Consumers accuse small retailers of price gouging on Covid tests

When Ja’Kiem Crayon tells customers the price for a single Covid-19 at-home test at the Manhattan-based pharmacy where he works, he’s often in for an argument.

“They come in, they’re like, 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 apiece. And then the eyes pop out of the head.”

Crayon said customers often point to examples of lower prices at large chain drug stores, where a single test might sell for under $10 — if they’re in stock. It’s an assertion pharmacy workers across the country have been fielding as state attorneys general warn against price gouging during a crisis amplified by a constrained supply of tests. But Crayon and others say the mismatched supply and demand has forced wholesale prices up that they then have to pass down to consumers.

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

Until recently, the pharmacy was able to get single swab test kits for $11 each, Crayon said earlier this month, but its vendor is now selling them for $18. That’s raised customer prices from $16 to $25, “just to see kind of a profit back,” he said.

Jimmy Azhari, manager of Milford Pharmacy in Connecticut, has also fielded customer complaints over high test prices, but he chalks up the cost to what it takes to even have them on the shelves. 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 Amazon takes at least two weeks to ship the tests.

“I mean, this is paying for, you’re paying for the convenience to have it now, instead of 15 days from now, where you can easily spread it in these 15 days not knowing if you have it or not,” he said.

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

State attorneys general across the country have warned retailers against price gouging for at-home tests amid the shortage. But retailers say they aren’t the ones to blame.

That’s why Connecticut’s attorney general, William Tong, for example, has supported legislation that would allow his office to go after suppliers for excessively increasing prices. The AG’s office said in May that many state investigations of alleged price gouging ultimately found wholesalers were the ones who initially raised prices, forcing retailers to up their 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 ambiguously defined, which California Gov. Gavin Newsom recently attempted to address through an emergency order. Under the order, retailers may not sell at-home test kits for more than 10% charged on Dec. 1 and sellers who haven’t previously sold the products can’t sell them for more than 50% of 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, who owns Manhattan-based East Village Farm and Grocery, said earlier this month that his wholesaler used to sell single tests for $7 to $9, which the store would mark up by about a dollar. But recently the wholesaler offered to sell the store single tests for about $14. Shah said he declined the order and complained, but his supplier showed him an invoice showing his costs rose to $13.50 for each test.

Shah’s taken to selling packages of sick day essentials, combining Covid at-home tests with goods like a thermometer, tissues, masks, hand sanitizer and Gatorade on food delivery apps. The packages sell for $59.99 to as much as $124.99 depending on what combination of goodies buyers select, and they include two tests a piece. Shah said he got the idea to package the tests with other goods to provide more value to customers while offsetting the 20% fee he says he pays to platforms like Grubhub-owned Seamless.

While large pharmacy retailers can sell tests for less because they’re able to buy in bulk, they often run out much more quickly, Shah said, noting that his store has always maintained at least some tests in stock at any given time.

“I think the majority of the time, all these larger places, whenever they had the product, it was sold cheaper than us. But 95% of the time, they did not have the product,” Shah said.

Jordan Berkowitz, president of test and personal protective equipment distributor Sunline Supply, said while he understands why consumers believe they are being price gouged, that doesn’t account for the massive demand and risk sellers are experiencing.

Berkowitz said he’s lost nearly $5 million in deposits from more than 10 different test shipments he placed 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 tests. And even then it’s still possible to get scammed.

“When you ask me if I think it’s price gouging, I lose millions of dollars taking chances on inventory that I never get,” said Berkowitz, who said last week he had a $10 million loan racking up interest as he waited to receive 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 pay more for it and I say I need you to pay me more for it, and they are 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 surge in demand has meant “there’s like 10 different places where our costs go up, our risk goes up, our overhead is up.” Those include costs for customer service representatives, financing fees on loans to purchase orders that have not yet come through, and dealing with riskier or less known suppliers to source product.

Berkowitz said Sunline sells tests on its site for about $15, though some go for even less. But he remembers just a few weeks ago listing them for about $7 or $8 apiece. And he foresees prices continuing to climb until supply can catch up to demand, something that could be complicated by an anticipated reduced workforce in China where some materials are manufactured during Lunar New Year.

“We’re expecting it to be like kind of a bloodbath of supply for another two months probably, is my guess,” said Berkowitz. “It’s all going to get worse, honestly, on the price side. For us and for everybody else.”

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