Last month, Susan Houghtelling, a hospital supply-chain manager in upstate New York, was facing a shortfall of medical supplies when her inbox suddenly flooded with offers.
There were advertisements for gallons of hand sanitizer, crates of isolation gowns and, most crucially, pallets of N95 masks — perhaps the most sought-after product on the planet. All were for prices that were multiples higher than what she normally paid.
“All of these people are coming out of the woodwork, and all of them mysteriously now have access to an abundant supply,” said Ms. Houghtelling, who works for three hospitals owned by Arnot Health, based in Elmira. She forwarded dozens of messages to The New York Times from brand-new vendors. One offered her boxes of 50 surgical masks for $70 each; she used to pay $2.28.
One solicitor in particular caught her attention: Blank Industries, a company that offered N95 masks for nearly $5 each — and only if Ms. Houghtelling ordered a million. She figured it was a scam.
Blank Industries is a real company, but it’s an ice-melt manufacturer in Hudson, Mass. In an interview, Andrew Blank, the founder, said he had upended his business to sell masks after hearing from a former Chinese supplier he had once hired to make a new kind of toothbrush. (Mr. Blank had invented it.) After the coronavirus hit, the supplier turned his dental-products plant into a mask factory. Mr. Blank told his 12 employees to stop selling rock salt and start selling masks.
Why was he charging $4.92 for each N95? “To be honest, I don’t even know what an N95 normally sells for,” he said.
I told him. “50 cents?” he repeated. His supplier was charging him $4.75.
The eruption in demand for dwindling amounts of masks has resulted in a kind of global supply-chain bedlam. In the United States, the federal government has decided against commandeering American factories to create a new stream of masks. Instead, federal officials are competing against states, hospitals and medical suppliers for the same pool of masks, which come mostly from China.
Yet states and hospitals, whose typical suppliers are overwhelmed and overextended, have little experience negotiating directly with the Chinese supply chain. Thousands of middlemen — entrepreneurs, do-gooders and profiteers — have rushed to fill the void.
That frenzy has created a mess of confusion, according to interviews with hospitals, factories and mask buyers. Production of masks is soaring, but so are scams, logistical hurdles and, of course, prices.
After the coronavirus outbreak began, China imported two billion masks. France ordered a billion and vowed to become self-sufficient by year-end. The U. S. government has done comparatively little to coordinate purchasing and ensure that American governments and hospitals aren’t competing.
Last month, federal officials agreed to buy roughly 600 million N95 masks over the next 18 months. But many states and hospitals are desperate for supplies right now, and the government has already nearly exhausted the supply of protective gear in the national stockpile. On Thursday, the White House said it had invoked the Defense Production Act, a 1950s law, to ensure the manufacturing giant 3M sends a certain share of its masks to the United States.
Some of the entrepreneurs stepping up in the government’s stead have succeeded. Operation Masks, a two-week-old nonprofit run by tech executives, said it had just closed deals for one million N95s for New York State and 200,000 for Hawaii, charging just over $3 for each mask, not including shipping and other costs. On Thursday, Massachusetts received 1.2 million N95 masks via the New England Patriots team plane.
Still, several hospital executives said that while they appreciated the surge of well-intentioned people, they were overwhelmed with new names in their inboxes, all offering products they need for prices far higher than what they typically pay.
“We’re getting bombarded,” said Ed Bonetti, head of supply chain for the UMass Memorial hospital network in Worcester, Mass.
The hospital is prepared to pay more for masks, but it does not want to buy counterfeit gear. “You’re in this uncharted territory where you’re struggling to just at least validate,” Mr. Bonetti said. “The last thing we want to do is put product on a clinician that is not going to protect them.”
Not every new entrant to the market is a good Samaritan. Groups on Facebook, WhatsApp and Telegram are teeming with posts hawking thousands of masks at inflated prices.
Some are wholesalers who bought pallets of masks from China or in liquidation sales and then marked them up. Many more are simply middlemen who call themselves brokers. They scour the groups for masks advertised for a relatively low price, and then repost the offer for a few thousand dollars more. They don’t handle the masks or put up their own money.
Yaear Weintroub is one of those brokers. A 22-year-old community college student from Brooklyn, he typically sells wholesale electronics to Amazon sellers. But the online forums he searches for deals became flooded with listings for masks last month, so he now spends his days trying to connect buyers and sellers for a bit of medical-supply arbitrage.
In a recent interview, he said he was working with a partner to close a deal for 280,000 surgical masks that would increase their price 20 percent and net the pair a roughly $40,000 profit. He said many of the brokers sold to other br... (Read more)
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