Philips caught in Covid-19 ventilator battle

Philips caught in Covid-19 ventilator battle

Business news |
By Nick Flaherty

Dutch consumer and medical electronics giant Royal Philips has been caught up in US politics over production of ventilators to tackle the Covid-19 pandemic.

A report from the US House of Representatives Subcommittee on Economic and Consumer Policy released on Friday was looking at possible overcharging for ventilators at the start of the Covid-19 pandemic. The chair of the subcommittee is calling for Philips to repay $500m as a result.

Philips was asked for information about contracts for the delivery of 10,000 Trilogy Universal ventilators and 43,000 EV300 ventilators to the US Department of Health and Human Services (HHS).

 “We have been transparent about our production ramp up plans, pricing and allocation policies. We have cooperated and delivered the requested information to the subcommittee,” said Frans van Houten, CEO of Royal Philips. “We do not recognize the conclusions in the subcommittee’s report, and we believe that not all the information that we provided has been reflected in the report,” he said. “I would like to make clear that at no occasion, Philips has raised prices to benefit from the crisis situation.”

eeNews Europe has been tracking the shipments of ventilators from the major manufacturers including Philips, Getinge, MedtronicHamilton Medical and Breas Medical as well as the UK’s Ventilator Challenge (see below).

The democratic chair of the subcommittee, Representative Raja Krishnamoorthi, accused the Trump administration of poor negotiation of the deal.

“The American people got ripped off, and Donald Trump and his team got taken to the cleaners,” he said. “The Trump Administration’s mishandling of ventilator procurement for the nation’s stockpile cost the American people dearly during the worst public health crisis of our generation. The Trump Administration’s efforts constitute over half-a-billion dollars of waste, fraud, or abuse.  The Subcommittee calls on Philips to return the excess money so that it may aid the nation’s response to the coronavirus pandemic,” said Krishnamoorthi.

Next: Covid-19 ventilator contract issues 

The issues with Philips and the US government arise from a 2014 contract with HHS and BARDA (the Biomedical Advanced Research and Development Authority) to design, develop and produce 10,000 low cost ventilators to stockpile for a pandemic. These were meant to be delivered in 2019, but the Republican administration of President Donald Trump extended the contract. In April this year, the administration also negotiated a contract for 43,000 EV300 ventilators for the pandemic at a cost of $653m.

Philips points out it quadrupled production in just five months from March 2020, adding three production lines in the US. It says employees in the factories in Western Pennsylvania and California are working around the clock to produce these ventilators. 

Philips says it is on track with the production and delivery of the 43,000 EV300 hospital ventilators according to the April 2020 contract with HHS. The list price of the specific bundle of the EV300 ventilator plus roll-stand and accessories, as selected by HHS, is over $21,000 and is being provided to the US government for $15,000.

Philips points out the BARDA contract was mainly a design and development project and the resulting ventilators, costing $3280, were not in commercial production, while the EV300 were. Philips has also launched a low cost ventilator with emergency regulatory approval, the Respironics E30. It says it is also using contract manufacturers Flex and Jabil to boost production

The experience of the UK in ramping production in the Ventilator Challenge also showed that existing low cost ventilators were of limited use in Intensive Care Units (ICU). Another factor not addressed in the report is that ICU systems needed modification to be used for Covid-19 patients.

The ParaPac Plus battery-powered ventilator from Smiths Medical is already used in ambulances and has a retail list price of $9,000. Smiths manufactured 5,000 units, while the Ventilator Challenge consortium manufactured another 5,000.

The ESO 2 from Penlon was adapted to avoid using components that could be in short supply and to meet the clinical requirements for Covid-19 patients, with the company currently building 10,000 units and the consortium building another 5,000 units.

The subcommittee has no power to force Philips to repay the money and the contracts were agreed with HSS.

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