China disease center’s backdoor deal with testing firms fueled pandemic’s spread
Beijing only approved tests made by 3 companies that officials had personal ties with; early kits were faulty and scarce, causing backlog and aiding virus to circulate unchecked
WUHAN, China (AP) — In the early days in Wuhan, the first city first struck by the virus, getting a COVID test was so difficult that residents compared it to winning the lottery.
Throughout the Chinese city in January, thousands of people waited in hours-long lines for hospitals, sometimes next to corpses lying in hallways. But most couldn’t get the test they needed to be admitted as patients. And for the few who did, the tests were often faulty, resulting in false negatives.
The widespread test shortages and problems at a time when the virus could have been slowed were caused largely by secrecy and cronyism at China’s top disease control agency, an Associated Press investigation has found.
The flawed testing system prevented scientists and officials from seeing how fast the virus was spreading — another way China fumbled its early response to the virus. Earlier AP reporting showed how top Chinese leaders delayed warning the public and withheld information from the World Health Organization, supplying the most comprehensive picture yet of China’s initial missteps. Taken together, these mistakes in January facilitated the virus’ spread through Wuhan and across the world undetected, in a pandemic that has now sickened more than 64 million people and killed almost 1.5 million.
China’s Center for Disease Control and Prevention gave test kit designs and distribution rights exclusively to three then-obscure Shanghai companies with which officials had personal ties, the reporting found. The deals took place within a culture of backdoor connections that quietly flourished in an underfunded public health system, according to the investigation, which was based on interviews with more than 40 doctors, CDC employees, health experts, and industry insiders, as well as hundreds of internal documents, contracts, messages and emails obtained by the AP.
The Shanghai companies — GeneoDx Biotech, Huirui Biotechnology, and BioGerm Medical Technology — paid the China CDC for the information and the distribution rights, according to two sources with knowledge of the transaction who asked to remain anonymous to avoid retribution. The price: One million RMB ($146,600) each, the sources said. It’s unclear whether the money went to specific individuals.
In the meantime, the CDC and its parent agency, the National Health Commission, tried to prevent other scientists and organizations from testing for the virus with their own homemade kits. In a departure from past practice for at least two epidemics, the NHC told Wuhan hospitals to send virus samples — from which tests can be developed — only to labs under its authority. It also made testing requirements to confirm coronavirus cases much more complicated, and endorsed only test kits made by the Shanghai companies.
These measures contributed to not a single new case being reported by Chinese authorities between Jan. 5 and 17, even though retrospective infection data shows that hundreds were infected. The apparent lull in cases meant officials were slow to take early actions such as warning the public, barring large gatherings and curbing travel. One study estimates that intervention two weeks earlier could have reduced the number of cases by 86 percent, although it’s uncertain whether earlier action could have halted the spread of the virus worldwide.
When tests from the three companies arrived, many didn’t work properly, turning out inconclusive results or false negatives. And technicians were hesitant to use test kits that would later prove more accurate from more established companies, because the CDC did not endorse them.
With few and faulty kits, only one in 19 infected people in Wuhan was tested and found positive as of Jan. 31, according to an estimate by Imperial College London. Others without tests or with false negatives were sent back home, where they could spread the virus.
Days after he first started coughing on Jan. 23rd, Peng Yi, a 39-year-old schoolteacher, waited in an eight-hour line at a Wuhan hospital. A CT scan showed signs of viral infection in both his lungs, but he couldn’t get the test he needed to be hospitalized.
When Peng finally got a test on Jan. 30, it turned out negative. But his fever wouldn’t drop, and his family begged officials for another test.
His second test, on Feb. 4, turned out positive. It was too late. Weeks later, Peng passed away.
“There were very, very few tests, basically none….if you couldn’t prove you were positive, you couldn’t get admitted to a hospital,” his mother, Zhong Hanneng, said in a tearful interview in October. “The doctor said there was nothing that could be done.”
China was hardly the only country to grapple with testing, which varied widely from nation to nation. Germany, for example, developed a test that became the World Health Organization gold standard days after the Chinese government released genetic sequences on Jan. 12. But in the US, the CDC declined to use the WHO design and insisted on developing its own kits, which turned out to be faulty and led to even longer delays than in China.
