Missouri's Online Marketplace For Coronavirus Safety Gear Leaves Businesses Open To Scams
Inflated prices for protective equipment could hurt small businesses and rural health care providers the most.
On one thing, both Missouri’s Gov. Mike Parson and health experts agree: The state must dramatically increase supplies of masks and other protective medical gear to keep health care workers and the general public safe from COVID-19.
To that end, state officials recently created an online PPE marketplace. But critics say a lack of oversight and legal protections has left marketplace buyers vulnerable to scams and price gouging.
Enormous demand and short supplies of PPE in the last several months have attracted unscrupulous actors, creating a “Wild West” market that has frustrated even the most seasoned veterans of the business.
“We’ve had to vet a lot of programs, do the research, ask for samples,” says Dennis George, CEO of Associated Purchasing Services, who has been in the PPE business since 1983. “It’s been difficult because you wouldn’t think people would try to sell stuff that wasn’t correct in a crisis.”
The Missouri PPE Marketplace, which Parson rolled out on April 22, allows buyers and sellers to register to deal in supplies like N95 masks, gloves and face shields — equipment that will be needed in the coming months not just by health care providers but by nursing homes, restaurants, shipping centers and manufacturing plants.
The marketplace was developed and built at a total cost of $148,000 and costs $12,250 to maintain each month. Funding came from the federal CARES Act.
The idea of connecting buyers directly with sellers to improve access and prices is sound, says Nada Sanders, a professor of supply chain management at Northeastern University in Boston.
“We need all the help we can get,” she says. “It could potentially be an effective tool because what you’re trying to do is give a little power back to the consumer."
But Sanders says she’s concerned about the risks it poses for buyers.
The Missouri Department of Economic Development, which operates the site, does not vet merchandise offers or make any guarantees to buyers who use the marketplace, according to department spokesman Ashton Kever, although it can remove sellers who don’t provide valid business information upon registering.
A message on the state’s marketplace website warns buyers, “If it looks too good to be true, it probably is.”
In fact, some sellers on the marketplace offer what appear to be impossibly good deals, such as masks or ventilators well below market rates.
Other red flags have cropped up, including sellers who require upfront payment for PPE that will not be available for months, sellers with websites that have broken links or are incomplete, sellers who deal in questionable treatments or screening tools and sellers based in far-away places like China, India and the United Arab Emirates.
In addition, the marketplace allows sales of protective medical supplies that are not FDA-approved.
The responsibility for making sure the buyers and merchandise are legitimate is in the hands of buyers, according to the Department of Economic Development.
“We also strongly encourage buyers on the marketplace to vet sellers on the marketplace as they would any online vendor – that includes doing appropriate cost comparisons,” Kever said in an email.
But negotiating the PPE marketplace during the last few months has been difficult even for hospitals and government entities that buy such equipment regularly.
George says the supply chains have been overrun by scam artists and people selling inferior protective equipment.
“There’s been times people have purchased hundreds of thousands of masks and when they get them, they weren’t as good as a paper coffee filter,” he says.
Many sellers on the marketplace are undoubtedly offering quality supplies, and at least one hospital chain in the Kansas City area, HCA Midwest, says it has used it to obtain supplies.
The Department of Economic Development says it has not received complaints regarding sellers.
But Matt Wellington, campaign director of the U.S. Public Interest Research Group, says it’s unfair to expect businesses and especially health care providers to vet sellers and assess the quality of medical gear in the middle of a pandemic.
“This is already a stressful situation,” Wellington says. “These people are trying to save folks’ lives. They don’t need any more anxiety. We need to be able to get them the equipment they need to do their jobs.”
Even if a company is offering quality merchandise on the marketplace, buyers could end up paying inflated prices for it.
The price of N95 masks in the U.S. in April, for example, exceeded 1,500% of the pre-pandemic price, according to research conducted by the Society for Healthcare Organization Procurement Professionals.
PPE prices have generally fallen since then, but N95 masks, which George says cost between $.65 and $1.10 per mask before the pandemic, are now being offered at an average price of about $3.40 on the marketplace.
