As the coronavirus spreads, the collapse of the project helps explain America’s acute shortage. 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 with another company in 2014, whose ventilator was approved only last year and whose products have not yet been delivered. Today, with the coronavirus ravaging America’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 R. 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 re-evaluate their strategy for the next public health emergency.
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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, Calif.
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 C. D. C.
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. Mr. 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.
Dr. Frieden, who ran the C. D. C.
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 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 J. 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 J.
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 Mr. White was under the impression that the contract had been winding down before Covidien bought Newport. In a statement Sunday night, after the article was published, Medtronic said, “The prototype ventilator, developed by Newport Medical, would not have been able to meet the specifications required by the government, nor at the price required.
” Medtronic said that one problem was that the machine was not going to be usable with newborns. It wasn’t until last July that the F. D. A.
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 S.
Fauci, director of the National Institute of Allergy and Infectious Diseases, revealed on 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 a 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. ” transcript From The New York Times, I’m Michael Barbaro. This is “The Daily.
” Today: States and cities across the U. S. are reporting dangerous shortages of vital supplies needed to contain the pandemic. Sarah Kliff on what’s behind those shortages.
It’s Tuesday, March 31. Well, it’s Friday, what feels like has been an endless week. I know so many New Yorkers have really felt this week. It’s been very, very difficult.
Last Friday in New York City, Mayor Bill de Blasio gave a news conference, and he essentially came out and said that the city is running out of medical supplies. We’re getting through this week. It’s tough. We have what we need for next week, but it will definitely be a very hard week.
But after next Sunday, April 5 is when I get very, very worried about everything we’re going to need. The people power we’re going to need, the equipment, the supplies, obviously the ventilators. That they only have about a week left of the things they really need. Mm-hm.
But I want to put down that marker right now, and I’ve put down that marker to the White House, that that is a decisive moment for the city of New York. We need to make sure that we can get to that day ready to face the week after that and the week after that as well. And right now, we’re not there. And this is what we’re hearing from mayors, from governors all across the country.
Everybody’s looking for ventilators. Everybody’s looking for P. P. E.
Everybody’s looking for medical staff, and everybody’s looking for beds. And so that’s what makes this particularly hard. There aren’t enough supplies to treat the coronavirus outbreak. There’s not enough ventilators.
We need thousands of ventilators in Michigan. There is not enough N95 masks. We’ve got nurses who are wearing the same mask from the minute they show up for their long shift to the end of that shift. There aren’t enough masks.
There aren’t enough hospital beds. There aren’t enough ventilators. The list is long, and hospitals are getting worried about running out. So how can that be?
How is it that the U. S. is running so low, and in many cases, actually running out of so many essential components of a response to this pandemic? Well, for each component, there’s actually a unique backstory.
There’s a clear reason why we don’t have enough and why it is hard to get more. Well, let’s go through each one of the three that you mentioned, starting with what would seem to me like the easiest problem to solve, which is masks. So what explains the shortage there? The masks were one of the first things to come into shortage.
It was one of the first places where we started realizing we might not have enough supplies for our health care workers. Mm-hm. And to understand the shortage of masks, you probably want to go back 20 or 30 years. Hm.
Back then, a lot of the masks that were being used in hospitals were made in the United States. That really shifted about 15 years ago or so. You saw mask manufacturers, like other manufacturers, moving their operations offshore, where they could manufacture masks cheaper. A lot of them went to China.
And if you think about it, you can manufacture abroad. You didn’t need a ton of specialized equipment, and then you could ship it right back to the United States. Orders are generally pretty predictable. At the time, it seemed like a prudent business decision for mask manufacturers to move their business to places where labor was cheaper.
And so why is there now a shortage if this was a rational outsourcing decision with predictable deliveries from China to the U. S. , that would allow us to create a stockpile? This system made sense when you understood the health care needs — when you knew a certain number of people tended to get the flu, so here is how many surgical masks you would need in a country.
It really falls apart when you have a pandemic like coronavirus, which has spiked the amount of health care supplies we need. And all of a sudden, we’re in the situation where the surgical masks we want are half a world away. A lot of the transport that we rely on has been shut down. And other countries where the masks are being made are saying, we need these masks, too.
This is particularly true in China, which had a coronavirus outbreak before us, and in certain cases has been holding on to its masks, not allowing manufacturers to export them abroad. Hm. So it made sense at the time, but it was not a supply chain built for the pandemic we’re in right now. So how solvable is this problem, given what you’ve laid out?
