A congressional subcommittee is investigating whether the U.S. government is paying too much for ventilators made by a Dutch company that received millions in tax dollars to develop an affordable one for pandemics, but is now charging quadruple the price under a new deal.
“This all seems very fishy to me,” said Rep. Raja Krishnamoorthi, who chairs the Subcommittee on Economic and Consumer Policy. The subcommittee falls under the House Committee on Oversight and Reform.
The deals between the Department of Health and Human Services and a U.S. division of Royal Philips N.V. were the subject of two ProPublica stories in recent weeks, and a letter from Krishnamoorthi to the head of Philips’ North American operations on behalf of the subcommittee cites those reports. His subcommittee demanded records and information from Philips dating to 2014, when the agency’s Biomedical Advanced Research and Development Authority, known as BARDA, struck a $13.8 million deal with the company to develop ventilators for the Strategic National Stockpile. Based on the advice of experts, the agreement called for the devices to be low cost, portable, durable and easy to use by personnel with limited medical training.
Once Philips’ Respironics division received clearance for that ventilator from the Food and Drug Administration last year, BARDA ordered 10,000 of them for $3,280 each — a price agreed upon when Philips entered into the original deal in 2014.
As ProPublica previously reported, Philips never produced any of those devices for the stockpile. Instead, as the coronavirus spread, the company manufactured commercial versions of the ventilator at its factory outside Pittsburgh and sold them for far higher prices overseas. Then, rather than pushing the company to accelerate the delivery of the ventilators developed for the stockpile, HHS this month agreed to buy 43,000 of the commercial version at a price of $15,000 per ventilator.
Kristhnamoorthi, a Democrat from Illinois, said he found Philips’ actions “very troubling.”
BARDA, he said, rightly recognized that the U.S. needed low-cost ventilators to “preserve people’s lives” in a pandemic and was able to get the private sector to “develop exactly such a ventilator.”
But once Philips got the crucial FDA clearance for the new design, Krishnamoorthi said, “they turn around — at the very time we most need these ventilators — and use the fruits of taxpayers’ dollars to essentially sell a high-margin version of what taxpayers wanted to foreign consumers and deprioritized the sales of what taxpayers wanted.”
In its letter to Philips, the House subcommittee is asking questions that Philips has declined to answer so far and that may reveal whether the commercial version, known as the EV300, is virtually the same as the one developed with taxpayer funds. The subcommittee has asked the firm to detail the differences between the stockpile ventilator and the commercial version.
The subcommittee is also trying to find out what Philips was charging others for the commercial version before the pandemic and whether it is now charging the federal government more. It has asked how many ventilators Philips has sold, at what prices and to whom since September 2019, the month that HHS placed its order for stockpile ventilators.
Steve Klink, a Philips spokesman, said his company was reviewing the letter and looks forward to assisting the subcommittee.
“We take this matter very seriously,” Klink said in an email to ProPublica. “Philips is working very closely with the U.S. government to combat the COVID-19 pandemic, and we will continue those efforts.”
HHS originally gave Philips three years to deliver the stockpile ventilators. Klink told ProPublica last month that Philips planned to stick to that timeline. He said that the company had only made the stockpile ventilator in small batches and did not want to ramp up production on a product that had not been mass produced. Instead, it is increasing production of the more expensive commercial version. Though based in Amsterdam, the company only makes ventilators in the U.S.
The House subcommittee has asked Philips for the fine print of the contracts, which neither Philips nor HHS would turn over to ProPublica. It also requested all records of communications between Philips and the government team that struck the recent deal.
Kristhnamoorthi questioned why President Donald Trump didn’t use the Defense Production Act to order Philips to produce the ventilators designed for this very situation and at the price BARDA originally agreed to pay.
“This seems like such a clear cut example of why the Defense Production Act was created, and this is a situation that’s quite frankly life and death in a lot of cities and hospitals,” he said. “Why would you ever not invoke the full authority under the law to make sure that we preserve the lives of the taxpayers, the investors into this technology?”