In April the U.S. Department of Health and Human Services (HHS) has signed new purchase orders with seven medtech manufacturers, totaling nearly $1.44 billion, to add about 137,000 ventilators to the national stockpile by the end of the year, including Philips ventilators. This should be added to previous $1.1 billion in purchases from Philips and automaker General Motors, the U.S. Department of Health and Human Services said it expects to acquire nearly 30,000 new ventilators by the end of May.
After that announcement Democratic members of the House Oversight Committee say the Trump administration may have overpaid Philips by as much as $500 million for tens of thousands of the critically needed devices. This conclusion include fact that Department of Health and Human Services contracted with the medtech manufacturer that was already on the books—a 2014 purchase order from the Obama administration for Philips to develop and provide 10,000 ventilators for the national emergency stockpile by 2019, at a price of $3,280 per unit. Besides in March the White House pushed those deadlines out to September 2022, and instead of this they signed an agreement to acquire 42,900 Trilogy EV300 ventilators, at $15,000 apiece, delivered by the end of 2020.
$2.5 Billion In Ventilator Orders
HHS has placed more than $2.5 billion in ventilator orders this year with large medtech manufacturers, for more than 187,000 of the devices.
According to all this information the Trump administration has cut short its COVID-19 ventilator contract with Philips before a majority of the order could be delivered to the national stockpile. As it goes from a letter Philips will complete the deliveries for this month, resulting in a total of 12,300 bundled ventilator configurations supplied to the Strategic National Stockpile by the end of August 2020, in line with the contract. As directed by HHS, Philips will not supply the remaining 30,700 Philips EV300 ventilators to the Strategic National Stockpile.
“To date, we have delivered on our commitments to HHS,” said Frans van Houten, CEO of Royal Philips. “I am proud that with great urgency and under intense pressure, we achieved a fourfold ventilator production expansion with substantial investments: we hired hundreds of new colleagues for our factories in the U.S. and called upon our supply chain partners to massively step up, all in response to the COVID-19 pandemic. While we are disappointed in light of these vast efforts, we will adjust our plans and work with HHS to effectuate the partial termination of this contract.”
HHS Spend $646.7 Million On Philips Ventilators
Health and Human Services (HHS) contracted in April for $646.7 million with Phillips, and looked to obtain 43,000 ventilators by the end of the year.
Frans van Houten ended: “While we continue to see uncertainty and volatility related to the impact of COVID-19 across the world, our order book remains solid. The reduction in our ventilator deliveries to HHS will obviously impact Philips’ financial performance, but we continue to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter. For the full year 2020, we now expect to deliver modest comparable sales growth with an Adjusted EBITA margin of around the level of last year.”