It is solvable, but it takes time and it takes some kind of unusual measures. So one of the things you do see happening is factories being turned over to mask manufacturing. Mm-hm. And companies are trying to do that.
If you look at Honeywell, for example, they’ve a factory that makes glasses and goggles usually. They’re going to turn that over to making masks, but they say it’s going to take about a month to make the transition. They’re going to have to hire 500 workers. You can’t just flip a switch in these factories that have been used from something else.
And I think that’s why you see everyone trying anything possible. It’s why individuals are sewing masks at home and giving them to their local hospitals. That’s how dire the need is, that we’re really looking at any possible way to make a mask, even if it’s not in the traditional factories that typically manufacture them.
“OK, so that is masks.”
Where should we turn next? I think we should talk about hospital beds. OK. We’re facing a pretty dire shortage there, but for entirely different reasons.
So the United States has significantly fewer hospital beds per capita than a lot of our peer countries and a lot of other countries that are fighting coronavirus. Hm. And you can really trace that back to a law that passed in 1974. This was about a decade after Medicare and Medicaid had come into existence, and all of a sudden, the government had become a huge payer of health care bills.
Right. So they had a significant reason to be concerned about rising health care costs. And one of the things they started noticing was that when you had more hospital beds, they just seemed to get filled. Hm.
It’s like when you add a lane onto a highway, you think it’s going to make the traffic better. It just turns out more cars show up and start using that route. The theory there being that however many beds you have, hospitals, which are businesses, they will find a way to fill them. So policymakers identified that having all these hospital beds was probably driving up costs, because hospitals had strong financial incentives to keep those hospital beds full.
So in 1974, they passed this law that essentially required hospitals to apply for permission to build beds. So if I wanted to build a 500-bed hospital in New York, I’d have to go to the state and say, here’s why I think there aren’t enough hospitals in this area and why I should be allowed to build this new hospital. And what is the impact of that law on the number of beds in our system? It really limited the number of beds.
We’ve shed about a half million hospital bed since 1974. I think that’s pretty telling. Wow. There’s other things driving this.
Certain procedures that used to require a few nights in a hospital have gotten faster and safer, so you don’t really need that. Medicines have gotten better, so certain things that used to be treated with surgery, you can treat with prescriptions. But at the core of this, we really have made this decision that we want to limit the number of hospital beds in the United States. And that might help hold down costs in a normal time, but then we get to a pandemic and all of a sudden it becomes a real constraint on our ability to treat a wave of sick patients.
Right. So we created this shortage on purpose, and with a reasonable motive that just wasn’t anticipating what it would mean in a crisis. Exactly. And when you think about hospitals, you have to remember they’re businesses.
If you have an empty bed in a hospital, that’s a bed that’s not generating revenue. So hospitals try to operate pretty full. A lot of the ones I’ve been talking to tend to operate, particularly now in the middle of flu season, at like a 95 percent capacity. Hm.
That means there isn’t a lot of slack in the system to surge up when you have a lot of patients who need care at once. Because hospitals are already generally so full, they just don’t have these empty beds sitting around for patients to use. Mm-hm. But now we’re seeing that not having slack in our health care system, not having empty beds that could be used when the need for health care surges, that leaves us really vulnerable in a situation like coronavirus, where you actually really want some slack in the system to treat those extra patients.
OK, so that brings us to what I think is probably one of the scariest and most urgent problems of this pandemic, which is ventilators. Right. Ventilators are a crucial tool in fighting coronavirus. And the story of why we don’t have enough of them, it highlights probably better than anything else this incredible tension between the business of American health care and the ability to respond to a crisis.
We’ll be right back. So, Sarah, what is the story behind our shortage in ventilators? So in 2006, the federal government creates an entire new division just to prepare medical responses to whatever sort of disasters it can imagine. Hm.
And in its first year of operation, they started thinking about how to expand the number of ventilators. They thought that we would need about 70,000 extra machines in a moderate flu pandemic. And one of the things they noticed is that we did have some ventilators in a national stockpile, but they weren’t really ideal. They were big, they were expensive, so you couldn’t order a lot more of them.
They required a lot of training. So they come up with this idea that the federal government should develop a ventilator that is the opposite of all of that. So the U. S.
is going to get into the business of making its own ventilators. Exactly. Well, they’re going to outsource it. So they’re going to find a private partner who already makes ventilators and asks them to design something to their specifications.
