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Gouged prices, middlemen and medical supply chaos: Why governors are so upset with Trump

Masks that used to cost pennies now cost several dollars. Companies outside the traditional supply chain offer wildly varying levels of price and quality. Health authorities say they have few other choices to meet their needs in a ‘dog-eat-dog’ battle.

An N95 mask at Massachusetts General Hospital. (Josh Reynolds for The Washington Post)

Inside RWJBarnabas Health, New Jersey’s biggest health-care network, hospital leaders are so desperate for medical supplies to combat the coronavirus pandemic that they’re paying 50 times the usual price.

Confusion and want are so massive that they’ve been willing to work with sellers they don’t know, even paying upfront for the equipment they need. The threat of fraud is everywhere: A recent delivery of 500,000 surgical masks from a Chinese supplier turned out to be medically useless. They appeared designed for a nail salon.

“We’re burning through cash, but there’s no other option,” the network’s chief medical and quality officer, John Bonamo, told The Washington Post. “The rules as we know them don’t exist anymore.”

This “otherworldly atmosphere,” as Bonamo calls it, is driving demands from governors and local health officials for the federal government to take control of the distribution of scarce medical resources nationwide.

New York Gov. Andrew M. Cuomo (D) updated New Yorkers on the coronavirus’s spread and the state’s resources in attempting to fight the virus on March 24. (Video: The Washington Post)

They’ve pleaded for the White House to invoke the Defense Production Act, the legislation that would compel American companies to make critical supplies. President Trump has refused. “I just haven’t had to use it,” Trump said Thursday night.

But late Friday afternoon, Trump reversed his stance, invoking the act to order General Motors to make ventilators and arguing the company had been “wasting time.” "Our fight against the virus is too urgent to allow the give-and-take of the contracting process to continue to run its normal course,” he said in a statement.

The federal move follows weeks of anguish and confusion over supply shortages, according to hospital purchasing managers, state emergency management officers and even the middlemen themselves. In interviews, they portrayed a broadly dysfunctional system across the United States, with hospitals and health authorities having few options but to rely on largely unknown middlemen whose priority appears to be making a profit as they promise to quickly replenish the nation’s depleted medical stockpiles.

The companies exist outside the traditional medical supply chain and offer wildly varying levels of price and quality, leaving hospitals with limited recourse when deliveries go wrong. The frenzy is helping drive up costs and forcing already strained hospital leaders to vet suppliers for dangerous counterfeits and scams.

Without clear federal coordination, states and hospital groups said they were having to grapple with suppliers eager to secure sales and squeeze profits from companies spending billions of dollars to combat the viral spread.

Over the past four months, President Trump has regularly sought to downplay the coronavirus threat with a mix of facts and false statements. (Video: The Washington Post, Photo: Jabin Botsford/The Washington Post)

The governors of New York, Texas, Illinois and other states have said they are competing with the federal government and other states in a mad scramble for lifesaving supplies such as surgical masks, N95 respirators, isolation gowns and ventilators that are widely drained or out of stock.

They are also dealing with a frenzy of pitches from unknown suppliers offering to sell them the materials directly from Chinese factories. Christian Mitchell, deputy governor of Illinois, said he’s on a team of more than a dozen staffers attempting to sort through a dizzying array of sellers offering masks and medical equipment.

“You’ll have a friend of a friend of a guy who has a friend of a cousin who maybe does business in China, and you have to make sure: Is this person legitimate?” Mitchell said in an interview. “Can they give you pictures, or can they actually send you samples? … It is a dog-eat-dog world out here.”

In Texas, officials with a Supply Chain Strike Force convened this week by Gov. Greg Abbott (R) are manning the phones inside the state’s emergency operations center in hopes of screening a rush of international brokers and businesses.

“I’m getting emails, LinkedIn messages, Facebook messages from people I’ve never heard of in my entire life, saying, ‘I’ve got a supplier that can get you this or that,’ ” said John Wittman, an Abbott spokesman.

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For American hospitals, the crisis is here with no end in sight. The United States has more confirmed infections than any other country, with 82,000 cases and counting, updated data Thursday showed.

Some of the intermediaries acknowledge they are capitalizing on the chaos of a market where hospitals and state health leaders bid against one another for dwindling supplies.

Andre Leite and Adrian Small, Washington D.C.-based luxury real estate agents with no medical-supply experience, said they have been cold-calling hospitals, mayors and nurses groups with an extraordinary offer: all the protective material they could need, delivered for an affordable price. They insist they know the right factories from their days buying porcelain and home-remodeling materials from Chinese industrial zones. And for their services, all they’re asking is a profit margin of about 20 percent.

“That’s the minimum I can go,” Leite said in an interview. “I’m telling people, ‘Stick your hand in your pocket, fish out a few bucks, and let’s do something about it.’ ”

Bonamo, of RWJBarnabas Health, said a team of hospital executives now sifts through a daily flood of pitches demanding upfront payments for a chance at supplies. Prices change by the day, soaring for the items health-care providers need most. Surgical masks that once cost 3 to 5 cents now cost several dollars a piece, while coveted N95 masks that once cost less than a dollar are now sold for $7.50 or more.

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“There’s a cacophony of emails and texts and phone calls from people who know people who have product,” Bonamo said. “Very often they’re middlemen: There’s a lot of people out there with product who were never in this business before, but they’re entrepreneurial, they see the opportunity, they have connections in China or elsewhere around the world.”

