Becoming ‘King of Ventilators’ may result in unexpected glut

A professor at the University of Chicago Booth School of Business who teaches health care analytics said the U.S. is now buying more than twice the number of ventilators it needs, even under a worst-case scenario forecasting the spread of COVID-19.

SHARE Becoming ‘King of Ventilators’ may result in unexpected glut

In a typical year, U.S. companies produce about 29,000 ventilators. Though several domestic manufacturers had already announced they were adding extra shifts and hiring additional workers to ramp up production, it was clear additional industrial capacity would be needed to get 100,000 units by the president’s deadline.

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WASHINGTON — As requests for ventilators from the national stockpile reached a crescendo in late March, President Donald Trump made what seemed like a bold claim: His administration would have 100,000 within 100 days.

At the time, the Department of Health and Human Services had not ordered any new ventilators since the start of the COVID-19 pandemic in January. But records show that over the following three weeks, the agency scrambled to turn Trump’s pledge into a reality, spending nearly $3 billion to spur U.S. manufacturers to crank out the breathing machines at an unprecedented pace.

An analysis of federal contracting data by The Associated Press shows the agency is now on track to exceed 100,000 new ventilators by around July 13, about a week later than the 100-day deadline Trump first gave on March 27.

By the end of 2020, the administration is expected to take delivery of nearly 200,000 new ventilators, based on the AP’s review of current federal purchasing contracts. That would more than double the estimated 160,000 ventilators hospitals across the U.S. had before the pandemic.

“We became the king of ventilators, thousands and thousands of ventilators,” Trump boasted in an April 29 speech.

But over the past month, demand for ventilators has decreased even as the U.S. death toll from the novel coronavirus has surged past 80,000. After observing unusually high death rates for coronavirus victims who were put on ventilators, many doctors are using them only as a last resort.

That’s raising the unexpected prospect that the United States could soon be awash in surplus ventilators, so much so the White House is now planning to ship thousands overseas to help boost the virus response of other nations.

In a speech to Republican members of Congresson Friday, the president credited his son-in-law, White House senior adviser Jared Kushner, with heading up the effort to purchase the ventilators.

“We built, and we built, and we built,” Trump said. “Now we have nine factories that are throwing out ventilators at numbers that nobody can believe. It was really — there’s not been anything like that, since the Second World War, where we did the same thing with other types of product.”

Daniel Adelman, a professor at the University of Chicago Booth School of Business who teaches health care analytics, said the U.S. government is now buying more than twice the number of ventilators it needs, even under a worst-case scenario forecasting the spread of COVID-19.

But Adelman said mathematical models cannot predict with certainty how many ventilators will be needed if there is a resurgence of the coronavirus later in the year or if there is another pandemic in the future.

“It seems incongruent with the forecasts that you’re seeing,” Adelman said of the government purchases. “I’d probably rather they order too many rather than ordering too few.”

In patients with severe cases of COVID-19, the virus attacks the lungs, causing fluid to collect in tiny air sacs called alveoli. That makes it difficult for the lungs to transfer oxygen from the air to the blood, which can be deadly. To treat these low oxygen levels, doctors have historically relied on ventilators.

The Strategic National Stockpile, the federal government’s emergency reserve of medical supplies, had about 16,660 ventilators ready to deploy at the start of March, with an additional 2,400 out for maintenance.

By the middle of the month, health officials and governors in states with the worst virus outbreaks began expressing concerns that the supply of breathing machines could run out, potentially leaving thousands of critically ill patients gasping for air.

Among those calling for additional ventilators was Gov. Andrew Cuomo (D-N.Y.), who predicted on March 24 that all of the ventilators in his state would be in use, and patients in need would be left without proper treatment. Cuomo said projections showed New York would need at least 30,000 additional ventilators to get through the mid-April peak of the outbreak. At that point, FEMA had sent New York 400.

Trump expressed skepticism at Cuomo’s figures even as his administration rushed to send New York 4,000 additional ventilators — about one-quarter of the nation’s entire emergency stockpile. Still, Cuomo pleaded for more.

“You pick the 26,000 people who are going to die,” Cuomo said at a news conference,

It wasn’t just New York, however. Similarly dire projections of a ventilator shortfall were also then circulating within the White House.

