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Consumers accuse small retailers of price gouging on Covid tests

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Consumers accuse small retailers of price gouging on Covid tests

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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 argues.

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

Crayon said customers often cite examples of lower prices at large drugstore chains, where a single test can sell for less than $10 — if they’re in stock. It’s a claim that pharmacists across the country have defended as state attorneys general warn of price hikes during a crisis amplified by a limited supply of tests. But Crayon and others say the mismatch of supply and demand has driven up wholesale prices which they then have to pass on to consumers.

“Vendors who sell to us have dramatically increased their prices,” Crayon said, adding that customers “forget we’re a family shop.”

Until recently, the pharmacy could get single swab test kits for $11 each, Crayon said earlier this month, but its supplier is now selling them for $18. It took customers’ prices from $16 to $25, “just to see some kind of profit in return,” he said.

Jimmy Azhari, director of Milford Pharmacy in Connecticut, has also responded to customer complaints about high prices for the tests, but he attributes the cost to what it takes to even have them on the shelves. Some customers ask why he would sell the On/Go Quick Test for $35 when they could buy it on Amazon for $25. Azhari said Amazon takes at least two weeks to ship the tests.

“I mean it’s paid, you’re paying for the convenience of having it now, instead of 15 days from now where you can easily stream it in those 15 days not knowing if you have it or not “, did he declare. .

Azhari said that in addition to the higher prices he’s seen from suppliers, he has to pay extra for expedited shipping, which increases the end cost to the customer. He said express shipping alone for an order of 200 dual-swab test kits could cost at least $600.

State attorneys general across the country have warned retailers of price hikes for home testing amid the shortage. But retailers say they aren’t the only ones to blame.

That’s why Connecticut Attorney General William Tong, for example, backed legislation that would allow his office to sue suppliers for excessively high prices. The AG’s office said in May that numerous state investigations into allegations of price gouging eventually found wholesalers were the ones who raised prices initially, forcing retailers to raise prices as well.

In New York, the AG’s office told CNBC that retailers accused of price gouging have the opportunity to provide evidence that their own prices have increased.

Price gouging can also sometimes be defined in ambiguous ways, which California Governor Gavin Newsom recently tried to resolve with an emergency order. Under the order, retailers cannot sell home testing kits for more than 10% charged on December 1 and sellers who have not yet sold the products cannot sell them for more than 50% what they bought them for. But, the order provides an exception for those who had to pay more for tests they plan to resell.

Paul Shah, owner of Manhattan-based East Village Farm and Grocery, said earlier this month that his wholesaler was selling single tests for $7 to $9, which the store would mark up about a dollar. But recently, the wholesaler offered to sell the store’s single tests for around $14. Shah said he refused the order and complained, but his supplier showed him an invoice that said his costs were $13.50 for each test.

Shah has taken to selling packages of sick-day essentials, combining at-home Covid testing with products like a thermometer, tissues, masks, hand sanitizer and Gatorade on delivery apps. food. The packages sell for $59.99 to $124.99 depending on the combination of goodies shoppers choose, and they include two tests per piece. Shah said he came up with the idea of ​​bundling testing with other products to provide more value to customers while offsetting the 20% fee he says he pays platforms such as Seamless, owned by Grubhub.

While large pharmacy retailers may sell tests for less because they can buy in bulk, they often sell out much faster, Shah said, noting that his store has always kept at least a few tests in stock at a given time.

“I think most of the time in all these big stores, whenever they had the product, it was undercutting us. But 95% of the time they didn’t have the product,” Shah said. .

Jordan Berkowitz, president of testing and personal protective equipment distributor Sunline Supply, said while he understood why consumers thought they were being ripped off prices, it did not take into account the massive demand and the risks. that sellers face.

Berkowitz said he lost nearly $5 million in deposits from more than 10 different test expeditions he made last year that never showed up. And while his testing business remains profitable even with those losses, he said it takes a lot of vetting to find reliable sources for testing. And even then, it is still possible to get scammed.

“When you ask me if I think it’s a price hike, I’m losing millions of dollars taking risks on stocks I never get,” said Berkowitz, who said last week that he had a $10 million loan accruing interest while waiting to receive a pending test. kit orders. This puts him between “the hammer and the anvil”.

“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 pay more for it and say I need you to pay me more for it. that, and they’re upset because they have to pay more,” he said. “So it’s kind of a lose-lose for us in that regard.”

Berkowitz said the increase in demand means “there are about 10 different places where our costs are going up, our risk is going up, our overhead is going up.” These include the costs of customer service representatives, finance charges on loans for purchase orders that have not yet closed, and dealing with riskier or lesser-known vendors to source product.

Berkowitz said Sunline sells tests on its site for around $15, though some cost even less. But he recalls that just a few weeks ago he listed them for around $7 or $8 each. And it predicts prices will continue to rise until supply can catch up with demand, which could be complicated by an anticipated reduction in labor in China where some materials are made during the Lunar New Year. .

“We expect it to be like a sort of supply bloodbath for another couple of months, I guess,” Berkowitz said. “Honestly, everything is going to get worse on the price side. For us and for everyone else.”

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Consumers accuse small retailers of price gouging on Covid tests

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