Philips receives notice for termination of bundled ventilator configurations

HHS to not supply the remaining 30,700 Philips EV300 ventilators

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PM Cares Fund
Photo - Photo by Javier Matheu on Unsplash

Philips has announced that it has received notice from the US Department of Health and Human Services (HHS) of the partial termination of the April 2020 contract to deliver 43,000 bundled EV300 ventilator configurations to HHS through December 2020. Philips will complete the deliveries for this month, resulting in 12,300 bundled ventilator configurations supplied to the Strategic National Stockpile by the end of August 2020, in line with the contract. As directed by HHS, Philips will not supply the remaining 30,700 Philips EV300 ventilators to the Strategic National Stockpile.

Philips’ hospital ventilator contract with HHS was one of several contracts that the department announced in April 2020 for the production and delivery of a total of more than 156,000 ventilators to the Strategic National Stockpile by the end of August 2020, and a total of more than 187,000 ventilators by the end of the year.

“To date, we have delivered on our commitments to HHS,” said Frans van Houten, chief executive officer of Royal Philips. “I am proud that with great urgency and under intense pressure, we achieved a fourfold ventilator production expansion with substantial investments: we hired hundreds of new colleagues for our factories in the US and called upon our supply chain partners to massively step up, all in response to the Covid-19 pandemic. While we are disappointed in light of these vast efforts, we will adjust our plans and work with HHS to effectuate the partial termination of this contract.”

Houten added, “The Covid-19 pandemic is far from over, and we will continue to focus on our triple duty of care — meeting critical customer needs, ensuring business continuity, and safeguarding the health and safety of our employees. In the US, Philips is committed to work with the government and several of its agencies to support healthcare providers with the diagnosis, treatment, monitoring and management of Covid-19 patients, as well as the provision of regular health care.”

As the epicenter of the pandemic started to shift to the West in February 2020, Philips reached out to various governments worldwide to discuss how to combat Covid-19 collaboratively. From March 2020 onwards, Philips achieved a massive fourfold increase in ventilator production in just five months, adding production lines in the US and creating hundreds of new jobs. Employees in Philips’ factories in Western Pennsylvania and California have been working around the clock to produce these ventilators.

“While we continue to see uncertainty and volatility related to the impact of Covid-19 across the world, our order book remains solid. The reduction in our ventilator deliveries to HHS will obviously impact Philips’ financial performance, but we continue to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter. For the full year 2020, we now expect to deliver modest comparable sales growth with an Adjusted EBITA margin of around the level of last year,” Houten concluded.

Philips has a comprehensive portfolio of products, services, and solutions to support high-quality care delivery to Covid-19 patients worldwide. Solutions include secure, connected, and intelligent approaches to diagnosis, treatment, and predictive monitoring in the hospital, plus screening, remote patient monitoring, and care at home. Philips’ telehealth and AI-enabled data analytics can help support workflows, facilitate remote collaboration and optimize resources. Philips’ Covid-19-related solutions are designed for rapid deployment and scalability.

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