Medtronic 'cooperating fully' as US investigates ventilator competition

©Star Tribune (Minneapolis)

Medtronic's headquarters in Fridley, Minnesota, in a 2011 file image. - Glen Stubbe/Minneapolis Star Tribune/TNS

Federal investigators have subpoenaed information from medical device maker Medtronic in a probe over why private companies failed to provide low-cost mechanical ventilators for patients suffering from severe respiratory conditions including COVID-19.

The Wall Street Journal reported Thursday that the Justice Department has sent a civil subpoena to Medtronic asking whether a 2012 acquisition of California-based Newport Medical Instruments by Covidien hindered competition in the market for the lifesaving devices.

Medtronic, which is run from offices in Minnesota, received the subpoena because it acquired Covidien in a $50 billion deal in 2015. Medtronic spokesman Ben Petok said only the Covidien-Newport deal is under scrutiny.

“Medtronic is cooperating fully with DOJ’s review of the 2012 Covidien-Newport transaction,” Petok said in an e-mailed statement.

The New York Times reported in March that viral respiratory disease outbreaks in the early 2000s convinced federal officials that they needed a reliable supply of low-cost ventilators, which inject oxygen and remove carbon dioxide from patients whose lungs are weakened by illnesses like SARS, MERS, and H1N1.

Newport Medical got a federal contract in 2010 to design the $3,000 devices, but was acquired two years later by Covidien, which had its own line of ventilators and respiratory supplies.

Newport was a small company at the time, with less than 100 employees, while Covidien was a global medical supplier with more than 41,000 people on its payroll. Covidien paid $108 million to acquire Newport after a fast-track antitrust review from the Federal Trade Commission.

Last April, members of the antitrust subcommittee of the House Judiciary Committee sent Medtronic a letter demanding information on whether Covidien intentionally killed Newport’s federally funded, low-cost ventilator design because of the competitive threat it posed.

“We owe it to all of the affected patients and medical professionals to understand whether this merger was indeed a ‘killer’ acquisition that is partly to blame for the current scarcity of ventilators during a viral pandemic,” the antitrust subcommittee members wrote April 10.

Medtronic’s Petok disputed the allegation, saying the market for mechanical ventilators includes at least 10 “major players.”

“Covidien purchased Newport to expand its ventilator portfolio in a highly competitive and fractured market, and, rather than discontinue the Newport family of ventilators, Medtronic continues to market Newport ventilators today,” Petok said.

Medtronic’s ventilators range in price from $5,000 to $50,000 apiece, depending on how many features they have and whether they’re intended for use in the hospital, ambulance, or home.

Early in the pandemic, larger proportions of hospitalized COVID patients were being put on ventilators than today. That caused demand for ventilators to quickly outstrip supply, triggering drastic actions including a federal contract to have General Motors manufacture the devices.

Medtronic, for its part, partnered with Taiwan-based Foxconn to ramp up production of Medtronic Puritan Bennett 980 ventilators using a Foxconn manufacturing plant in Mount Pleasant, Wis.

Medtronic also took the unusual step of publicly distributing design specs for a lower-end ventilator, the Puritan Bennett 560, so that other companies could “evaluate options for rapid ventilator manufacturing.”

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©2020 Star Tribune (Minneapolis)