“The scariest day of my life was about a month ago when, after a long day of meetings, my team told me that we were going to be needing 130,000 ventilators; that we were short hundreds of thousands of ventilators,” Trump recounted in an April 14 briefing. “I had governors requesting unreasonable sums that the federal government just didn’t have.”

By late March, a bipartisan chorus of state governors and members of Congress were calling on the president to exercise his emergency authority under the Defense Production Act to force U.S. companies to produce ventilators.

Trump had resisted invoking the Korean War-era law, which grants the president sole authority to direct U.S. industrial production of critical supplies in times of national emergency, saying the private sector was stepping up production of ventilators and other medical supplies on its own.

But on March 27, Trump changed course, announcing that he would invoke the Defense Production Act to produce ventilators, which meant companies would have to give priority to federal orders over other customers.

“In the next 100 days — well, first of all, we’ve already delivered thousands of them — but within the next 100 days, we will either make or get, in some form, over 100,000 additional units,” Trump said.

By the start of April, FEMA officials confirmed to the House Oversight and Reform Committee that demand for ventilators would soon outpace the available supply. To ration what was left, FEMA Administrator Peter Gaynor directed that the remaining ventilators in the national stockpile be designated as a “strategic national asset” — to be provided to states only on a case-by-case basis where hospitals could demonstrate an “exigent need” to sustain life within 72 hours.

Federal purchasing records show that three months into the pandemic, HHS, which includes the Strategic National Stockpile, had not yet placed any orders for new ventilators in 2020.

That changed within three days of Trump’s March 27 edict, with HSS signing a $350 million deal with Zoll Medical Corp. Records show a flurry of about a dozen big orders with other ventilator makers over the next two weeks, most of them no-bid contracts exempted from the typical federal purchasing rules due to the national emergency.

In a typical year, U.S. companies produce about 29,000 ventilators, according to data cited by the White House. Though several domestic manufacturers had already announced they were adding extra shifts and hiring additional workers to ramp up production, AP’s analysis of HHS contracts show that even with the emergency no-bid orders the traditional medical device makers would deliver about 73,990 new ventilators by July 6 — the 100-day mark since Trump’s March 27 pledge.

It was clear additional industrial capacity would be needed to get 100,000 units by the president’s deadline.

General Motors, which had shut down auto production, had already entered into a partnership on March 20 with Ventec Life Systems, a small ventilator company, to simplify an off-the-shelf design for rapid production at GM’s Kokomo, Indiana, plant.

Though GM had announced it was “working night and day” to launch production, Trump accused CEO Mary Barra via Twitter of dragging her feet, and revived his long-running feud with the company over its 2019 closure of an Ohio factory that Trump had pledged to save.

“As usual with ‘this’ General Motors, things just never seem to work out,” Trump tweeted on March 27. “General Motors MUST immediately open their stupidly abandoned Lordstown plant in Ohio, or some other plant, and START MAKING VENTILATORS, NOW!!!!!!”

GM had sold the Lordstown factory in 2019.

The president also took aim at Ford Motor Co., tweeting that the rival automaker should also “GET GOING ON VENTILATORS, FAST!!!!!!”

On April 8, HHS announced it had reached a $489.4 million deal with GM to produce 30,000 ventilators by the end of August, with the first 6,132 delivered by June 1.

The following week, HHS announced a $336 million contract with Ford and General Electric, which teamed up to make 50,000 of GE Healthcare’s ventilators by July 13.

Assuming all the companies meet their deadlines, AP’s analysis shows the national stockpile should surpass 100,000 new ventilators by mid-July.

HHS declined to release to AP its contracts with ventilator producers without a Freedom of Information Act request, a legal process that can often take months or even years.

But AP’s analysis of the limited contract data available online and figures taken from HHS media releases shows the agency will spend more than $2.9 billion for 198,890 ventilators by the end of 2020, an average per-unit cost of $14,618.

Whether that’s a good deal for U.S. taxpayers is difficult to determine because medical device makers generally don’t publish their prices. HHS is buying at least 13 different models of ventilators from 10 different companies, all with different capabilities, features and accessories.

When AP sought details from HHS about the per-unit cost of four models from manufacturer Hamilton Medical, the agency’s press office provided figures that did not add up to the totals announced in earlier media releases. An HHS spokesperson said the previously provided figures were wrong and would be corrected on the agency’s website.

