Royal Philips (NYSE: PHG, AEX: PHIA), a global leader in health technology, today announced that it has received the report from the U.S. House of Representatives Subcommittee on Economic and Consumer Policy and is providing an initial response.
In April, 2020, Philips received a letter from the subcommittee, requesting information about Philips’ hospital ventilator activities in connection with the contracts for the delivery of 10,000 Trilogy Universal ventilators and 43,000 EV300 ventilators to the U.S. Department of Health and Human Services (HHS). Philips has cooperated with the subcommittee’s information requests.
“Philips is supporting healthcare providers in the U.S. and globally to combat the COVID-19 pandemic,” said Frans van Houten, CEO of Royal Philips. “We have been transparent about our production ramp up plans, pricing and allocation policies. 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 combatting the pandemic through its acute patient care and diagnostic products.”
As the epicenter of the COVID-19 pandemic started to transfer to the west in February of 2020, Philips reached out to various governments around the world to discuss how to collaborate to combat the COVID-19 pandemic. Philips is investing over 100 million dollars in 2020 in the production ramp up of acute care products to diagnose, treat, manage and monitor COVID-19 patients. From March, 2020 onwards, Philips has achieved a massive fourfold increase of ventilator production in just five months, adding three production lines in the U.S. as well as hundreds of jobs. Philips’ employees in the factories in Western Pennsylvania and California are working around the clock to produce these ventilators.
The EV300 contract
Philips is on track with the production and delivery of the 43,000 EV300 hospital ventilators according to the April 2020 contract with HHS. The list price of the specific bundle of the EV300 ventilator plus roll-stand and accessories, as selected by HHS, is over $21,000 and is being provided to the U.S. government for $15,000. The agreed price reflects a discount, while taking into account part of the higher costs for the expedited delivery schedule.
The BARDA R&D contract
The contract that Philips entered with HHS/BARDA (Biomedical Advanced Research and Development Authority) in 2014 to develop a stockpile ventilator, which was yet to be developed and manufactured, was chiefly a research and development contract. Tied to this contract, BARDA requested a one-time purchase option for 10,000 of these units be included in the contract for a price considerably lower than commercial prices. Philips is producing and delivering this ventilator to HHS in line with the agreed delivery schedule.