Medtronic Faces Federal Probe Over Causing Ventilator Shortage During Pandemic: WSJ

Medtronic plc MDT is the subject of a probe from the United States Department of Justice over the acquisition of competing ventilator makers, the Wall Street Journal reported Wednesday.

What Happened: The investigation stemmed from the shortage of ventilators during the COVID-19 pandemic, according to the Journal.

The medical device maker has received a civil subpoena from the Justice Department requesting more information, people familiar with the matter told the Journal.

Authorities are reportedly probing events from 2012 when ventilator seller Covidien plc purchased rival Newport Medical Instruments for $108 million.

Newport had a prior contract with the federal government to develop and supply low-cost ventilators but that was scrapped through mutual agreement after Covidien purchased the company.

Medtronic purchased Covidien in 2015 for $50 billion and also came to own Newport. The deals secured antitrust clearance from the Federal Trade Commission, as per the Journal.

Why It Matters: During the pandemic, industry consolidation has been blamed in part for the shortage of ventilators, bringing the Covidien-Newport deal under fire, the Journal noted.

The shortage led to non-traditional manufacturers such as Ford Motor Company F, Tesla Inc TSLA, and General Motors Company GM to make ventilators during the crisis.

Democrats in a House antitrust subcommittee wrote to FTC Chairman Joseph Simons in April, terming the deal as a “killer acquisition, where an incumbent firm acquires and then shuts down a key rival,” the Journal reported.

Medtronic said that Covidien after it acquired Newport found gaps between what it promised the federal government and the company’s capability to adhere to the government’s requirements.

The Dublin headquartered company announced Wednesday it had purchased yet another medical device company — the San Juan, California-based Avenu Medical — focused on the creation of arteriovenous fistulae for patients with end-stage renal disease. The terms of the deal haven't been disclosed.

Price Action: Medtronic shares closed 1.2% higher at $103.92 on Wednesday and fell almost 0.9% in the after-hours session.