The Perfect Enemy | US Covid test makers consider layoffs as government shifts funds
July 5, 2022
Read Time:4 Minute

Domestic Covid test manufacturers are wrestling with the federal government’s decision to shuttle an already dwindling amount of Covid-19 funding to vaccines and treatment and away from testing.

“Testing manufacturing capacity is already heading to 65% of pre-peak production, and we estimate that we could lose thousands of additional American jobs in the coming weeks,” an HHS spokesperson said in an email to STAT.

Declining demand for tests had already caused some companies to scale back production, and some said further cuts, as well as layoffs, were probable after White House officials said last week that funding earmarked for testing and personal protective equipment would instead go to buy vaccines and Paxlovid oral antiviral treatment.

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And it doesn’t look like the White House will be getting more funding to replenish their Covid-19 response accounts from Congress anytime soon. The most obvious compromise proposal has fallen apart, and the top Senate Republican negotiator, Sen. Mitt Romney (R-Utah), blasted the Biden administration as giving him “patently false” information about the urgency the situation.

Labcorp, one of the biggest U.S. test makers, said government support was crucial for the company to maintain its capacity to address demand for PCR tests.

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“In response to decreasing demand for COVID-19 PCR testing due, in part, to the availability of vaccines, boosters and other testing options and the loss of government funding, Labcorp reduced its staffing levels, primarily contingent and temporary workers, dedicated to daily COVID-19 PCR testing,” Christopher Allman-Bradshaw, a Labcorp spokesman, said in an email to STAT.

Tom Inglesby, director of the Johns Hopkins Center for Health Security at the Bloomberg School of Public Health, emphasized the need to be prepared with stable testing capacity that won’t need to be rebuilt if we have another surge of cases this fall.

“We also need to develop additional tools like new vaccines that can handle the variants that have emerged and will emerge, and a testing infrastructure that doesn’t go up and down, and have to get dismantled and rebuilt when we have peaks and troughs, should we have them in the future,” Inglesby said. He previously served as the Biden administration’s Covid-19 testing coordinator.

A health care consultant who requested anonymity given that discussions on this topic are still ongoing said layoffs were likely without funding.

“Everybody is wrestling right now with what to do with no federal money, which has supported most of the tests,” the consultant said. Anticipating another surge in Covid cases, the person said that if “it becomes a more virulent and aggressive variant, we are in deep trouble.”

These events carry a sense of déjà vu. In the spring of 2021, virus cases in the U.S. plummeted, leading to fewer Covid-testing sales. Abbott Laboratories canceled contracts with suppliers, stopped production at its plants, and dismissed 2,000 employees only to hire hundreds back when there was a surge of cases with the Delta variant that fall and winter.

At the moment, funding cuts have not affected Abbott’s ability to provide testing, according to John Koval, a spokesman. But having a reliable supply of tests will depend on consistency of orders and manufacturing when case counts are still low seasonally, he said in an email statement to STAT.

“We self-invested to build our new facilities at the beginning of the pandemic in the U.S. and source nearly all of our BinaxNOW test components from diversified domestic suppliers, which protects against overseas supply chain disruptions and supports 200,000-300,000 indirect American jobs,” he said.

The companies and health officials alike said that trading off between testing and vaccines was dangerous, especially for a virus that is contagious even before or without symptoms. Investing in testing is beneficial from a monetary standpoint, too, the consultant argued. After all, an average hospitalization from Covid costs $20,000 — the cost of approximately 2,000 Covid tests, which can deter the spread of the virus.

The consultant explained that after a manufacturing line is shut down, not only is the process of rehiring tedious logistically, but also complicated by the need to find employees with very specific skills. Companies also undergo the laborious process of ensuring quality control for their manufacturing sites as per the Food and Drug Administration’s policies.

The HHS spokesperson said that at the start of the pandemic, the United States  had very little domestic manufacturing of tests. Once that increased production winds down, “it takes months to ramp up, which is too slow for fast-moving and evolving variants.”

The loss of domestic Covid-19 testing production means that the U.S. is likely to be dependent on foreign nations, like China, during future Covid surges. The current leading Covid test manufacturer, iHealth, is an example of an Asian manufacturer ramping up testing capacity as U.S. companies scale down.

At a briefing last week, the White House coronavirus coordinator, Ashish Jha, acknowledged the impasse and said there would be consequences.

“The domestic manufacturing of testing issue is really unfortunate because the U.S. government put a lot of resources and effort into building up that domestic manufacturing and what we are seeing is that day-by-day and week-by-week that is beginning to go away,” Jha said. “Companies, because the demand has fallen for these tests, are laying off workers and shutting down production lines.”

And, he warned, rebuilding production after scaling down would be more expensive and difficult.

“If we are not able to reverse it and we find ourselves in another surge without tests, we will largely rely on foreign manufacturers mostly from China to provide the tests that Americans need,” Jha said. “That is not the situation we need to be in.”

Rachel Cohrs and Lev Facher contributed reporting.