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Audit criticizes Maryland’s $9 million purchase from South Korean company of coronavirus tests that had to be replaced

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A shoddy procurement process led to Maryland’s purchase from a South Korean company of 500,000 coronavirus tests that later had to be replaced, according to an audit released Friday by the state Department of Legislative Services.

The $9.46 million purchase from South Korea-based LabGenomics was made with neither a written contract nor documentation of why that company was chosen, both of which are required by state regulations, the auditors said.

“We found no records documenting the formal evaluation of the vendors, the basis for the selection of LabGenomics, or whether LabGenomics was the best qualified vendor,” the audit report said.

Soon after the shipment arrived last April, state officials learned the tests did not match those that LabGenomics had weeks earlier submitted to the Food and Drug Administration for authorization, the report said.

With no contract requiring the tests to conform to the FDA authorization, state officials had little recourse, and they paid LabGenomics another $2.5 million for replacement tests.

Auditors wrote that they “were provided no documentation supporting negotiations for the additional $2.5 million paid” for the replacements.

“While there was an expressed urgency to procure the tests,” wrote the state’s legislative auditor, Gregory Hook, “such conditions would not mitigate the need to properly document and comply with State regulations specifically tailored to emergency procurements.”

Hogan’s first batch of coronavirus tests from South Korea were flawed, never used

Gov. Larry Hogan (R) announced the purchase at a news conference last spring alongside his South Korea-born wife, Yumi, who helped acquire the tests. He called it “an exponential, ­game-changing step forward” in the state’s fight against covid-19. But because of the problems, none of the initial tests were used to diagnose patients, and months passed before the replacement tests could be used in significant numbers. In the meantime, labs used other available brands of tests.

A spokesman for Hogan, Mike Ricci, said in an email Friday that the governor had no regrets, “except for the time and tax dollars that have been wasted trying to undermine this international accomplishment.”

“We could not be more proud of our entire team that has been working around-the-clock to save lives,” Ricci said, “and of the vital contributions made by the First Lady, as well as the Korean government and LabGenomics, who came to our aid when we needed it.”

The Washington Post reported in November that Hogan and his top health and procurement officials withheld the tests’ flaws from the legislature, state spending authorities and the public, according to a review of public testimony and hundreds of pages of emails and other records.

After The Post’s report, Hook told lawmakers in a letter that he and his audit staff “were somewhat taken aback” because it contained information his office had requested from state health officials weeks earlier but not received.

State Sen. Clarence K. Lam (D-Howard), one of the lawmakers who had questioned the purchase but received few answers from the Hogan administration, said Friday that the audit confirmed “the worst of what we thought.”

“The lack of a written contract and supporting documentation points to exactly why all procurements must follow State law and regulatory requirements — even during an emergency,” Lam, the Senate’s lone physician, said in a news release. “While the urgency to obtain tests were well intentioned, the rushed and opaque process led to so many subsequent problems that the tests went unused for many months.”

The state could have chosen various manufacturers to supply the most widely used type of tests — called polymerase chain reaction (PCR) tests. By late March 2020, U.S. manufacturers were shipping PCR tests by the millions to domestic labs.

Shortages in testing persisted at that time, experts say, because of limitations in the volume of tests that labs could process, as well as a scarcity of ancillary supplies, such as nasal swabs to collect samples and chemical reagents needed to process the tests. Local governments were scrambling for these supplies amid the crisis after the federal government left it to the states to lead testing efforts.

Hogan enlisted his wife to help acquire tests from her native country, which was drawing worldwide attention for its effective handling of the virus through large-scale testing. He directed procurement and health officials to vet various South Korean test makers, focusing on them rather than U.S. suppliers, emails obtained by The Post through the Maryland Public Information Act show.

Contradicting Hogan, health official says first batch of Korean virus tests were never used

By early April, when Hogan administration officials selected LabGenomics, they did not appear to have considered one of the leading domestic tests providers, Thermo Fisher Scientific, which reached out to Maryland on its own the day the state scheduled a wire transfer to LabGenomics, records show.

State officials soon discovered that LabGenomics shipped a different version of its tests than what the FDA authorized. According to the audit, LabGenomics agreed early last April to a recommendation from the FDA to change a “control” in the test to ensure the efficacy of a step in the testing process. The company then shipped Maryland tests that didn’t contain the new control, the audit said.

LabGenomics, which has previously declined to comment, did not immediately return messages Friday.

The replacement tests arrived in secret, and Hogan first mentioned them publicly in July while being interviewed on Washington Post Live. He called them “upgraded and new and improved testing.” Later he told a local television station the initial tests “were swapped out, like you trade in your iPhone, for faster, better tests.” He did not reveal the problem with FDA authorization, and he said no one had raised concerns about the original batch of tests.

Ricci, the governor’s spokesman, later told The Post in an email that the replacement tests “analyzed an additional gene,” then retracted the assertion when confronted with evidence to the contrary.

The audit report said that after several clusters of suspected false-positive test results involving the replacement tests, some health officials raised concerns. But the reason for the suspect results could not be determined, and the Hogan administration pressed ahead to use all the tests by the end of last year.

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