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Corrupted: How Cronyism and Ineptitude Tainted Medical Supply Procurement

Before we get a viable COVID-19 vaccine, the most powerful weapons we have to fight the coronavirus are commonsense hygiene practices, personal protective equipment, and medical supplies like ventilators. Yet the federal government’s efforts to secure these crucial supplies have been hampered by waste, politics, and cronyism.

Most recently, attention has focused on White House trade adviser Peter Navarro, who negotiated a $646.7 million contract for ventilators that’s now under investigation by both Congress and the Department of Health and Human Services.

But the corruption extends beyond that one deal. Many of the administration’s early efforts to secure life-saving supplies were marred by ineptitude and favoritism, which has left those without money, access, and influence struggling to get what they need to keep the virus at bay and treat the ill.

One-Man Ventilator Negotiation

Several years ago, the government contracted with Philips Respironics to make low-cost ventilators for the national stockpile. But the company has yet to fulfill that contract. The Trump administration gave Philips three extensions, pushing back the ventilator delivery from the already-extended deadline of November 2019, to June 2021. Meanwhile, last year the company started selling versions of the ventilator to other customers around the world.

Fast-forward to March 2020. As the pandemic reached the U.S., President Donald Trump put Navarro—an economist and academic with no experience managing logistics in a national health emergency—in charge of procuring supplies under the Defense Production Act. Though the administration had apparently received an offer from Philips in January to expedite ventilator delivery under the existing contract, the offer sat untouched until March, a congressional investigation would later find.

Now at the helm, Navarro finalized a new deal with Philips in April to purchase ventilators, at almost five times the previous price.

The ventilators the government had previously agreed to buy would have cost $3,280 each, but the new contract had us shelling out $15,000 per ventilator. The House Committee on Oversight and Reform’s Subcommittee on Economic and Consumer Policy found that the two models were “functionally identical,” and that the government had overpaid by as much as $500 million total.

Late last month, the government cancelled the contract, with Philips delivering just 12,300 of the 42,900 ventilators initially ordered.

Navarro negotiated the contract virtually on his own, excluding career contracting officials at the Department of Health and Human Services until the terms of the contract had already been agreed on.

The House report bluntly concluded that Navarro and his team “appeared gullible and conceded to Philips on all significant matters, including price.”

This is the kind of fiasco that can happen when the president puts inexperienced loyalists in charge of responding to a national crisis, rather than relying on career civil servants who have years of experience in contracting and disaster preparedness.

And now, the White House has refused to make Navarro available to testify in the House, preventing further transparency into the deal.

All in the Family: Favoritism and Ineptitude at the Start

Navarro isn’t the only White House official who bungled the logistics effort.

Early in the pandemic, Trump put his son-in-law and senior adviser Jared Kushner in charge of a task force with a broad mandate to help distribute supplies and equipment, among other responsibilities. The task force would essentially research ways to obtain and distribute personal protective equipment and other critical materials and send leads to the Federal Emergency Management Agency (FEMA).

Kushner proceeded to put together a team of advisers, many of whom had extensive conflicts of interest but limited experience in pandemic response strategy and planning.

Sure enough, Kushner’s task force—operating independently from another White House coronavirus task force led by Vice President Mike Pence—quickly devolved into a racket that put the needs of the administration’s allies ahead of the country’s needs.

Team Kushner fielded protective equipment requests from a Fox News personality and was told to prioritize leads from “VIPs,” including Republican members of Congress and a former “Apprentice” contestant.

There’s no way to measure the task force’s effectiveness because it basically operated off the books. The young business buddies and dealmakers Kushner enlisted were volunteers, so they were exempt from ethics and transparency rules that would normally require disclosure of conflicts of interest, and they did their work for the federal government using personal email accounts.

Those personal email addresses posed problems for the group’s efforts: According to a complaint from a former task force member, filed with the House Oversight Committee and also obtained by the Washington Post, the task force had trouble establishing relationships with companies that could manufacture and transport supplies, in part because the companies balked at requests made through non-government email addresses. Government officials were also confused by communications they received from task force members.

Money for Hospitals Tied up with Strings

Meanwhile, hospitals were struggling to get key supplies and keep up with the onslaught of infections. In April, the Trump administration likely made the situation more challenging by making emergency funding for hospitals in coronavirus hotspots contingent on their cooperation with a private contractor collecting data on COVID-19 admissions and hospitals’ intensive care capacity, according to an email obtained by the New York Times.

The arrangement with that vendor, TeleTracking Technologies, came under scrutiny in July, when Health and Human Services Secretary Alex Azar ordered hospitals to stop reporting all COVID-19 patient data to the Centers for Disease Control and Prevention—never mind that collecting such data is among the agency’s primary missions—and instead report it directly to the private company.

The Impact

Unsurprisingly, the corruption has had ripple effects. While Navarro and the Kushner task force were fumbling to obtain equipment and supplies, the administration mostly left the states to fend for themselves.

Corruption was pretty much inevitable as hospitals scrambled to stock up. State officials and hospitals with connections in Washington or large financial reserves could get what they needed, leaving everyone else out of luck.

Some suppliers played states off each other, driving up prices, according to the Wall Street Journal. Some states could call in favors. Florida Governor Ron DeSantis, a close political ally of Trump, called the president after his state’s emergency management team was unable to get supplies. Florida got all the supplies it requested in March and April. A state official told the Journal that DeSantis’s intervention was crucial.

A survey Politico conducted in August found that smaller and poorer medical facilities across the country were still struggling to obtain the supplies and resources they needed. Bigger and wealthier hospitals, the survey found, were outbidding them for protective supplies and health care workers.

So, as the federal government stands on the sidelines, the well-resourced and well-connected throughout the country are managing, while everyone else is being stretched to the breaking point.

Looking Ahead

It may be too late for the COVID-19 crisis, but there are steps the government should take to prepare for future pandemics. The first is to make sure the national stockpile of medical supplies is regularly updated, with the government paying fair and reasonable prices. The second step is to have in place a well-defined and adequately resourced pandemic response process at the Department of Health and Human Services. The federal government must take the lead on all aspects of the response: from tracking and controlling the spread of the disease to obtaining and distributing personal protective equipment and medical supplies.

Above all, politics and cronyism should not be allowed to undermine that process. We can’t have a crisis response that’s conducted behind closed doors and that results in wasteful spending instead of solutions—lives are on the line.