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As feds play ‘backup,’ states take unorthodox steps to compete in cutthroat global market for supplies

  • Author: Annie Linskey, Josh Dawsey, Isaac Stanley-Becker, Chelsea Janes, The Washington Post
  • Updated: April 12
  • Published April 12

FILE - In this March 26, 2020, file photo Ohio Gov. Mike DeWine, left, and Dr. Amy Acton, director of the Ohio Department of Health, leave the State Room before their daily update on the states response to the ongoing COVID-19 pandemic at the Ohio Statehouse in Columbus, Ohio. (Joshua A. Bickel/The Columbus Dispatch via AP, File)

Rushing to stave off a shortage of medical-grade protective gear to combat the spread of the coronavirus, Minnesota officials leaned on a local company’s global connections to airlift a cache of N95 masks from a Chinese factory back to the state for delivery this week.

Washington state purchased 750,000 cotton swabs for coronavirus tests, taking a risk because the product located by officials has not yet been approved by the Food and Drug Administration. The state is also betting that a Seattle-based outdoor gear company, known for its backpacks and parkas, can reconfigure its operations to produce N95 respirators.

And California, acting as a "nation state" in the words of the governor, began buying 200 million masks per month to shore up supplies in that state and, potentially, across the country.

Elsewhere, some governors and lawmakers have watched in disbelief as they have sought to close deals on precious supplies, only to have the federal government swoop in to preempt the arrangements.

Officials in one state are so worried about this possibility that they are considering dispatching local police or even the National Guard to greet two chartered FedEx planes scheduled to arrive in the next week with millions of masks from China, according to people familiar with the planning. These people, who spoke on the condition of anonymity, asked that their state not be identified to avoid flagging federal officials to their shipment.

As the Trump administration assumes what the president has called a "backup" role in distributing supplies to fight the pandemic, state governments are taking extraordinary - and often unorthodox - steps to compete in an increasingly cutthroat global marketplace.

The result is a patchwork and often chaotic scramble for goods, pitting states against each other and, often, against other countries or even the U.S. government.

"We're doing what everyone else is doing," Ohio Gov. Mike DeWine, a Republican, said in an interview. "You've got 50 states and the federal government all chasing the same companies. It's crazy."

Soaring prices have left states at times to pay up to 10 times the normal prices for certain goods, according to officials from multiple states, eating away at cash reserves and laying the foundation for a fiscal crunch that several governors believe will require federal bailouts. Windfalls, so far, go largely to foreign companies that make the equipment along with third-party brokers that often help connect states with manufacturers and then get a cut, according to state officials and business people.

Worried about losing potential deals, state governments have tossed aside long-standing purchasing rules about how to spend taxpayer money, offering funds up front for equipment before it disappears. Governors and top aides are spending hours on the phone, hunting for friends, relatives of aides or other personal connections that might give them an edge. Teams of senior state aides - who in normal times oversee issues such as climate change and health policy - sit in conference rooms and bid all day.

The frenzy invites the potential for fraud, according to several aides to governors, with officials in New Jersey, Illinois, Massachusetts, Connecticut and Washington state all saying they have been inundated with pitches from likely scam artists.

White House adviser Jared Kushner listens as President Donald Trump speaks about the coronavirus in the James Brady Press Briefing Room of the White House, Thursday, April 2, 2020, in Washington. (AP Photo/Alex Brandon)

Help from the federal government is inconsistent, with some governors having luck working with their regional directors from the Federal Emergency Management Agency, others finding an in with Jared Kushner, a White House adviser and the president’s son-in-law, and some appealing directly to President Donald Trump.

Some governors are directing blame at the federal government, which has taken only partial control of the supply chain, dictating how certain supplies are allocated while standing by as a bidding war ensues over the rest.

"If I was going to draw a model, I think that our national response should look a lot more like a national response to World War II and less like the Balkans," said Washington Gov. Jay Inslee, a Democrat, whose state saw the initial outbreak.

This account of the worldwide scramble by governors and their administrations to locate the supplies they need to protect their residents and health-care workers amid a public health crisis unlike any other in modern history is based on interviews with 48 state, local and federal officials and business leaders involved with the response, as well as a review of procurement records and public statements by officials.

Administration officials say that they are now shipping supplies directly to states instead of going to the national stockpile first.

