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Philips Healthcare suspends production at Ohio facility


By Chuck Soder, Crain's Cleveland Business
Posted: April 23, 2014 - 3:00 pm ET
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Philips Healthcare temporarily has suspended production at its medical imaging facility in Highland Heights, Ohio, while it works to improve its quality control processes.

Philips stopped production voluntarily, but the shutdown was prompted by process-related issues that federal regulators identified during a recent inspection, according to a statement Philips e-mailed to Crain's.

However, “there is no indication” that those issues have affected the safety of the medical imaging machines made at the facility, according to the statement. Philips makes computed tomography (CT) scanners and molecular imaging machines in Highland Heights.

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“Our customers can remain confident in the safety of our products,” the company said in the statement.

It's unclear how the shutdown is affecting employees at the Highland Heights facility. At Philips' request, Crain's sent additional questions via e-mail at about 10 a.m. Wednesday, April 23, but the company has yet to respond.

Philips had 1,064 full-time employees in Northeast Ohio as of June 30, 2013.

The U.S. Food & Drug Administration has previously chided Philips' Highland Heights facility for failing to meet standards the agency sets for medical device manufacturing processes.

The FDA in 2011 sent Philips a warning letter pointing out several flaws in the processes that the facility used to prevent and correct manufacturing problems that could arise.

Philips did address those problems, according to another letter the FDA sent in 2012. In that letter, however, the FDA promised to keep an eye on the facility.

The shutdown has hurt the sales and profitability of Philips' healthcare division, which is based in Europe. The division's sales dropped below 2 million euro ($1.44 million) in the first quarter of 2014, down from 2.1 million euro ($1.52 million) in the first quarter of 2013, according to a press release announcing Philips' first quarter results.

The division's earnings before interest, taxes and amortization (EBITA) fell by 70 million euro ($50.7 million), a 32% drop, during that period. The decline is reduced to 51 million euro ($36.9 million), when restructuring and acquisition-related charges are excluded.

The drop in profits is “mainly due to lower sales volume, reduced gross margins and the production suspension in our Cleveland facility,” the press release stated.

"Philips Healthcare suspends production operations at its Highland Heights medical imaging facility" originally appeared on the website of Crain's Cleveland Business.


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