Update, Nov. 25, 2024: On Nov. 22, hours after this article was published, Lincare announced internally that “effective immediately, Greg McCarthy is no longer Chief Operating Officer. Greg is leaving Lincare to pursue other opportunities.”
For users of breathing machines made by Philips Respironics, recent years have been a nightmare in multiple acts. First came complaints of illnesses and injuries caused by the devices. Then came reports of deaths. Then came a large-scale recall that itself was beset by problems.
Now ProPublica has learned of another episode. As Philips struggled to execute its recall in 2022, it turned to its biggest distributor, a company called Lincare, to help ensure that replacement equipment would reach the patients who needed it most. But instead of sending those machines to vulnerable longtime users — what Philips expected — Lincare diverted thousands of machines to new customers, which resulted in greater profits. Some patients did not receive replacement breathing machines for as long as two years. Meanwhile, complaints to the FDA reporting deaths (561) and illnesses, injuries or malfunctions (116,000) associated with the recalled devices continued to climb.
Philips’ problems first surfaced publicly in June 2021, when the company warned that the noise-deadening foam lining its equipment, mostly CPAP machines, could break apart, sending potentially toxic particles and fumes into users’ throats and lungs. (Millions of people use such “continuous positive airway pressure” devices to treat sleep apnea, a condition that causes breathing to stop and start repeatedly during the night.)
Philips announced a recall. The company vowed to stop selling to new customers and dedicate its manufacturing capacity to replacing the recalled devices with safe, redesigned CPAP machines “as expeditiously as possible.” (The Philips recall, and the tangled history that led up to it, were the subject of a series of investigations by ProPublica and the Pittsburgh Post-Gazette.)
But the recall was marred by problems, and by the spring of 2022, many patients hadn’t received replacement devices. Some were informed by Philips that they might have to wait another year, meaning the company would fail to fulfill its plan to swap out all the recalled equipment by the end of 2022. That left even a patient who’d had a double lung transplant waiting for months on end.
Under pressure from the Food and Drug Administration, which regulates medical-device safety, Philips agreed to pursue a “prioritization approach,” providing new equipment first to the “most vulnerable” patients — those who depend on the breathing equipment the most. Philips pledged that all the safe devices it produced would go as quickly as possible to the sickest patients, according to a March 10, 2022, FDA notification order.
Lincare is America’s biggest distributor of breathing equipment. It buys tens of thousands of CPAP machines from Philips and other manufacturers every year, then collects up to 13 months of rental payments for providing them to patients, with Medicare and other insurers picking up most of the tab. Lincare also sells lucrative replacement supplies, such as masks, filters and hoses. The company has a lengthy history of misbehavior, including repeated instances of overcharging Medicare and elderly patients — Lincare has been placed on Medicare’s equivalent of probation four times in the past quarter-century — according to a recent investigation by ProPublica.
Lincare and most other distributors had refused to actively help Philips with the recall, according to four sources familiar with the recall. They complained that Philips wasn’t offering enough money to do the work of picking up old equipment and replacing it. Meanwhile, Philips’ CPAP woes had cut into Lincare’s profits, since there was a dearth of new machines to make money off while the recall was underway.
But a top Lincare executive found a way to exploit the recall to the company’s benefit. In late March 2022, Lincare’s chief operating officer, Greg McCarthy, unveiled a plan to his deputies that would ease the financial hit, according to Sam Markovic, then one of the company’s four regional vice presidents. McCarthy told them, in their regular Friday conference call, that he’d arranged for Philips to give Lincare 20,000 CPAP machines for free.
Philips had assured the FDA that it would direct that all of the new machines be sent to replace recalled devices, prioritizing customers who needed them the most. But that’s not what Lincare planned to do with its supply. Instead, according to Markovic, McCarthy told his deputies that Lincare would provide the devices to new customers. The company would make more money that way. Lincare could add more patients even as existing customers kept paying for supplies for their recalled machines. McCarthy ended the conference call, Markovic said, with his frequent admonition: “If you’re not growing, you’re dying!”
In a private conversation that was tape recorded, McCarthy later described how he had obtained the machines, according to Spence Hodges, then Philips’ top sales executive on the Lincare account, who was given a copy of the recording. In that conversation, McCarthy said he had let Philips believe that Lincare would use the machines to replace recalled devices that it owned and were needed for existing patients in long-term care facilities, such as assisted living and nursing homes.
This article is based on accounts from Markovic, other former Lincare employees and Hodges. Lincare, which has a history of litigation with its former executives, fired Markovic in 2022 and sued him for obtaining more than $100,000 in reimbursements for allegedly improper expenses; earlier this year, a judge issued a summary judgment in Lincare’s favor. Markovic disputes the allegations.
