Trump administration accused of overpaying Philips by $500 million for ventilators

por John R. Fischer, Senior Reporter | August 03, 2020
Business Affairs

Members of the subcommittee claim that the Trump administration failed to question Philips and granted modifications that made the 2014 contract “useless” for helping the country address the pandemic. They also say the administration never asked Philips to increase the number of ventilators under the existing contract, and that under advisors Peter Navarro and Jared Kushner, conceded to Philips on a number of matters, including accepting the company’s first proposed offer of $646.7 million for the deal.

“By taking advantage of the Trump Administration’s incompetence, Philips was able to secure a financial windfall to which it clearly is not entitled, and these funds should have been dedicated to obtaining desperately needed PPE and other critical medical supplies during this pandemic,” said the subcommittee in its report. “To remedy this apparent profiteering, the Trump Administration now should engage competent contracting officers at federal agencies to determine whether any of these funds can be clawed back under the provisions of the contract signed during the Obama administration or the modifications entered into by the Trump administration.”

Philips claims that the 2014 contract — which was signed with the U.S. Biomedical Advanced Research and Development Authority (BARDA) — was more of an R&D contract than a purchase order, due to the ventilator not yet being developed at the time. It asserts that the $15,000 unit price for the Trump order falls below the list price of $21,000, when including accessories, and factors in an accelerated time frame.

Subcommittee Democrats, however, say that smaller buyers in the U.S. were able to purchase the same ventilator for prices as low as $9,327, while the government was charged more than any other organization. Philips, in response, denies any wrongdoing.

"We have been transparent about our production ramp-up plans, pricing, and allocation policies,” said Frans van Houten, CEO of Royal Philips, in a statement. “We have cooperated and delivered the requested information to the subcommittee. We do not recognize the conclusions in the subcommittee's report, and we 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, Philips has raised prices to benefit from the crisis situation. Philips is proud to make its contribution to combating the pandemic through its acute patient care and diagnostic products."

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