Major manufacturers and armies of volunteers have banded together to donate millions of masks and other equipment to medical providers across the country. But there still aren’t enough, leaving an opening for for-profit businesses and speculators who often also bid for the same supplies.

“The dynamic of the market is very weird at this point,” said Andrew Stroup, a co-founder of Project N95, a nonprofit clearinghouse working to connect hospitals with suppliers. The group has received more than 2,000 requests from health-care institutions searching for more than 110 million pieces of personal protective equipment.

“With the shift of how the market is operating and the lack of a timetable as well, things are feeling very uncomfortably unnatural,” Stroup said. “There’s a lot of demand and a lot of issues with being able to vet the supply.”

N95 respirator masks use a microscopic web of plastic threads to block 95 percent of airborne particles, making them a critical piece of protection for doctors and nurses. Federal agencies regulate the masks’ use and manufacture in the United States.

Some hospital executives said they worry the masks they’re being sold are coming from unregulated factories seeking to capitalize on the booming market: Though real masks and counterfeits look similar, they offer widely different levels of protection that could leave health providers at risk.

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The price gouging has hollowed out public health budgets, officials say. Minnesota-based industrial giant 3M, which makes hundreds of millions of N95 masks a year, said in a statement Tuesday it had “received reports of an increase in fraudulent and counterfeit” masks and was working to find and stop “pandemic profiteers.”

The FBI said this week that it had also seen a rise in N95 fraud, with investigators saying that scam listings had led victims to lose more than $3 million so far this year. In one case, a seller pocketed money for masks, blamed their delayed delivery on trade disruptions related to the virus and then disappeared.

A growing chorus of lawmakers from both parties had urged Trump to invoke the Defense Production Act, a 1950 law designed to give the commander in chief the authority to marshal resources in time of war. One proposed bill this week would have compelled Trump to buy 300 million N95 masks within 24 hours of enactment.

The government maintains a federal stockpile of strategic medical equipment, but states and hospitals have found it woefully deficient. State officials in Virginia learned this week that they would receive less than 10 percent of the items they had requested from a backup Department of Health and Human Services supply, Rep. Abigail Spanberger (D-Va.) said in an interview.

“This is a public health crisis, and people will die if we do not focus on obtaining the supplies we need to keep health-care workers safe,” said Spanberger, a former CIA operations officer. “It is shocking to me that we have people pleading for help and the administration is not using the power it has to provide that help. It is devastating.”

Rhonda Medows, president for population health at Providence St. Joseph Health in Seattle, one of the largest hospital systems on the West Coast, said she and other executives have been pleading for weeks with federal agencies for help to fill the shortfall in needed supplies.

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They’ve received few answers and pitifully small shipments. The only positive response came from the Department of Agriculture, which she said offered to help find large animal ventilators that could be converted for human use.

Some medical professionals have pursued last-ditch attempts to safeguard their health. Lee Saunders, a union leader representing health-care workers, said Thursday that some health-care workers in New York have donned garbage bags because hospitals are short of protective gowns.

“This is a train wreck happening in slow motion right before our eyes,” Saunders said in a conference call. “Do the moral thing, Mr. President: Get those nurses and health-care workers the protective gear they need by invoking the Defense Production Act.”

The shortages are forcing some people to turn to untested methods. Brendan Babb, an official with the city of Anchorage, said he is working with designers on an experimental prototype of N95 masks that could be manufactured by the 3-D printers used by dental clinics and hobbyists. His team is crowdsourcing supplies and coordinating with hospitals, and he expects they could make hundreds within the next three weeks.

But until the supply lines are at capacity, some hospital executives said they expect to continue fielding calls from unusual sources. Leo Friedman, whose Chicago-based company, iPromo, sells branded pens and promotional swag for corporate events, said he has rapidly retooled his company to sell respirator masks, gloves and isolation gowns. The company is currently sending promotional blasts to health-care providers promising bulk discounts and seven-day deliveries direct from Chinese factories.

Many hospital administrators, he said, are so desperate they’re “getting ripped off left and right” by factories selling equipment for “$11, $12, $20 a mask.” His company, he assures them, is reputable. N95 masks — sold in shipments ranging from 200 masks to more than 50,000 — start at about $9.99 each.

Jeanne Whalen, Tom Hamburger and Sheila Eldred contributed to this report.

Coronavirus: What you need to know

The latest: The CDC has loosened many of its recommendations for battling the coronavirus, a strategic shift that puts more of the onus on individuals, rather than on schools, businesses and other institutions, to limit viral spread.

Variants: BA.5 is the most recent omicron subvariant, and it’s quickly become the dominant strain in the U.S. Here’s what to know about it, and why vaccines may only offer limited protection.

Vaccines: Vaccines: The Centers for Disease Control and Prevention recommends that everyone age 12 and older get an updated coronavirus booster shot designed to target both the original virus and the omicron variant circulating now. You’re eligible for the shot if it has been at least two months since your initial vaccine or your last booster. An initial vaccine series for children under 5, meanwhile, became available this summer. Here’s what to know about how vaccine efficacy could be affected by your prior infections and booster history.

Guidance: CDC guidelines have been confusing — if you get covid, here’s how to tell when you’re no longer contagious. We’ve also created a guide to help you decide when to keep wearing face coverings.

Where do things stand? See the latest coronavirus numbers in the U.S. and across the world. The omicron variant is behind much of the recent spread.

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