(Reuters) – As the coronavirus pandemic engulfed the United States, Joe Shia, a consultant to Chinese medical companies, said he was bombarded with inquiries from American firms who saw a golden opportunity in selling tests to determine coronavirus immunity.
Unlike his typical clients, some firms seeking his help had never before sold medical equipment. Others wanted to register test kits with the U.S. Food and Drug Administration without approval from the manufacturer, or to offer home-based tests, which are not allowed by the FDA. One was in the window business, he said.
“They replace windows and do window cleaning,” said Shia, adding that he did not do business with the company. “That is just awful – think about it. Someone who doesn’t know anything about medical devices.”
As demand escalates for blood antibody tests to determine who might be fit to release from lockdown, an array of distributors with no background or established competency in medical testing have joined experienced companies in an all-but-unregulated marketplace, Reuters found. The rush to obtain, advertise and find buyers for test kits follows the FDA’s unprecedented decision last month to allow any company to sell antibody tests in the United States without prior review by the agency.
Pounded by criticism for a delay in expanding diagnostic tests for coronavirus infection, the FDA has swung in the opposite direction in overseeing tests for coronavirus immunity. This take-all-comers approach, Reuters found, has provided an entree for questionable vendors and middlemen — including an electronics salesman hawking an unauthorized home test kit and a former physician convicted in a fraudulent gold-peddling scheme.
“There are literally dozens and dozens of companies jumping out of the blue that I’ve never heard of, and they are saying to us that, ‘If you put money up front before we deliver tests, we can put you first in line for our allocation,'” said Stefan Juretschko, senior director of infectious disease diagnostics at Northwell Health Laboratories, the laboratory testing division of Northwell Health, one of New York’s largest hospital systems.
The sums of money up for grabs are vast. Antibody tests can retail for between $25 to more than $100. It is too early to know how many Americans will seek testing and how often. But – conservatively – if tens of millions get tested just once, that translates into a multi-billion-dollar market.
Under the FDA’s new rules, a vendor must only notify the FDA it is selling a test, affirm the product is valid and label it as unapproved. On its website as of April 29, the FDA listed 164 tests that it had been informed would be offered on the market, more than half of them manufactured in China.
The agency has said it is working with the National Institutes of Health and the Centers for Disease Control and Prevention to validate tests, including tests already on the market. It is unclear how many antibody test kits have been distributed for sale in the United States.
In a statement to Reuters, the FDA said the aim of its policy was to provide laboratories and healthcare providers early access to the tests. But the agency said that it would adjust the approach as needed.
“Every step we have taken as part of our approach to COVID-19 testing has been a careful balancing of risks and benefits in order to meet the urgent public health needs as we combat this new pathogen,” said Anand Shah, deputy commissioner for medical and scientific affairs, in the statement.
In a separate statement, FDA spokeswoman Sarah Peddicord said some test developers had falsely claimed that their tests were FDA approved, that they could diagnose COVID-19 – the disease caused by the coronavirus – or that they were appropriate for home use.
“When we become aware of these issues, we have and will continue to take appropriate action,” she said, including rejecting tests at the U.S. border.
Antibody tests are different from the nasal-swab diagnostic tests that show an active infection. They are blood tests intended to determine who at some point has been infected by the virus and now could be immune. Antibodies, disease-fighting proteins formed in the days and weeks after infection, may protect a person from re-infection, at least for a time, although it has not been proved whether that holds true for the coronavirus.
Propelling demand for the blood tests is a foundering economy, a sharply rising rate of unemployment and a stir-crazy public anxious to return to their former lives.
“Think about it, testing is an emotional thing,” said Meg Wyatt, senior director of diagnostics for Premier (NASDAQ:PINC) Inc, a leading buyer of equipment for hospitals and nursing homes. “It’s this one single thing that can tell me, am I ok, is my family ok, when can I visit my older parents again? It is a good hook” for sellers.
‘NOT EASY TO MAKE’
The entry of unqualified or unscrupulous manufacturers and brokers into the antibody testing business poses risks. Perhaps the greatest one is that they’ll sell a test that indicates immunity where there is none – known as a “false positive.” That could lead people to return to the community while unwittingly posing a risk to themselves and others, infectious disease experts say.
A team of scientists in California and Massachusetts recently evaluated 14 blood antibody tests now on the market and found significant variation in their performance.
The tests were generally effective at detecting antibodies three weeks after an infection but much less so for more recent cases, said Patrick Hsu, an assistant professor of bioengineering at the University of California, Berkeley, who was involved in the research.
Congressman Raja Krishnamoorthi of Illinois, whose House Subcommittee on Economic and Consumer Policy is investigating the regulation of antibody testing, sent letters this week to the FDA and four of the companies cited in the study. He expressed concern about lax regulation of the testing and has called for the FDA to remove tests that don’t meet the agency’s usual standards from the market.
Antibody tests are easy to administer, sometimes requiring only a finger prick to derive a blood sample. Some samples are analyzed in laboratories; other test results are readable on a device, like a pregnancy test, within minutes.
But “if you want good quality, (the tests) are not easy to make,” said Alberto Gutierrez, who led the FDA’s office overseeing diagnostic testing from 2009 to 2017. “They do require a fair amount of expertise.”
Some companies that have notified the FDA of their intent to sell kits without securing approval have separately applied for “emergency use authorization (EUA),” a temporary stamp of approval that requires some review but far less than is typical for a medical device.
Nine tests had been approved for emergency use as of Thursday, including those made by Ortho Clinical Diagnostics, an established testing company owned by private-equity firm Carlyle Group (NASDAQ:CG) Inc.
The company said it made every effort, as did the FDA, to ensure the tests were reliable and accurate.