AP found several instances where the U.S. government had purchased the same models of ventilators before the pandemic. For example, contracting data does show that in December the Department of Defense bought a single, portable ventilator from Zoll Medical for $12,260.

Under its current contract with Zoll, HHS is purchasing 18,900 of the same model for slightly more than $350 million. That works out to about $18,500 each, which would be a more than 50 percent increase from what the Pentagon paid less than five months ago.

A HHS spokeswoman said Friday the government was paying about $12,100 for each ventilator, and that the additional money was for hoses, face masks and other related supplies needed to treat COVID-19 patients. The ventilators also came with a wheeled plastic case with power port, which cost an additional $722 each, according to HHS.

The Defense Department did not respond to questions Friday about whether its 2019 ventilator deliveries also included accessories.

Zoll’s top executive said his company’s pricing had remained consistent.

“Zoll is supplying the U.S. government with its requested products at our usual and customary government pricing, absorbing the additional costs associated with Zoll’s rapid increase in production capacity,” Zoll CEO Jonathan Rennert said Friday. “We are focused on fulfilling the government’s order on time and meeting this urgent public need.”

Erik Gordon, a business professor at the University of Michigan who studies the medical device industry, said ventilator companies are probably incurring increased costs as they ramp up production to meet high demand. Manufacturers haven’t had time to bulk buy additional parts and probably had to add workers to make more of the machines, he said.

U.S. ventilator makers have raised production from a rate of about 700 per week in February to about 5,000 per week by early April, according to the Advanced Medical Technology Association, an industry trade group.

“If you don’t have time to change your manufacturing processes to get those economies of scale, you get there by brute force, extra labor,” said Gordon, who teaches a course in monetizing medical device ideas. “Your costs actually go up, not down.”

With the federal government buying most of the new ventilators being made in the U.S., state governments and hospital systems urgently seeking the machines have often been forced to go through middlemen or foreign suppliers.

Cuomo has compared the free-for-all bidding to going on eBay, and said during a March 31 briefing that New York had ordered 17,000 ventilators from China for $25,000 each.

“We are paying $25,000 per ventilator, and we are broke,” Cuomo said. “The last thing I want to do is buy a single ventilator I don’t need.”

More than a month later, only 2,500 of the Chinese machines have been delivered, according to Cuomo’s office. In a separate case, New York officials are trying to recover another $69.1 million paid to a Silicon Valley electrical engineer who promised 1,450 ventilators that never materialized.

With nearly 200,000 new ventilators set for delivery to the federal stockpile by the end of the year, Trump is declaring victory. But it is now unclear whether the stockpile of new ventilators will be needed.

In the little more than a month since Trump announced the buying spree, a series of medical studies has spurred questions about whether ventilators are effective at saving the lives of critically ill COVID-19 patients.

study published in the New England Journal of Medicine on March 30 found that only 1 of 7 patients older than 70 who were put on a ventilator survived. For patients younger than 70, just 36% lived.

In New York City, state officials say 80% or more of coronavirus patients placed on the machines died.

The studies have caused doctors to reevaluate the use of ventilators in favor of less intensive forms of respiratory support.

Trump administration officials say the new ventilators could still prove valuable if the virus outbreak were to intensify into a second wave after the warm summer months.

“It’s very important that we have a completely refreshed and a comprehensive stockpile going into the fall,” Dr. Deborah Birx, a medical adviser on the White House Coronavirus Task Force, said at a briefing on April 21. “I think that’s why we’ve continued to bring in those shipments and work on the ventilators so that those would be available not only for the United States but certainly if other partner countries have this level of tragedy.”

Trump said he intends to ship thousands of the breathing machines overseas, where the needs are greater.

On Tuesday, Mexico said it received a shipment of ventilators from the United States. Trump said last week Russia is also set to receive U.S. ventilators, along with other countries.

“People dying because they don’t have ventilators, and they’re not equipped to do what we did,” Trump said Friday. “So we’re giving thousands and thousands of these ventilators away to many countries that have suffered greatly: Italy, France, Spain, so many countries. And Nigeria called. Tremendous problems in Nigeria. Tremendous problems all over. And so they’re very happy.”

Krisher reported from Detroit. Associated Press writer Marina Villeneuve in Albany, New York, contributed to this report.

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