Philips declined to comment on Lincare’s role in the recall. But in a written statement, Philips confirmed that the new CPAP devices it provided were supposed to be used to replace recalled machines: “All of the decisions Philips Respironics has taken to allocate new and remediated devices in the United States are based solely on prioritizing patient needs. Our position has always been, and remains, that all devices manufactured to address the recall in the United States are intended for affected patients only.”
An FDA spokesperson declined to make officials available for interviews or comment on Lincare’s actions, but wrote, “Protecting impacted patients and ensuring they receive relief has been a high priority for the FDA throughout this recall.”
Lincare also declined to make executives available for comment. In response to a summary of this article’s findings, provided separately to a spokesperson and to COO McCarthy, the spokesperson emailed a two-sentence response: “We appreciate your questions. We take this matter seriously and are looking into it.” McCarthy did not provide any comment.
In early April 2022, shortly after their meeting with McCarthy, Lincare vice presidents began contacting local center managers around the country who would be receiving shipments of the otherwise scarce Philips CPAP machines, to pass on the COO’s orders that they be used for new patients. Markovic said he personally notified five managers in four states.
Several were surprised to learn that Lincare would have devices for new customers (or “setups,” in industry parlance). The new machines allowed one local center to exceed its monthly quota for new CPAP sales despite the recall, according to a former manager who requested anonymity. “I set up over a hundred in that time,” the former manager told ProPublica. “I just remember every time before I thought I had to cancel setups, there would be another two pallets of them [arriving]. It was just perfect timing.”
By June 2022, Hodges, Philips’ account executive for Lincare, had learned about Lincare’s plans. Hodges promptly reported what he had heard to Philips management, he told ProPublica. A few weeks later, he received the recording of McCarthy discussing how he’d misled Philips, he said, and turned that over to his bosses too. “All I know is that information was brought back to me,” he said, “and I went through the appropriate channels at Philips. I turned over everything and let them decide what to do with it.” It’s unclear what, if any, actions Philips took in response to that information.
Hodges, who left Philips in 2023 after 15 years at the company, said he was upset at the time. “People were having to wait,” he said. “To my mind, these devices were meant to be used by patients that needed their devices replaced, and I felt strongly that’s what they should be used for. Philips was doing their best to remediate as fast as they could.”
It’s not clear exactly how much longer some patients had to wait for new equipment because of Lincare’s diversion. It was only in October 2023 that Philips said it had fulfilled “over 99%” of requests made by patients who registered for the recall. (Those patients received new equipment or, in some instances, a payment.) That means that some users may have waited as long as two years for replacement equipment.
As ProPublica previously reported, Philips waited years to act on health complaints and internal concerns before issuing its recall, which involved both CPAP machines and ventilators, in June 2021. Since then, the company has faced an ongoing federal criminal investigation and more than 700 lawsuits. Since December 2023, Philips, without admitting fault, has agreed to $1.7 billion in settlements and a federal consent decree that indefinitely bars any new respiratory device sales in the U.S. and provides health monitoring and payments for affected customers.
Philips has long cultivated a cozy relationship with Lincare. Philips’ efforts to boost sales to Lincare and other distributors have led to three civil suits by the federal government claiming Philips gave the distributors kickbacks. In 2016, Philips agreed to pay $34.8 million to resolve claims that it illegally provided free call-center services in exchange for companies’ purchase of Philips CPAP masks. In 2022, it agreed to pay $24 million to resolve claims that it provided physician prescribing data to Lincare and other companies in exchange for equipment orders, and to pay $1.3 million for allegedly arranging interest-free loans for equipment purchases. (Philips denied wrongdoing in each of the cases.)
These days, Lincare and Philips are squaring off in court — with Lincare as the plaintiff. The company sued Philips in February in state court in Pennsylvania, where Philips manufactures its devices. Lincare is seeking payment for “many millions of dollars” in costs and losses that Lincare blamed on the recall, citing an indemnification provision in its contract with Philips. Philips has not filed a response to the lawsuit. In a public filing with the Securities and Exchange Commission, however, Philips said it is “engaging with certain of its business partners on the level of compensation they alleged to be entitled to” from the recall.
Tom Wilson, administrator of the 7,700-member CPAP Recall Support Group on Facebook, called Lincare’s actions in the recall “terrible.” In mid-2022, he said, many patients were still waiting for new, safe machines. Those with severe cases of apnea, unable to simply stop using their recalled devices, were especially frightened and desperate to get replacements. “You’ve got something that’s on your face eight hours a night, and you don’t know how safe or unsafe this equipment is.”
Doris Burke contributed research.