And a handful of sellers are offering them at nearly twice that price.
George says he was able to buy N95 masks for $2.10 apiece in mid-June through a distributor.
While the prices of individual masks or gowns might not seem especially high, for health care providers and businesses looking to buy large quantities of protective gear to keep employees safe, they can be huge.
“Companies are shocked to find out how much that actually adds up to,” Sanders says.
Saint Luke’s Health System recently cited the high costs of medical supplies, along with the losses from suspending non-urgent care, as a reason it furloughed some employees for 90 days and cut top officials' salaries.
And Children’s Mercy Hospital said that price increases of as much as 900% had resulted in hundreds of thousands of dollars in additional costs for the pediatric hospital.
Missouri, however, does not provide or collect data on PPE costs on the marketplace, according to spokesman Kever.
“Because the State of Missouri is not involved in negotiations and transactions between buyers and sellers, we do not have information on the cost of personal protective equipment in comparison to other sources,” he said in an email.
Throughout the pandemic, Missouri Attorney General Eric Schmitt has insisted his office is working aggressively to stop price gouging.
“Our office is working overtime to identify these instances of price gouging, collect consumer complaints, and educate Missourians on what to look out for during this time of uncertainty. Rest assured, the Missouri Attorney General’s Office has your back,” Schmitt wrote in a March press release.
States like Oklahoma and New Jersey have legal definitions of price gouging during a state of emergency. They define price gouging as pricing items 10% higher than they cost before a state of emergency was declared.
Unlike them, however, Missouri has no defined threshold for price gouging, leaving the attorney general as the final arbiter of which cases warrant action.
The attorney general’s office has investigated more than 1,800 reports of price gouging during the pandemic, spokesman Chris Nuelle said in an email.
But the office has taken action in only a small number of extreme cases, including one where it issued a cease and desist order to a Springfield man who was allegedly offering N95 masks for $12.50 apiece.
“While we did investigate most every complaint related to price gouging, we focused more on the most egregious examples for additional enforcement,” Nuelle said.
But Northeastern University's Sanders, who describes herself as a free market advocate, says that allowing prices to be set by the market during a pandemic can put public health at risk.
“I don’t think that there is a point where you say, ‘Oh, it’s price gouging,’ because it’s competition for a scarce resource where the health of the nation, as a whole, is dependent,” Sanders says.
Other states have adopted different strategies to help health care providers and businesses obtain PPE at a reasonable price.
Several northeastern states, for example, have formed a consortium to find and purchase PPE. Other states, such as Indiana and Colorado, are buying PPE on behalf of their entire state and then selling bundles of supplies to businesses.
Sanders says such collective buying strategies are probably among the best ways for states to obtain quality supplies at optimum prices.
That said, she adds that the ability of any state or group of states to do that has been limited by the lack of coordinated action on the part of the federal government.
Many groups, such as the American College of Physicians and the Federal Emergency Management Agency's employees union, have called on President Trump to use the Defense Production Act to compel companies to produce PPE as a way to alleviate shortages and price inflation.
The act has been used to boost domestic manufacturing of N95 masks, and supplies of PPE have been increasing, although critics say it's not enough to fix the larger problem.
Months into the pandemic, dozens of Missouri hospitals continue to report low supplies of masks, gowns and face shields, and more than 9 out of 10 are reusing N95 masks, which are are not intended to be used more than once.
Matt Wellington, of the Public Interest Research Group, says the country still lacks a top-down strategy to get PPE where it’s needed.
“We still need a solid, central logistical operation for getting those directly to impacted areas,” Wellington says. “And tracking exactly what we have, exactly who is requesting it and why, and then exactly where it’s going. And we don’t have that right now.”
As more businesses, health care providers and even state consortiums buy PPE, and as many governments and hospitals work to build PPE reserves, Sanders says that many smaller business and health care providers – the very businesses that Missouri’s marketplace aims to help - could get even less access to protective medical equipment.
“What I’m afraid is going to happen is that it’s going to go to the highest bidder,” Sanders said. “Let’s say you are a corporation, you have a little more resources, you might outbid a poor health care system.”