The White House got duped into overpaying for ventilators by half a billion dollars in the first few months of the novel coronavirus pandemic, House Democrats alleged in an oversight subcommittee report released Friday.
Philips Respironics signed a contract with Health and Human Services in 2014 to develop and reserve 10,000 units of its cheaper Trilogy Evo Universal ventilator at a price of $3,280 each for a national stockpile. Under the Trump administration, Philips received several extensions on its deadline. After the Food and Drug Administration finally approved that unit in September 2019, according to ProPublica, Health and Human Services signed off on a deal that gave Philips one year to start delivering it to the stockpile and two additional years to produce all 10,000. Philips instead focused on manufacturing more expensive ventilator models like its Trilogy EV300 for the commercial market, saying the contract didn’t obligate it to prioritize production of the cheaper government ventilators.
Then the coronavirus pandemic hit. The report states in January 2020, when concerns that the disease could spread throughout the U.S. were mounting, Philips “approached the Trump Administration about accelerating the delivery of ventilators under its existing contract.” Instead, the White House (which was downplaying the danger of the virus) ignored the offer. In March, when doctors and public health officials across the country were sounding the alarm about a shortage of ventilators, the White House offered Philips yet another extension moving the delivery date to September 2022. Per the report:
Philips secured the extension by suggesting it would actually help move up delivery. The Trump Administration failed to question Philips and granted the modification, which made the Obama-era contract useless for aiding the country during this pandemic. The Administration never asked Philips to produce more ventilators under the existing contract.
Instead, the Trump administration negotiated a new deal with Philips in April 2020 to buy 43,000 of the more expensive ventilators—at a price of about $15,000 per unit, nearly five times the per-unit price of the original contract. The new contract cost nearly $644 million.
Per NBC News, the U.S. negotiator was Trump trade adviser Peter Navarro, one of the architects of the administration’s trade war with China and a wellspring of coronavirus misinformation who has launched attacks on the nation’s top disease expert, National Institute of Allergy and Infectious Diseases director Dr. Anthony Fauci. According to the report, Navarro failed to examine whether the new units were materially different from the ones Philips had already agreed to produce (they were not) and simply signed off on the company’s opening offer:
The ventilators purchased under the new contract (called Trilogy EV300s) were functionally identical to those required under the previous contract (called Trilogy Evo Universals), but the Trump negotiators appeared gullible and conceded to Philips on all significant matters, including price. The documents show that the Administration accepted Philips’ first offer without even trying to negotiate a lower price.
Democrats wrote in the report that Navarro and the White House negotiating team likely fell for an email from Philips stating “As promised, we spoke with our product specialists and they recommended that you select the EV300 for the more clinician-friendly screens.” In fact, product specs show the cheaper and more expensive models had identical screens and had almost the same user interface—something the White House might have realized if they’d even looked at pictures of them:
Notably, the April 2020 contract followed Trump’s decision at the end of March to invoke the Defense Production Act to compel General Motors and Ventec Life Systems to begin building ventilators. Trump had previously resisted immense pressure to invoke the act, suggesting it was tantamount to socialism, but finally decided to use the law after the two companies proposed a price tag of $18,000 per unit for an order of 80,000, coming to about $1.5 billion. (Ventec didn’t confirm that number in an email to Gizmodo, but wrote that the contract it eventually agreed to under the DPA was for 30,000 ventilators for $489.4 million, a lower rate.)
According to NBC News, while Philips says it is on track to deliver most of the 43,000 pricier units by the end of 2020—so there’s that, at least.
House Democrats contended in the report that repeated extensions, the Trump administration’s failure to press Philips on the original deal, and the gullibility of negotiators who got bilked on a nearly identical product all ended up wasting resources that could have been “used for personal protective equipment (PPE) and critical medical supplies” in short supply. Republicans on the House Oversight Committee shot back that Democrats are being hypocrites.
“After months of Democratic governors rushing to television cameras to beg for more ventilators, Congressional Democrats are now unhappy with the Administration’s successful efforts to quickly secure a robust supply from American manufacturers,” Oversight Committee Republicans spokesperson Matt Smith told NBC. “Rather than provide credit for the more-than quadrupling of available ventilators in the national stockpile since March, they now seek to diminish President Trump’s success by throwing a tantrum over contracting terms.”
“The results of this investigation lead me to question how many other ways have the American people been unknowingly hurt by this administration’s incompetence and ineptitude over the course of the pandemic and over the past three-and-a-half years,” Representative Raja Krishnamoorthi, the chairman of the subcommittee, told NBC.
“I’d probably rather they order too many rather than ordering too few,” University of Chicago Booth School of Business healthcare analytics professor Daniel Adelman told the L.A. Times in May.
Update: 8/3/2020: This article has been updated with comment from Ventec Life Systems.