And what they want is a machine that is cheap, that is lightweight, so you can move it around, that doesn’t require a lot of training to use. And they set out to find a private company that is willing to build such a ventilator. And a small medical device company in California called Newport Medical raises their hand, and they are really excited about it. They think it would be really prestigious to work with the government.
They want to build this device, and they get the contract. Mm-hm. For the first two years, things go pretty well. Newport Medical actually creates three working prototypes, and they ship them out to Washington, D.
C. , where officials are excited. They see this thing they wanted to build, and they can start envisioning it as part of the national stockpile. Hm.
So everything really seems to be going as planned until May 2012. That’s when it’s announced that Newport Medical is being purchased by a much larger medical device company called Covidien. Newport Medical was worth about $100 million. Covidien was worth $26 billion dollars.
Wow. Just a magnitude larger company that makes all sorts of devices, whereas Newport Medical, the only thing they did was make ventilators. Mm-hm. The government officials who worked on the contract say they saw kind of an immediate change in how things were going.
The larger company didn’t seem quite as interested. They requested more money to finish the contract. And at the end of the day, late 2013, early 2014, the contract just falls apart, and the ventilator is never built. Hmm.
Sarah, what’s your sense of why this larger company, Covidien, didn’t want to make this ventilator? I mean, if it was prestigious enough for this little company, why wasn’t it prestigious enough for this bigger company? Yeah, when I talked to former government officials, they had a sense that Covidien didn’t want to manufacturer a lower cost ventilator that would compete against their higher cost ventilators that were already in the market. You know, it doesn’t make a lot of sense for them as a business to introduce a product that’s going to earn less money into the marketplace.
So basically it wasn’t economically advantageous for this big company. Exactly. Even more than that, it was economically disadvantageous to have this other product on the market. Covidien executives, they tell a different story.
They felt like the government had unrealistic expectations. That when they came in, purchased this small company, they realized this project was just not feasible and ultimately had to negotiate their way out of it with the government. In any case, once this company was purchased, the contract was never finished and the ventilator that was supposed to be designed was not designed. So all of a sudden, this ahead-of-its-time, pre-planned program to make sure the U.
S. has enough ventilators is not producing ventilators that the U. S. may eventually need.
Right. And the government does keep trying. They redid the contract after this one falls apart, and they award it to Philips, another very large company. The thing is, it was too late for the crisis that we’re in right now.
Hm. So we’re in a situation where the government spent 13 years, about $20 million trying to build a device that could respond to a pandemic outbreak, and we don’t currently have any ventilators to show for it. Hm. And so where does that leave the United States’s stockpile of ventilators?
How many do we have versus how many we expect to be needing in this moment? There are about 16,000 ventilators in the national stockpile that have been serviced recently, are ready to go out to American hospitals if needed. But back in 2007, when this whole effort started, the government estimated we’d need about 70,000 ventilators. So we’re obviously still quite short of that number.
And what is the federal government doing in the face of this ventilator shortage? So they are figuring out how to best use the stockpile. That effort is a little bit mysterious to the public. We don’t exactly know which states are going to get which ventilators, when they will be released and how that will roll out.
What is happening a little more publicly, and would likely produce more ventilators, is companies ramping up their production of new units. Thank you very much. It’s great to have you. You really see that in two ways.
One is trying to get other manufacturers, particularly the car manufacturers, to start making ventilators. This afternoon, I invoked the Defense Production Act to compel General Motors to accept, perform and prioritize federal contracts for ventilators. This is something President Trump has put some pressure on the industry, on General Motors to start doing. This invocation of the D.
P. A. should demonstrate clearly to all that we will not hesitate to use the full authority of the federal government to combat this crisis. And while it is well-intentioned, it’s an effort that’s going to be pretty challenged.
Why? Well, the thing to know about ventilators is they’re complex machines that really cannot malfunction. We’re talking about machines with hundreds of parts, that if they stop working, a patient stops breathing. Right.
So you need them to be put together correctly, and you need all those hundreds of parts to be at the exact right spot. That’s not something a technician learns to do overnight. So when I’ve talked to some of these ventilator manufacturers, asking them, do you think an automobile company could make these, they’re a little bit skeptical. Hm.
They worry that the expertise isn’t there, and some training is really going to have to happen before you can turn a car assembly line into a ventilator assembly line. The other thing we see happening is the ventilator manufacturers themselves ramping up. They are adding second shifts. They are bringing in more workers.
