Public Health

Consumers accuse small retailers of price gouging in tests

When Ja’Kiem Crayon tells customers the price of a single at-home Covid-19 test at the Manhattan pharmacy where he works, he often gets into a fight.

“They come in and say, OK, give me five,” said Crayon, who works at the Tisane Pharmacy and Cafe on Manhattan’s Upper East Side. “And I think, well, they’re $25 a piece. And then your eyes pop out of your head.”

Crayon said customers often point to examples of lower prices at major drugstore chains, where a single test could sell for less than $10 — if they’re in stock. It’s a claim made by pharmacy workers across the country as attorneys general warn of price-gouging during a crisis compounded by restricted testing. But Crayon and others say the supply/demand mismatch has pushed up wholesale prices, which they then have to pass on to consumers.

“The vendors who sell to us have raised their prices tremendously,” Crayon said, adding that customers “forget that we’re a mom and pop shop.”

Until recently, the pharmacy could get individual swab test kits for $11 each, Crayon said earlier this month, but their vendor is now selling them for $18. That raised customer prices from $16 to $25 “just to get some kind of profit back,” he said.

Jimmy Azhari, manager of Connecticut’s Milford Pharmacy, has also raised customer complaints about high test prices, but he attributes the cost to what it takes to get them on the shelves in the first place. Some customers ask why he would sell the On/Go Rapid Test for $35 when they could buy it on Amazon for $25. Azhari said it would take Amazon at least two weeks to ship the tests.

“I mean, that pays off, you’re paying for the convenience of having it now instead of 15 days where you can easily spread it out in those 15 days without knowing if you have it or not,” he said .

Azhari said he has to pay extra for expedited shipping on top of the higher prices he’s seen from vendors, adding to the final cost to the customer. He said expedited shipping alone could cost at least $600 for an order of 200 double-swab test kits.

Attorneys general across the country have warned retailers against price markdowns for at-home testing amid the shortage. But retailers say they’re not to blame.

That’s why Connecticut Attorney General William Tong, for example, has backed legislation that would allow his office to prosecute suppliers for excessively rising prices. The AG’s office said in May that many government investigations into alleged price gouging eventually concluded that wholesalers were the ones who initially raised prices, forcing retailers to raise prices as well.

In New York, AG’s bureau told CNBC that retailers accused of price gouging have an opportunity to present evidence their own prices have risen.

Price gouging can also sometimes be defined ambiguously, which California Gov. Gavin Newsom recently attempted to remedy with an emergency executive order. Under the order, retailers cannot sell home test kits for more than 10% charged on Dec. 1, and sellers who have not yet sold the products cannot sell them for more than 50% of the purchase price. But the order provides an exception for those who had to pay more for tests they plan to resell.

Paul Shah, who owns Manhattan-based East Village Farm and Grocery, said earlier this month that his wholesaler was selling individual tests for $7 to $9, which would raise the store by about a dollar. But recently, the wholesaler offered to sell individual tests in-store for about $14. Shah said he refused the order and complained, but his supplier showed him an invoice showing his cost of each test had increased to $13.50.

Shah has moved to selling packages of Sick Day essentials and combining at-home Covid testing with goods like a thermometer, tissues, masks, hand sanitizer and Gatorade in grocery delivery apps. The packs sell for $59.99 up to $124.99 depending on what combination of treats shoppers choose, and they include two tests per piece. Shah said he came up with the idea of ​​packaging the tests with other merchandise to offer customers value while offsetting the 20% fee he allegedly pays to platforms like Grubhub-owned Seamless.

While large pharmacy retailers can sell tests for less because they can buy in bulk, they often run out much quicker, Shah said, noting that his store always had at least some tests in stock at all times.

“I think most of the time when all these bigger places had the product, it was selling cheaper than us. But 95% of the time, they didn’t have the product,” Shah said.

Jordan Berkowitz, president of testing and personal protective equipment retailer Sunline Supply, said while he understands why consumers think the price will be reduced, that doesn’t explain the massive demand and risk the seller faces.

Berkowitz said he lost nearly $5 million in deposits due to more than 10 different test deliveries he gave up last year that never showed up. And while its testing business remains profitable even with these losses, it takes a lot of verification to find reliable sources for testing. And even then, it’s still possible to get scammed.

“If you ask me if I think it’s price gouging, I lose millions of dollars taking risks on inventory that I never get,” said Berkowitz, who said last week he has a $10 loan Million dollars raising interest rates while waiting for pending test kit orders. It puts him between “a rock and a hard place”.

“Either I don’t pay the money, I don’t get the product and they’re upset because I don’t have it. Or I’ll pay more for it and I’ll say you have to pay me more for it and they’re upset because they have to pay more,” he said. “So in that way it’s kind of lose-lose for us.”

Berkowitz said the increase in demand has meant that “there are about 10 different places where our costs go up, our risk goes up, our overheads go up.” These include costs for customer service representatives, financing charges for credit for orders not yet received, and dealing with riskier or lesser-known suppliers to source products.

Berkowitz said Sunline sells tests on its website for about $15, though some cost even less. But he remembers listing them for about $7 or $8 a piece a few weeks ago. And he expects prices to keep rising until supply catches up with demand, which could be complicated by an expected downsizing in China, where some materials are manufactured during the Lunar New Year.

“We’re anticipating that there’s going to be some sort of supply bloodbath for probably another two months, I think,” Berkowitz said. “Honestly, on the price side things are getting worse. For us and for everyone else.”

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