Other countries also had the benefit of learning from China’s experience. But China was grappling with a new pathogen, and it wasn’t yet clear how bad the pandemic would be or how many tests would be needed.
“It was very early,” said Jane Duckett, a professor at the University of Glasgow examining the Chinese government’s response to the coronavirus. She said the government was “just trying to figure it out.”
Still, the hiccups and delays in China were especially consequential because it was the first country to detect the virus.
“Because you have only three companies providing testing kits, it kept the capacity of testing very limited,” said Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations. “It was a major problem that led to the rapid increase in cases and deaths.”
China’s foreign ministry and China’s top medical agency, the National Health Commission, did not respond to repeated requests for comment.
“We did a brilliant job, we worked so hard,” said Gao Fu, the head of China CDC, in a videoconference in July. “Unluckily, unfortunately, this virus we are facing, it’s so special.”
None of the first three diagnostics companies tapped to make test kits for the biggest pandemic in a century were well-known in the industry. For one engineer from a Wuhan-based diagnostics firm, the Shanghai competitors popped out of nowhere “like bamboo shoots” – all the more so because his company had the factories and expertise to produce testing kits in the city where the virus was first detected.
“We were surprised, it was very strange,” the engineer said, declining to be named to speak on a sensitive topic. “We hadn’t heard about it at all, and then suddenly there’s test kits from certain companies you have to use, and you can’t use ones from anyone else?”
BioGerm was officially founded just over three years ago in a conference room, where the CEO mulled how to survive in a small and crowded market for test kits. GeneoDx had fewer than 100 employees, according to Tianyancha, a Chinese corporate records database – compared to competitors that employ hundreds or even thousands of staff.
But what the companies lacked in resources or experience, they made up for in connections.
Company posts, along with hundreds of internal emails and documents obtained by The Associated Press, show extensive ties between the three companies and top China CDC researchers in Beijing and Shanghai. Chinese regulators barred AP attempts to obtain credit reports on the companies, saying they were classified as “confidential enterprises” during the outbreak.
Despite China’s efforts over the years to reform public health and push for open bidding in a competitive marketplace, medical companies still cultivate personal relationships with officials to secure deals, according to seven executives from different competitors. Under President Xi Jinping, China has cracked down on corruption, but industry insiders say a lack of firm boundaries between public and private in China’s health system can create opportunities for graft.
It’s unclear whether the agreements between the China CDC and the three test kit companies violated Chinese law.
They raise questions around potential violations of bribery laws, along with rules against abuse of authority, self-dealing and conflicts of interest, said James Zimmerman, a Beijing-based corporate attorney and former chairman of the American Chamber of Commerce in China. Even amid the uncertainty of the pandemic, “there is no excuse for the flow of cash from these companies to the CDC,” he said.
Chinese bribery laws also state that any financial transaction has to be recorded and documented clearly. The AP was unable to ascertain whether the agreements between the CDC and the Shanghai companies were documented, but a CDC employee with access to some of the agency’s finances said there was no record of them.
Despite the questions around bribery, other experts caution that the state may have designated the three companies to make test kits under special laws on the procurement of emergency goods during major natural disasters. The Chinese government is pushing to cultivate domestic companies focused on emergency response technologies, including test kits, to protect its national interest.
“Things will be different in the middle of a crisis,” said Lesli Ligorner, a Beijing-based attorney specializing in anti-corruption law. “Anything affecting the national interest can be deemed to be of utmost importance for special regulations… I wouldn’t be so quick to rush to judgement.”
China CDC guidelines state that the agency is responsible for maintaining a reserve of testing chemicals to screen for rare pathogens, but do not specify how to procure them. An AP search of CDC procurement bids did not turn up any records, even though some other emergency procurements were publicly documented.
The China CDC has about a sixth the staff of its separate American equivalent, and they often earn far lower wages than in the private sector. So many employees from the China CDC have departed for private sector jobs over the past decade, draining its labs of talent.
Among those who left was BioGerm’s founder, Zhao Baihui, the former chief technician of the Shanghai CDC’s microbiology lab. Emails and financial records obtained by the AP show that Zhao first started BioGerm’s predecessor through an intermediary in 2012, while she was still at the Shanghai CDC. In the next five years, she sold thousands of dollars’ worth of test kits to her own workplace through the intermediary even as she herself was at times in charge of purchasing, internal emails, records and contracts obtained by the AP show.