But that’s really limited by labor supply. One of the things that’s really hard right now is you’re trying to bring workers into a factory in the exact moment when the government is asking people to stay home. So increasing work at a factory means providing protective equipment to those employees. It means doing temperature checks when they come into the factory to make sure nobody gets sick.
When I talk to ventilator manufacturers, the key constraint they’re facing isn’t enough assembly lines. It’s enough people to work on those assembly lines and who have the knowledge to work on those lines. That’s really what stands between us and having a larger number of ventilators. So despite all this activity we’re hearing about, despite the invocation of the Defense Production Act, despite car companies saying they’re going to start making ventilators, I’m hearing you say that there’s not going to be tens of thousands of ventilators suddenly rolling off some assembly line and solving this shortage in the next couple of weeks.
Exactly. And I think that’s why you see hospitals experimenting with how to expand the work of the ventilators they have. Some of those experiments are using one ventilator to support multiple patients. Another one is taking the anesthesia machines that would be used in surgery, and with elective surgery being canceled, retooling those as ventilators.
These are not things that would be happening if it were business as normal, but it’s obviously not business as normal. And because the hospitals, particularly those in New York, are waiting for ventilators, they’re starting to see how they can expand the capacity of the ventilators that they already have. Sarah, the three examples that you have take us through — the masks, the hospital beds, the ventilators — each of them seems to share the common theme that our preparedness for something like this pandemic, which people been warning about for so long, was undermined by the simple fact that our health care system is driven by profits. Right.
The thing to know about American hospitals, about device makers, is they’re just like any other business. They have to turn a profit and bring in revenue to stay open. But there’s also something that makes them really different. We absolutely need them in a pandemic situation like the one we’re in now, in a way we don’t quite as much need restaurants and car makers and other manufacturers.
They’re playing a crucial role in our safety net, but at the end of the day, we don’t have a tool we’re using to prevent them from being what they are, which is businesses. So, Sarah, there is a corner of our economy where everything you have just described is true, and yet the federal government always finds a way to make sure it gets what it needs. And that is the military. There is a principle in the United States that the U.
S. military has to be able to fight multiple wars at the same time, and the United States government and our taxpayer dollars make sure that that always happens. So we know this is possible. It’s just that the government hasn’t tried that, it seems, when it comes to a stockpile for health care.
I think a lot of public health officials would agree with that. The ones I’ve talked to say that if we wanted to, of course we could build a giant national stockpile. It’s a question of priorities and a question of funding. Mm-hm.
They see the cycle that happens to the United States, where there’s a bad pandemic disease, it reveals flaws in our system, and suddenly lawmakers are talking about wanting to commit a lot of money. But the money never quite seems to come through. A year or two later, there are other things they want to spend government money on. It kind of fades into the background until the next pandemic hits.
Right now, we seem to treat military threats as real, as something we need to be prepared against. Hm. We don’t really treat public health threats the same way. But I think what one of the lessons of coronavirus might be is that the public health threats are just as real as the military ones, and it takes a lot of planning and a lot of money to be prepared for them.
Thank you, Sarah. Thanks, Michael. The Times reports that in response to the shortages, the Trump administration has begun airlifting supplies of protective gear, including masks and gowns, from China to the United States. The White House said it would make 22 such flights by early April.
We’ll be right back. Here’s what else you need to know today. As deaths from the coronavirus climbed in Italy and Spain, both countries tightened restrictions on the movements of their citizens. Spain called for a period of quote, “hibernation,” saying that only essential workers could leave their homes, while Italy said that its national lockdown would be extended until the middle of April.
[SPEAKING ITALIAN] During an interview, Italy’s health minister, Roberto Speranza, warned that loosening the restrictions too soon would, quote, “burn everything we’ve obtained until now. ” In the U. S. , the virus is now spreading to Midwestern cities like Detroit, where there have been at least 35 deaths and 500 police officers are now under quarantine.
There’s no question that we have more density, and we’re more at risk. You’re also seeing the Chicago area and the New Orleans area are also hotspots, and you’re going to see this again and again. On Monday Detroit’s mayor Mike Duggan predicted that many mid-sized American cities would be next. Major cities in America that are destinations, that lots of people come into are likely to develop.
And I think it’s a matter of time before you see Philadelphia and Houston and some other cities develop the same way. That’s it for “The Daily. ” I’m Michael Barbaro. See you tomorrow.
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