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The Missing Ventilator Stockpile Was Not Inevitable

Posted  April 3, 2020

The coronavirus crisis has been a crash course for the general public in how lifesaving ventilators work.  But the federal government has long known how crucial they are and how important it is to be able to stockpile sufficient numbers.  Five years ago, the government tried to plan ahead by commissioning the design and production of a low-cost ventilator to build up public and private stores in case an international pandemic necessitated a surge in ventilator use.  The government worked with first one, then a second, medical device company to design these machines.  We are all now in the midst of the feared pandemic, in desperate need for more ventilators.  The government does not have the sufficient supplies which they ordered.  Two recent news investigations reveal the breakdown of the public-private partnership with both companies.

As reported by the New York Times, a small medical device company, Newport Medical Instruments, originally won the contract.  They successfully designed a prototype that fit the government’s tight price requirement of $3,000 per unit (or less than a third of the normal, commercial price).  They were ready to build.

However, before the government received any units, Newport was purchased by the much larger public company, Covidien.  Covidien, in turn, is now owned by Medtronic.  Covidien made market-price ventilators and was unhappy with making these cheaper models.  They thus terminated the government contract without the government receiving any benefit.

Pro Publica then picks up the story.  After Covidien backed out, the government contracted with the Pennsylvania-based subsidiary of Royal Philips N.V., which designed the “Trilogy Evo Universal,” a ventilator that met the government’s specifications and price tag.  Royal Philips won approval for this device from the FDA, and all would appear to be set to go.  Yet no ventilator was actually purchased by the government.  Instead, Royal Philips has marketed and sold a higher priced version to commercial entities around the globe.

Sometimes it can feel that government contracting is an obscure area without much effect on daily life.  This saga shows how crucial the arcane process can be.  We are all now living the consequences of this breakdown in the contracting process.  The government reasonably planned ahead, determined a need for a ventilator stockpile, and set about to find a way to build it.  Private companies, instead of working hand in hand with the government to everyone’s benefits, picked short-term profits over their commitment to the public and failed to deliver.

The False Claims Act and other whistleblower laws exist to try to help protect the public from unscrupulous government contractors.  Without more information, it is not possible to know whether this rises to the level of an FCA violation.  But it certainly shows the importance for regular, careful accounting to ensure the government gets exactly what it needs.  Because, as we’re all unfortunately seeing, the alternative can be dire.

If you have any information about government contracting fraud, please contact us.

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Tagged in: Anti-Kickback and Stark, COVID-19, Drug and DME Pricing, FCA Federal, Healthcare Fraud,