Dive Brief:
- The Department of Justice has opened a ventilator antitrust investigation focused on Medtronic following allegations industry consolidation contributed to a shortage of the breathing devices during the early months of the COVID-19 pandemic.
- DOJ's probe, first reported by the Wall Street Journal, centers around Covidien's 2012 acquisition of small ventilator maker Newport Medical Instruments for $108 million, which predated Medtronic’s $50 billion buy of Covidien in 2015, but may have limited competition for ventilators.
- A company spokesperson said Medtronic is fully cooperating with DOJ’s review of the 2012 Covidien-Newport transaction, which the company said was "appropriately assessed and approved" by the Federal Trade Commission. DOJ was not immediately available for comment.
Dive Insight:
Concerns about the supply and availability of ventilators for treating the sickest COVID-19 patients in hospital ICUs have since tempered. However, a shortage of the potentially life-saving breathing machines during the early months of the U.S. outbreak caused a Democratic-led House subcommittee to question whether the 2012 Covidien-Newport merger was a “killer” acquisition partly to blame for the then-scarcity of ventilators.
The House Subcommittee on Antitrust, Commercial and Administrative Law wrote an April 10 letter to FTC voicing its concern that Covidien's acquisition of Newport was made with "minimal scrutiny" under the fast-track, early termination process one month after the deal was announced.
In addition, lawmakers called out the fact that in 2010 Newport secured a federal contract to provide low-cost ventilators but the effort ended once Covidien bought the company.
"After acquiring a competitor that appears to have threatened to undercut the prices of its own ventilators, Covidien withdrew from the project because it was 'not sufficiently profitable,'" the subcommittee wrote to FTC. "Covidien’s purchase of a potentially market-disrupting competitor that threatened to drive prices down has all the hallmarks of a killer acquisition, where an incumbent firm acquires and then shuts down a key rival."
A Medtronic spokesperson argued the ventilator market "has been and remains a competitive market" with at least 10 major players and the top five accounting for approximately 50% market share.
"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," the spokesperson said.
Medtronic contends that since the start of the pandemic it has ramped up ventilator production five-fold compared to pre-pandemic levels. The spokesperson also noted that the company published the design specifications of its Puritan Bennett 560 ventilator, which has been downloaded more than 200,000 times, in order to "help increase global production of ventilators."