Chockalingam “Palani” Palaniappan, Ortho’s chief innovation officer, said the EUA approval process took about a week, but nonetheless was based on a substantial amount of data, including validation of about 400 test samples.
MONEY UP FRONT
Without a rigorous FDA approval process or enough trusted suppliers, hospitals and others in need of antibody tests say they are left to weed out the good products from the bad.
“All they want to talk about is price and quantity,” Wyatt of Premier said of testing companies whose claims strike her as dubious. Those pitches lack the usual scientific documentation and generally are not from established distributors, she added. The offers often are full of misspellings or appeals to emotion such as, “In order to help America,” she said.
“It’s just been extremely distracting for our member health systems,” she said. “They’re under such pressure to maximize testing capacity.”
Reuters found a number of aspiring antibody test distributors that have made questionable or false claims.
In one case, a distributor called BodySphere claimed in a Business Wire release that it had access to a test that had already been approved for emergency use as a “two-minute” coronavirus “diagnostic” test. BodySphere told Reuters its supplier was Safecare Biotech Co Ltd, based in Hangzhou, China.
Safecare – a client of the Maryland consultant, Shia – told Reuters it had no distribution deal with Bodysphere and that its test takes 10 to 15 minutes, not two, to deliver results. Moreover, Safecare has not received an EUA for its antibody test. And contrary to BodySphere’s release, the Safecare test is not diagnostic.
After being contacted by Reuters, BodySphere retracted its claim of receiving an EUA from U.S. health regulators. The company said it mistakenly had believed that the product was authorized.
Another vendor, David Melman, of Tel Aviv, recently sent Reuters an email and press release promoting an “accurate, fast, affordable, easy-to-use” antibody test “designed for everyone at home, providing results within a few minutes.”
Melman, who identifies himself on LinkedIn (NYSE:LNKD) as a sales representative for an electronics firm, has taken on a new title: chief executive of a company called COVI-Labs. He claimed in his pitch that his company’s test had received “pre-EUA approval” for the home test – impossible because the FDA does not allow this type of test.
In response to questions from Reuters, Melman said he intends to perform “research and evaluation” on the kit before distributing it and that he would sell the kit for home use in the United States only if it received an EUA from the FDA.
TWO MEN AND A TEST
A fight between two would-be distributors – both of whom had previous run-ins with the law – illustrates the race to cash in on the new testing marketplace.
Edward Joseph Eyring, a 52-year-old former colorectal surgeon in Utah, set up a company and a website in March offering antibody test kits under the name CoronaCide. He notified the FDA of his intent to sell and began talking with potential partners. These included businessman George Todt, who was working as a consultant for a California startup called Wellness Matrix, a publicly traded company.
Todt proceeded to market CoronaCide kits on his own: “Home test kits now! Approved by FDA,” he tweeted on March 19. After National Public Radio reported the claim, the U.S. Securities and Exchange Commission (SEC) suspended trading in Wellness’ stock.
On April 8, Eyring filed a federal lawsuit alleging that Todt and Wellness pitched CoronaCide kits without his permission and knowing they weren’t approved for home use. The trademark suit says those actions damaged CoronaCide – a company that Eyring’s lawyer, Anton Hopen, told Reuters was intended to help customers “better cope with the COVID-19 pandemic.”
Todt could not be reached for comment. A lawyer for Wellness, William Dailey, said in a statement to Reuters that the company did nothing wrong and wasn’t involved in Todt’s actions.
Eyring and Todt each have separate histories of defrauding investors.
Todt was sued by the SEC in 2005 for two stock manipulation schemes. In a judgment, he was fined $130,000 and ordered to pay $1.2 million in restitution.
Eyring allowed his medical license to lapse after he stipulated to making clinical errors and violating accepted professional and ethical standards in 2010 and did not complete the terms of his settlement, Utah state records show.
In 2017, he pleaded guilty to “a pattern of unlawful activity” to resolve charges in Utah that he lured investors into a fraudulent African gold trading venture. In a plea agreement, he said he would pay $473,039 in restitution. He was placed on probation, which ended last month – two weeks before he formed CoronaCide.
He will “take advantage of anybody and everybody he can,” said Carolann Fredericks, a nurse in Poughkeepsie, New York, now helping to care for critically ill coronavirus patients. A former friend of Eyring, Fredericks gave Eyring $200,000 for the gold deal, according to an affidavit in the case.
In written responses to Reuters, attorney Hopen said Eyring regrets that he and his investors lost money and has done his best to repay his debts.
WAITING ON CHINA
Though virtually unrestricted by the FDA, many antibody test distributors in the United States have run into obstacles posed by China’s export policy.
After European countries criticized the quality of China’s coronavirus tests, China adopted a new policy on April 1 that holds up exports of tests until the products have a certificate from the country’s regulator, the National Medical Products Administration.
Thus far, China has only certified about a dozen of the 90 China-made antibody tests on the FDA list of prospective sellers, leaving many U.S. distributors without kits to sell.
This past weekend, however, China’s commerce ministry said it would loosen those restrictions. It would allow domestic manufacturers to export test kits, provided an authorized trade association verifies that the tests are approved for use in the importing countries.
It was not immediately clear how the move would affect exports to the United States, since FDA approval is not required for antibody tests.
Some medical experts and policy makers say that as the market expands and the stakes grow higher for the tests, the U.S. regulator needs to take on a more assertive role.
Historically, “the FDA has been there as a bulwark for accuracy and reliability,” said William Schaffner, an infectious disease professor at the Vanderbilt University School of Medicine. “If they give up that role, that opens the door to all kinds of mishaps.”
(Caroline Humer reported from New York, Joseph Tanfani from New Jersey and Roxanne Liu from Beijing. Carl O’Donnell contributed from New York and Chad Terhune from Los Angeles; Editing by Michele Gershberg and Julie Marquis)