HHS' $646M Virus Respirator Deal Faces Mounting Scrutiny

By Kevin Stawicki
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Law360 (August 7, 2020, 8:37 PM EDT) -- A House oversight subcommittee is asking the U.S. Department of Health and Human Services watchdog to investigate whether the Trump administration mismanaged and fraudulently negotiated a $646 million ventilator contract with Philips in response to the coronavirus pandemic.

White House negotiators steered the deal on HHS' behalf and bowed to Philips North America Corp. on "all significant matters," leaving the government paying over four times more for a ventilator model that was functionally identical to the model from the previous contract, the House Oversight Economic and Consumer Policy Subcommittee said Thursday.

"The subcommittee requests that you immediately open an investigation into this apparent waste of taxpayer funds, how it was able to happen unchecked, and how to prevent it in the future," subcommittee Chairman Raja Krishnamoorthi, D-Ill., wrote in a letter to Acting Inspector General Christi Grimm.

Tesia D. Williams, the Office of Inspector General's Director of Communications, told Law360 in an email Friday that the office received the letter and is "reviewing it for appropriate action."

Also in an email Friday, an HHS spokesperson told Law360 that while the agency can't comment on ongoing contracts, it has followed all regulations for contracting efforts related to the Strategic National Stockpile.

"The efforts of the Administration and HHS ensured the federal government procured enough equipment to care for all hospitalized patients in the United States who needed a ventilator for respiratory support related to COVID-19 infections," the spokesperson said.

Thursday's letter, which also requested an "assessment of the reasonableness of the price of the contract and the amount of excess profits received," comes about a week after the subcommittee accused the administration in a report of blatantly disregarding its own emergency authority to expand a contract with Philips for the low-cost ventilators.

"[President] Donald Trump and his team got taken to the cleaners," subcommittee Chairman Raja Krishnamoorthi, D-Ill., said in a statement on July 31. "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."

Lawmakers started the investigation in April after the administration signed the contract to buy 43,000 ventilators from Philips instead of invoking the Defense Production Act to order faster deliveries under an existing contract with HHS.

The earlier deal, reached in 2014 and meant to help supply the national stockpile with 10,000 ventilators by November 2019, covered a relatively low-cost model developed in conjunction with HHS's Biomedical Advanced Research and Development Authority.

The low-cost Trilogy Evo Universal ventilators cost $3,820 each, while ventilators covered under the newer contract, the Trilogy EV300, cost $15,000 each, something Trump had said was because the administration chose "high-quality" ventilators over the cheaper versions even though the models are basically the same, according to the report.

"The waste of taxpayer funds caused by the Trump administration's incompetent procurement efforts for ventilators could be as much as $500 million or more," the subcommittee report said, comparing the prices of the Evo Universal and EV300.

Philips took advantage of the administration's "incompetence," enabling it to "secure a financial windfall to which it clearly is not entitled," the report said, calling on experienced contracting officers to work out a deal to get the money back and Philips to turn over the undeserved cash. 

Frans van Houten, CEO of Philips North America's Dutch parent Royal Philips, has disputed the report's findings, arguing that the company had been transparent with lawmakers and "believe that not all the information that we provided has been reflected in the report."

"I would like to make clear that at no occasion has Philips raised prices to benefit from the crisis situation," van Houten said in July. "Philips is proud to make its contribution to combating the pandemic through its acute patient care and diagnostic products."

A spokesperson for the White House and did not respond to requests for comment. 

--Additional reporting by Daniel Wilson. Editing by Steven Edelstone.

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