Officials: Fraudulent Products Still Plague COVID-19 Supply Chain

WASHINGTON — The domestic supply chain for personal protective equipment (PPE) and other products related to COVID-19 needs to be made more secure in order to avoid problems with fraudulent products, hoarding, and price gouging, members of a key Senate panel said Tuesday.

“Before the coronavirus pandemic, hospitals and healthcare workers could avoid purchasing counterfeits by tapping into tried-and-true supply chains,” Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said at a hearing on protecting the reliability of the U.S. medical supply chain during the COVID-19 pandemic. “However, as the demand for PPE skyrocketed, some of these providers have had to go outside their normal supply chains to source supplies, and in some cases have inadvertently purchased fake, faulty, and even illicit medical supplies.”

Sen. Ron Wyden (D-Ore.), the committee’s ranking member, placed the blame for many of the supply chain problems on President Trump. “Trump has said the government is, and I quote, ‘not a shipping clerk,’ and that when it comes to acquiring PPE, governors are supposed to be doing it,” Wyden noted. “His disinterest in leading any kind of coordinated effort to acquire and distribute PPE forced states to compete on the open market. That leaves a lot of room for sketchy suppliers and scam artists to rip off the taxpayer and endanger frontline public health workers with unsafe and substandard PPE.”

For instance, he said, “my home state of Oregon purchased close to 1 million N95 masks from a supplier in China, but after they arrived they were decertified because they couldn’t pass a key safety screening.”

Steve Francis, assistant director of the Global Trade Investigations Division at the Department of Homeland Security (DHS), discussed his agency’s efforts to stop COVID-19 supply fraud, a campaign known as Operation Stolen Promise.

“Since the launch of this operation, we’ve opened over 570 criminal investigations worldwide and … while working alongside Customs and Border Protection, we’ve seized over 900 shipments of mislabeled, fraudulent, unauthorized, or prohibited COVID-19 test kits, treatment kits, homeopathic remedies, purported antiviral products, and PPE,” he said. “The largest percentage of seizures have been of COVID-19 test kits at 45%,” followed by drugs at 27%, viral lanyards — which purport to keep COVID-19 away from the wearer — at 16%, and PPE at 10%; “these products didn’t meet federal standards or provide the benefits they claimed to provide,” he said.

Sen. Rob Portman (R-Ohio) said he was frustrated that the federal government wasn’t offering long-term contracts for COVID-19 equipment and supplies to domestic manufacturers. “How do you get PPE back here to this country? What the industry experts tell me is that the best way to accomplish that goal is to provide some certainty … so they know if they make a big investment, that they have a market,” he said. “Right now PPE is typically a 90-day contract. If we really want to bring it back, there’s a pretty simple way to do it: we should say, ‘Look, here’s a long-term contract.'”

Sen. Robert Menendez (D-N.J.) urged increased used of the Defense Production Act (DPA) to shore up domestic production. “It’s hard to comprehend, months after the virus’s initial outbreak in the U.S. we’re seeing hotspots all over the country and continuing to have problems procuring items like testing swabs and masks,” he said. “We wouldn’t even be here if the administration had invoked the full power of the DPA … Now flu season is about 2 months away and I have severe doubts we’ll be ready to deal with the ongoing pandemic.”

Sen. Debbie Stabenow (D-Mich.) discussed a failure of government regulation when it came to fraudulent COVID-19 testing supplies. “It all comes down to not having a national strategy,” she said. Stabenow added that in June, Michigan received 322,000 tubes of COVID testing transport medium manufactured by a newly created company called Fillakit. “The company had been incorporated 1 week before it was awarded the no-bid contract. It was headed by an untrustworthy individual who had been fined in the past for running telemarketing scams,” she said.

“We subsequently found out they were using repurposed miniature plastic soda bottles … They were not manufactured in sterile conditions and they would not provide reliable test results,” she said. “That’s more than 300,000 tests we couldn’t do, which was a week’s worth of tests in Michigan.”

Soraya Correa, chief procurement officer at DHS, said her agency was “aware of the Fillakit situation” and that DHS had discontinued use of the product and notified its Office of Inspector General to do a further investigation. “Often in these emergency situations, we rely on certifications from known bodies — in this case, Fillakit had an emergency use authorization provided by the FDA,” she said. “We relied on that authorization … but we subsequently found out these products were defective.”

Sen. Sheldon Whitehouse (D-R.I.) seemed somewhat sympathetic to Correa’s plight. “The fact that a state is thrown into this melée of competition is something you’re not in a position to remedy because you don’t work for the state,” he said. “That is correct,” Correa responded.

Thomas Overacker, of the Cargo And Conveyance Security division of CBP, pointed out that states who turn to the Internet to find PPE vendors also face challenges. “Any time you’re dealing with unvalidated entities selling products online, there’s an inherent risk,” he said.

Whitehouse said that the governor of Rhode Island was trying to track down a truckful of supplies that was headed for Rhode Island. “Nobody could tell us where the damn truck was,” Whitehouse said. “Glory day, the truck arrived, but the truck was empty. That’s the kind of nonsense we’ve had to put up with because of the absence of real leadership from the federal government.”