Medtronic (NYSE:MDT) is under investigation by the federal government for allegedly limiting competition in the ventilator business, the company acknowledged late yesterday.
The civil antitrust probe grew out of complaints about device shortages during the coronavirus pandemic, according to a report by the Wall Street Journal.
The Journal cited “people familiar with the matter” as saying that the U.S. Department of Justice has served Medtronic with a civil subpoena formally requesting more information.
Medtronic spokesman Ben Petok said the company is cooperating with the investigation, which stemmed from a failed BARDA contract with Newport Medical, a small California-based ventilator company that Covidien bought for $108 million in 2012. Medtronic acquired Covidien for $50 billion in 2015.
Newport Medical had agreed to a $6.1 million upfront deal in 2009 with the federal government, with the expectation of further payment as it continued to add ventilators to the national stockpile.
According to a March 29 report by the New York Times, the plan was for Newport to file for market approval for the ventilators in September 2013, but Covidien, after acquiring Newport, asked for more funding and assigned Newport executives to new roles away from the project.
By 2014, there were no ventilators delivered to the government, and the government canceled the contract after Covidien expressed its desire to be free from it, the Times reported.
Medtronic claimed in March and continues to maintain that the Times article lacked important information regarding Newport’s contract with the government.
“The ventilator market has been and remains a competitive market with at least 10 major players in which the top five account for approximately 50% market share,” Petok said in an email to MassDevice. “Indeed, 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.
“Since the COVID-19 pandemic began, Medtronic ramped up production of its high-performance ventilators five-fold compared with pre-pandemic levels,” he added. “Additionally, Medtronic published the design specifications of its Puritan Bennett 560 (PB 560) ventilator, which has been downloaded more than 200,000 times, to help increase global production of ventilators.”
This article has been updated with a statement from Medtronic.
