NRC. The battle was lost by the Egyptian cardiologist Hisham Elzayat (50), ‘Global Medical Director’ at Philips. Elzayat was hired at the beginning of 2020 to sort out the faltering administration of complaints about the apnea devices and to bring about a cultural change. He also had to improve the tense relationship between Philips and the American regulator FDA (the Food and Drug Administration).
However, Elzayat refused to sign a ‘Health Hazard Evaluation’ drawn up by Philips in the second half of 2021, according to a report of a hearing at the court in Pittsburgh in October 2023. NRC requested the report of the meeting.
Two people involved say yes NRC that the cardiologist turned against the communication strategy that had been devised from Amsterdam. Philips informed the FDA at the same time that, according to the company, there were no “critical” health risks for apnea patients, but only “marginal ones.” Elzayat believed that his employer should not conclude this on the basis of the research available at the time.
He later received support from the FDA, which proposed the downscaling of the risks “not convincing” mentioned and Philips pointed out shortcomings in their research.
The consequences for Elzayat were nevertheless far-reaching. After his refusal to sign, he was expelled from ‘Project Uno’ – the project organization within Philips that had to solve the problems with the apnea devices. He was also denied further access to the apnea files.
In the court report, Caleb Seeley, one of the American injury lawyers who held Philips liable for deaths and health damage to thousands of American apnea patients, outlines how Elzayat was kicked out of the Project Uno team. This happened at the instigation of the Dutch doctor Jan Kimpen, who was Philips’ ‘Chief Medical Officer’ until February and is now still associated with the company as a medical advisor.
Philips confirms in a response that Elzayat no longer works for the recall team. “Mr Elzayat was at one point involved in the safety report from Philips Respironics and later was given a different role in Mr Kimpen’s medical organization within Philips,” a spokesperson said.
During the hearing, Seeley discussed a second clash between members of the Project-Uno team in the US and Philips headquarters in Amsterdam. It was also about the story that Philips wanted to convey. This clash revolves around the role of Steve Klink, head of Philips’ communications department. As spokesperson, Klink was intensively involved in the medical research into the health risks, the court report states. According to Seeley, several Philips employees filed internal complaints about this.
“His involvement did not stop with the Health Hazard Evaluation. Philips also had him edit correspondence that went directly to doctors. This led to ethics complaints, Madam Judge, because it is unusual. This is not normal,” the American personal injury lawyer said in court. According to Seeley, the complaints have been dismissed. “The people who filed these complaints no longer work for the company. Mr Klink is still there.”
“Steve Klink is a communications expert (and qualified chemist) at Philips and in that capacity was consulted on the communication about the safety notification with doctors and the general public. His role did not go beyond communication advice,” the same Steve Klink emails in response to questions from NRC.
Heavy weather
Since the recall in the summer of 2021, Philips has been in dire straits. The stock price halved, CEO Frans van Houten resigned and American lawyers are preparing billions in claims. From joint data research earlier this year NRCthe American research collective ProPublica and the local newspaper de Pittsburgh Post-Gazette it emerged that Philips has withheld thousands of complaints from lung and apnea patients from 2010 onwards from the American regulator the FDA.
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The majority of legal proceedings are handled in court in Pittsburgh. Before the substantive hearing starts there, lawyers for Philips and the victims argue about whether this is the right location. The victims’ lawyers believe so, partly because Respironics is headquartered in Pittsburgh. They also want to conduct the legal proceedings in a place where generous compensation for victims is awarded.
Philips has been arguing for more than a year that it cannot simply be held liable for the problems in Pittsburgh. Subsidiary Respironics is said to be located a great distance from the Amsterdam headquarters and is itself responsible for the problems with the apnea devices.
Healthcare giant Johnson & Johnson has had similar discussions with injury lawyers in recent years about whether its headquarters or a subsidiary were liable for damages to American patients as a result of the use of potentially carcinogenic talcum powder. The company even set up a special subsidiary that would have to pay damages and tried to have this company declared bankrupt again shortly afterwards in order to avoid liability. The American judges put a stop to this trick.
Philips’ headquarters in Amsterdam “is responsible for the specific matters that happen at Respironics and the other Philips subsidiaries in the US,” lawyer Seeley said in Pittsburgh in October. He pointed out the direct involvement of top executives Frans van Houten and his successor Roy Jacobs in business operations in Pittsburgh. For example, Van Houten already spoke to the American regulator FDA in 2015 about problems with the complaints administration in the US and Jakobs was involved in the preparations for the recall of the apnea devices.
Philips did not respond to all of Seeley’s claims in court in Pittsburgh. “Respironics was a fantastic company when Philips bought it,” Philips attorney Michael Steinberg said in court in Pittsburgh. “It was so fantastic that they thought: we will leave them alone as a separate company, because it went so well.”
Billions lost
Philips must defend itself not only against claims for damages from patients, but also against those from investors who have collectively lost billions from the price falls since the recall. It is known that the Association of Securities Owners has reported such a claim to Philips.
They are not the only ones. NRC discovered that the London company Woodsford is also preparing proceedings against Philips. Woodsford is seeking compensation on behalf of institutional investors such as pension funds and asset managers from listed companies whose share price has fallen due to affairs, such as corruption or withholding information.
CEO Steven Friel says otherwise NRC that Woodsford represents the interests of a group of investors who have collectively lost “hundreds of millions” from the price falls at Philips. According to him, Philips made “catastrophic” mistakes prior to the recall. Friel: “We want to know how this could have happened.”
Woodsford requested the audit files from accounting firm EY, which has been auditing Philips’ figures since 2016, but did not receive them. Friel: “We reported our concerns to Philips in February 2022, but so far this has yielded little results. That’s why we have to escalate now. We are disappointed.” In order to obtain documents about Philips, Woodsford has hired the law firm Birkway in Amsterdam, which specializes in collective actions.
Friel often sees large listed companies trying to shift responsibility for mistakes to subsidiaries, as Philips is now trying with Respironics. With his office he conducts damage claim proceedings against various listed companies, including in the Netherlands – usually without making this public. The case against Philips is an exception to this, as is the case against the aircraft manufacturer Airbus – due to share price falls as a result of a major corruption affair.
According to Friel, Philips has a problem regardless, whether it knew about the problems in Pittsburgh or not. In one case the company withheld relevant information from investors, in the other case the corporate governance was not in order. “Even if Philips really did not know what was going on at their subsidiary for years, something went very wrong internally.”
‘Heartless organization’
Hisham Elzayat is no longer part of the Project Uno team, but is still employed by Philips. He lets NRC know via an app that he “cannot comment” on the course of events. From time to time he posts on the career platform LinkedIn. Like over a year ago, when he posted an article from the Harvard Business Reviewentitled “How Can You Be an Empathetic Manager in a Heartless Organization?”
In the article, the author asks how to be a good manager in a company where “the culture seems to revolve around favoritism and looking away” and what you can do “if you want to manage your team with empathy, while the people above you not embrace this philosophy?”
“Do you want to say something with this, Hisham?” an acquaintance responds under the message on LinkedIn.
His answer: “Maybe ;)”
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