OMG...THAT is scary!!
Poor Peeka!
Thank goodness you were there with him. I know some people leave bully sticks with their dogs when they're gone to keep them occupied. I shudder to think if he'd been alone with it for a couple of hours.
Be sure to write the company about that product, so they can pull them off the shelves! Also, I'd send them a copy of your vets bill along with the pictures and ask for them to reimburse it. They should.