"We're giving states what they need when they need it," said Katie Miller, a spokeswoman for the Trump administration.

California Gov. Gavin Newsom. (AP Photo/ (AP Photo/Rich Pedroncelli, Pool, File)

An administration official said many states are asking for things they do not need and that some of the states are inflating their requests to look like they are delivering for their states. Officials quiz the states on their state stockpiles, what their burn rate is at personal protective equipment at hospitals, how many of their beds are filled, how many of them are coronavirus patients, what their capacity is and what they normally order.

Some of the states are seeking supplies, this official said, for items they say they might need in several weeks. Decisions are made by FEMA, but recommendations sometimes come from Trump, Vice President Mike Pence, Kushner and others based on their interactions with states.

"FEMA makes the decision, but it's not like FEMA is going to do the opposite of what the president tells them to do," a second official said.

Administration officials say there are now daily meetings about supplies, and Kushner has installed something of a SWAT team at FEMA to fix the issue. They are also counting on "Project Airbridge," the federal government's partnership with major health-care distributors, such as McKesson Corp. and Cardinal, to quickly source and deliver medical supplies to the United States.

The government is directing distributors to send about half of the material to hot spots and to release the other half to the commercial market, said a FEMA spokeswoman, Lizzie Litzow.

"This agreement may be misconstrued as FEMA 'commandeering' supplies from the company or their customers," Litzow said.

But some state officials and lawmakers see it differently - that FEMA, having failed to organize a coherent national strategy, is instead interfering in seemingly random ways.

"Stories from FEMA are contradicted by what we're hearing on the ground, namely that they deny that they're confiscating or redirecting PPE while they're clearly commandeering it for their distribution system," Rep. John Yarmuth, D-Ky., said in an interview.

Four shipments of equipment heading to Kentucky hospitals were redirected or taken over by FEMA, according to a hospital CEO who wrote to Yarmuth and other lawmakers earlier this month. The first order was en route from Texas when it was diverted to St. Louis at the demand of FEMA, Garren Colvin, the CEO, wrote in an email reviewed by The Washington Post. In another case, a deposit had already been made for supplies from China when, Colvin wrote, "we were told that the order was canceled at the request of the US Government."

Craig Fugate, a former FEMA administrator, said the agency is asserting its authority over the allocation of critically needed supplies. The agency, which historically responds to one-time disasters in particular regions such as hurricanes and earthquakes, has not been equipped to conduct a nationwide delivery effort for an ongoing crisis. The challenge is amplified by the relative lack of domestic medical supply production.

"They are using the tools the federal government has to move a system that was not built for this type of response," he said.

But the administration appears reluctant to fully override market competition. "I'm not here to disrupt a supply chain," Navy Rear Adm. John Polowczyk, who is heading FEMA's supply chain task force, said at a recent White House briefing.

The split approach only deepens the uncertainty in the states.

Sen. Chris Murphy, D-Conn., became so frustrated after accounts of the federal government apparently seizing some supplies that were headed to his state, that he tasked his staff with understanding their rationale.

"I wanted to figure out, how is FEMA making these decisions? How involved are they in the supply chain?" Murphy said in an interview. "My staff got on a bunch of calls. We weren't any closer to understanding how the federal government was using the supply chain."

For most states, the king of supplies is the ventilator - one of the few pieces of equipment that can provide hope for the sickest patients.

Trump has promised that thousands remain at hand, but states have begun sharing the equipment among themselves. And some say there still aren't enough to go around.

"The national stockpile was smaller than what we anticipated," said Kenneth Raske, the CEO of New York's largest association of hospitals. "We thought there were a lot more ventilators than there were."

One official in New Jersey said the state had offered to pay exorbitant funds for ventilators but still could not find them - and remained about 1,000 short of what was needed.

Purchasing has become more difficult since the federal government used the Korean War-era Defense Production Act to restrict access to ventilators produced by 11 companies. As of Thursday, these include Medtronic, General Electric and Philips, according to Litzow.

Whether states still have a shot at an order can be a matter of luck. One of Georgia's state-approved vendors, for instance, doesn't fall on that list, and the state was recently able to place an $18 million order for 1,200 ventilators, said Lisa Rodriguez-Presley, a spokeswoman for the state's emergency management and homeland security agency.

