The U.S. Tried to Build a New Fleet of Ventilators. The Mission Failed.

https://www.nytimes.com/2020/03/29/business/coronavirus-us-ventilator-shortage.html?utm_source=pocket-newtab

Published March 29, 2020
Updated March 31, 2020, 6:29 a.m. ET

Thirteen years ago, a group of U.S. public health officials came up with a plan to address what they regarded as one of the medical system’s crucial vulnerabilities: a shortage of ventilators.

The breathing-assistance machines tended to be bulky, expensive and limited in number. The plan was to build a large fleet of inexpensive portable devices to deploy in a flu pandemic or another crisis.

Money was budgeted. A federal contract was signed. Work got underway.

And then things suddenly veered off course. A multibillion-dollar maker of medical devices bought the small California company that had been hired to design the new machines. The project ultimately produced zero ventilators.

That failure delayed the development of an affordable ventilator by at least half a decade, depriving hospitals, states and the federal government of the ability to stock up. The federal government started over with another company in 2014, whose ventilator was approved only last year and whose products have not yet been delivered.

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Companies submitted bids for the Project Aura job. The research agency opted not to go with a large, established device maker. Instead it chose Newport Medical Instruments, a small outfit in Costa Mesa, Calif.

Newport, which was owned by a Japanese medical device company, only made ventilators. Being a small, nimble company, Newport executives said, would help it efficiently fulfill the government’s needs.

Ventilators at the time typically went for about $10,000 each, and getting the price down to $3,000 would be tough. But Newport’s executives bet they would be able to make up for any losses by selling the ventilators around the world.

“It would be very prestigious to be recognized as a supplier to the federal government,” said Richard Crawford, who was Newport’s head of research and development at the time. “We thought the international market would be strong, and there is where Newport would have a good profit on the product.”

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Every three months, officials with the biomedical research agency would visit Newport’s headquarters. Mr. Crawford submitted monthly reports detailing the company’s spending and progress.

The federal officials “would check everything,” he said. “If we said we were buying equipment, they would want to know what it was used for. There were scheduled visits, scheduled requirements and deliverables each month.”

In 2011, Newport shipped three working prototypes from the company’s California plant to Washington for federal officials to review.

Dr. Frieden, who ran the C.D.C. at the time, got a demonstration in a small conference room attached to his office. “I got all excited,” he said. “It was a multiyear effort that had resulted in something that was going to be really useful.”

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In May 2012, Covidien, a large medical device manufacturer, agreed to buy Newport for just over $100 million.

Covidien — a publicly traded company with sales of $12 billion that year — already sold traditional ventilators, but that was only a small part of its multifaceted businesses. In 2012 alone, Covidien bought five other medical device companies, in addition to Newport.

Newport executives and government officials working on the ventilator contract said they immediately noticed a change when Covidien took over. Developing inexpensive portable ventilators no longer seemed like a top priority.

Newport applied in June 2012 for clearance from the Food and Drug Administration to market the device, but two former federal officials said Covidien had demanded additional funding and a higher sales price for the ventilators. The government gave the company an additional $1.4 million, a drop in the bucket for a company Covidien’s size.

Government officials and executives at rival ventilator companies said they suspected that Covidien had acquired Newport to prevent it from building a cheaper product that would undermine Covidien’s profits from its existing ventilator business.

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In 2015, Covidien was sold for $50 billion to another huge medical device company, Medtronic. Charles J. Dockendorff, Covidien’s former chief financial officer, said he did not know why the contract had fallen apart.
[Who was the CEO?]

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