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 in 2014 with another company, whose ventilator was approved only last year and whose products have not yet been delivered.
Today, with the coronavirus ravaging the U.S. health care system, the nation’s emergency response stockpile is still waiting on its first shipment. The scarcity of ventilators has become an emergency, forcing doctors to make life-or-death decisions about who gets to breathe and who does not.
The stalled efforts to create a new class of cheap, easy-to-use ventilators highlight the perils of outsourcing projects with critical public health implications to private companies; their focus on maximizing profits is not always consistent with the government’s goal of preparing for a future crisis.
“We definitely saw the problem,” said Dr. Thomas Frieden, who ran the Centers for Disease Control and Prevention from 2009 to 2017. “We innovated to try and get a solution. We made really good progress, but it doesn’t appear to have resulted in the volume that we needed.”
The project — code-named Aura — came in the wake of a parade of near-miss pandemics: SARS, MERS, bird flu and swine flu.
Federal officials decided to reevaluate their strategy for the next public health emergency. They considered vaccines, antiviral drugs, protective gear and ventilators, the last line of defense for patients suffering respiratory failure. The federal government’s Strategic National Stockpile had full-service ventilators in its warehouses, but not in the quantities that would be needed to combat a major pandemic.
In 2006, the Department of Health and Human Services established a new division, the Biomedical Advanced Research and Development Authority, with a mandate to prepare medical responses to chemical, biological and nuclear attacks as well as infectious diseases.
In its first year in operation, the research agency considered how to expand the number of ventilators. It estimated that an additional 70,000 machines would be required in a moderate influenza pandemic.
The ventilators in the national stockpile were not ideal. In addition to being big and expensive, they required a lot of training to use. The research agency convened a panel of experts in November 2007 to devise a set of requirements for a new generation of mobile, easy-to-use ventilators.
In 2008, the government requested proposals from companies that were interested in designing and building the ventilators.
The goal was for the machines to be approved by regulators for mass development by 2010 or 2011, according to budget documents that the Department of Health and Human Services submitted to Congress in 2008. After that, the government would buy as many as 40,000 new ventilators and add them to the national stockpile.
The ventilators were to cost less than $3,000 each. The lower the price, the more machines the government would be able to buy.
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, California.
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.”
Federal officials were pleased. In addition to replenishing the national stockpile, “we also thought they’d be so attractive that the commercial market would want to buy them, too,” said Nicole Lurie, who was then the assistant secretary for preparedness and response inside the Department of Health and Human Services.
With luck, the new generation of ventilators would become ubiquitous, helping hospitals nationwide better prepare for a crisis.
The contract was officially awarded a few months after the H1N1 outbreak, which the CDC estimated infected 60 million and killed 12,000 in the United States, began to taper off in 2010. The contract called for Newport to receive $6.1 million upfront, with the expectation that the government would pay millions more as it bought thousands of machines to fortify the stockpile.
Project Aura was Newport’s first job for the federal government. Things moved quickly and smoothly, employees and federal officials said in interviews.
Every three months, officials with the biomedical research agency would visit Newport’s headquarters. 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.
Frieden, who ran the CDC 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.”
In April 2012, a senior Health and Human Services official testified before Congress that the program was “on schedule to file for market approval in September 2013.” After that, the machines would go into production.
Then everything changed.
The medical device industry was undergoing rapid consolidation, with one company after another merging with or acquiring other makers. Manufacturers wanted to pitch themselves as one-stop shops for hospitals, which were getting bigger, and that meant offering a broader suite of products. 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 of 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.
Some Newport executives who worked on the project were reassigned to other roles. Others decided to leave the company.
“Up until the time the company sold, I was really happy and excited about the project,” said Hong-Lin Du, Newport’s president at the time of its sale. “Then I was assigned to a different job.”
In 2014, with no ventilators having been delivered to the government, Covidien executives told officials at the biomedical research agency that they wanted to get out of the contract, according to three former federal officials. The executives complained that it was not sufficiently profitable for the company.
The government agreed to cancel the contract. The world was focused at the time on the Ebola outbreak in West Africa. The research agency started over, awarding a new contract for $13.8 million to the giant Dutch company Philips. In 2015, Covidien was sold for $50 billion to another huge medical device company, Medtronic.
Charles Dockendorff, Covidien’s former chief financial officer, said he did not know why the contract had fallen apart.
“I am not aware of that issue,” he said in a text message.
Robert White, president of the minimally invasive therapies group at Medtronic who worked at Covidien during the Newport acquisition, initially said he had no recollection of the Project Aura contract. A Medtronic spokeswoman later said that White was under the impression that the contract had been winding down before Covidien bought Newport.
It wasn’t until July 2019 that the FDA signed off on the new Philips ventilator, the Trilogy Evo. The government ordered 10,000 units in December, setting a delivery date in mid-2020.
As the extent of the spread of the new coronavirus in the United States became clear, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, revealed March 15 that the stockpile had 12,700 ventilators ready to deploy. The government has since sped up maintenance to increase the number available to 16,660 — still fewer than one-quarter of what officials years earlier had estimated would be required in a moderate flu pandemic.
Last week, the Health and Human Services Department contacted ventilator-makers to see how soon they could produce thousands of machines. And it began pressing Philips to speed up its planned shipments.
The stockpile is “still awaiting delivery of the Trilogy Evo,” a Health and Human Services spokeswoman said. “We do not currently have any in inventory, though we are expecting them soon.”