Elsewhere, hospitals have gone to great lengths to be sure they don't have a shortage. In Maine, officials looked to veterinarians for relief. The devices will need to be adjusted for human use, said Marta Agrodnia, a veterinary surgeon in Portland who gave up her practice's two machines.

Some Democrats have complained that politics appears to be a factor at times in determining which states receive ventilators from the national stockpile.

In Colorado, which is nearing 200 deaths from the virus, the governor's office learned via a tweet from Trump on Wednesday that the federal government would be sending 100 ventilators.

Trump credited the state's Republican senator, Cory Gardner, for requesting the items. Gardner is facing a difficult reelection campaign this year, and made the request to the president in a private conversation this past week. .

Rep. Diana DeGette, D-Colo. ,said she was alarmed by the episode.

"Do you have to have some sort of in with the president to get breathing devices?" DeGette said in an interview.

Moreover, the shipment is far short of the 10,000 ventilators requested by Colorado's Democratic governor, Jared Polis. And it's just a fraction of the 500 ventilators Colorado ordered from a private manufacturer, only to be told last week that FEMA had stepped in and preempted the request.

A White House aide, speaking on the condition of anonymity to discuss internal deliberations across multiple agencies, said the administration uses data provided by the states to distribute resources "at the right time." Gardner, in a statement, said he was "very thankful" that Trump had provided the ventilators, adding, "We're going to continue to work with the president for more and continue to meet Colorado's needs."

At the same time, there is bipartisan criticism of the chaotic global marketplace in which state and local authorities are seeking to fend for themselves.

"You have literally everyone in the world competing for all the same manufacturers right now," New Hampshire Gov. Chris Sununu, a Republican, told WMUR-TV. "A small municipality in France is competing with the state of New Hampshire, which is competing with the country of Mexico and the United States for these exact same items." Arkansas Gov. Asa Hutchinson, a Republican, told NBC this month that it "literally is a global jungle that we're competing in now."

With the national stockpile stretched so thin, officials in multiple states said they were working personal connections to free up resources all over the world.

"We've had people whose cousin has an entree into a factory in China that allows us to get products," Inslee said.

Many states have set up teams to collect incoming tips about potential supply caches, vet the tips and then follow up on those with promise. Massachusetts and Kansas developed Web portals where officials funnel all proposals. New Hampshire set up an emergency operations team stationed behind a state police roadblock. Temperature checks are required for entrance, according to local media reports.

Once a supply is located, finalizing a purchase has required states to throw out old rule books.

"The traditional norms have absolutely gone out the window in the middle of this pandemic," said Illinois Comptroller Susana Mendoza.

The state, which ordinarily spends up to six months negotiating with vendors, now cuts checks before items even leave China. In two instances, staff physically drove seven-figure checks from their Springfield office to meet vendors - including an official who transported a $3.2 million check to a McDonald's parking lot for an handoff to make a bank deadline.

"My thought was we're going to lose this," recalled Ellen Andres, an assistant Illinois comptroller who drove the check for the parking-lot rendezvous. "We're going to lose 1.5 million masks."

The masks arrived, but Andres is well aware of the cost. "Anytime we get something, another state is not getting it," she said. "We're all trying to get the same supply."

The sheer number of buyers willing to pay top dollar has inevitably led to price increases.

Masks that used to go for 50 cents a piece now cost as much as $13 apiece, said Adam Carlson, senior director for government and political affairs at the Michigan Health and Hospital Association.

In Illinois, the state is lucky to get N95 masks, which typically cost $1.75 a piece, for $4.75 each, said an aide to Gov. J.B. Pritzker, a Democrat, who spoke on the condition of anonymity to discuss the bidding process. Prices can sometimes go up to $10 or $12 per mask, the aide said.

Prices for medical gowns have soared to four or five times the usual cost, officials in several states said. A ventilator can now price for close to six figures.

Some states have considered forming consortia, to pool their buying power. But, officials said, the big states have little incentive to work with the smaller ones and the system rewards those who can pay the most.

“We’ve done the same thing every other state has done, but we all know how the free market works,” Kansas Gov. Laura Kelly, a Democrat, said in an interview. “It goes to the highest bidder. I can’t put in a bid for masks or ventilators or face shields that will rival what my colleagues in New York can do, or Illinois or Florida or California. You know what that’s going to do to the smaller states.”

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