After quitting the CDC in 2017, Zhao spearheaded lucrative contracts with government officials – such as one worth 400,000 RMB ($60,000) with Shanghai customs officials where her husband worked, and another worth 55,500 RMB ($8,400) with CDC officials in Shanghai’s Pudong district, the emails and contracts show. Zhao declined to speak when reached by phone, and did not respond to an emailed request for comment.
Another of the three companies, GeneoDx, enjoyed special access because it is a subsidiary of the state-run firm SinoPharm, which is managed directly by China’s cabinet. Before the outbreak, GeneoDx largely imported kits and acquired foreign technology to expand its business rather than develop its own products, according to company posts and a China CDC employee familiar with its operations.
In October 2019, GeneoDx co-organized an internal CDC training conference on emerging respiratory diseases in Shanghai. Tan Wenjie, the CDC official who ran the training, was later put in charge of developing test kits, according to an internal document the AP obtained. In November, the company won a contract to sell 900,000 RMB ($137,000) worth of test kits to Tan’s institute.
GeneoDx did not respond to requests for comment or interviews. The National Health Commission did not respond to a request for a comment or an interview with Tan.
Also in attendance at the invitation-only event was BioGerm, as well as other companies that used the conference to promote their products, blurring the line between the government and the private sector. China CDC staff were invited to join a BioGerm group on WeChat, a Chinese messaging application, which CEO Zhao later used to sell coronavirus test kits, according to a CDC employee and a screenshot seen by the AP.
The last company, Huirui, is a longtime partner with Tan, the CDC official in charge of test kits. Its founder, Li Hui, coauthored a paper with Tan on coronavirus tests in 2012 and “jointly developed” a test kit for the MERS outbreak in 2015 with Tan’s institute.
In an interview, CEO Li said the CDC routinely contracted with his company to make emergency testing chemicals. He said Tan’s lab at the China CDC had contacted him on Jan. 4 or 5 to make testing chemicals for the coronavirus based on CDC designs. He denied any personal relationship with Tan or any payments to the CDC.
“We’ve been working with the CDC to respond to emerging new diseases for about ten years, not just for a day or two, it’s normal,” Li said.
Their connections situated the three little-known companies in prime position in January, when a then-unknown pathogen was about to sweep the country and the world and change their fortunes.
The first step in making test kits is to get samples of the virus and decode its genetic sequence. This leads to test designs, essentially a recipe for the tests.
In the past, such as with H7N9 in 2013, the China CDC sent test designs to laboratories across the country just days after identifying the pathogen. It also shipped along the chemical compounds needed – in effect the ingredients – for hospitals and CDC branches to mix their own test kits as soon as possible.
At first it looked like the China CDC was using the same playbook this time. The CDC had found the genetic map, or genome, of the virus by Jan. 3. By the next day, under CDC official Tan, the Emergency Technology Center at its Institute for Viral Disease Control had come up with test designs.
But this time, the government held back information about the genome and test designs. Instead, the China CDC finalized “technology transfer” agreements to give the test designs to the three Shanghai companies, according to four people familiar with the matter. The selection process was kept secret.
The CDC did not have the authority to altogether prevent other scientists with competing agencies and companies from getting samples through back door routes and coming up with their own test recipes. But it tried to stymie such efforts and stop testing from being carried out.
For example, Dr. Shi Zhengli, a renowned coronavirus expert at the Wuhan Institute of Virology, obtained patient samples on her own, found the genome from them and came up with a test by Jan. 3, according to a slideshow presentation she gave in March. But her lab fell under the jurisdiction of a competing agency to the CDC, the Chinese Ministry of Science and Technology. The CDC barred her from obtaining more samples and testing for cases.
“There’s no open collaboration mechanism,” said a public health expert who often works with the China CDC, declining to be named for fear of damaging relations there. “Everyone wants their turf.”
Provincial CDC staff were told that instead of testing and reporting cases themselves, they had to send patient samples to designated labs in Beijing for full sequencing, a complicated and time-consuming procedure. Otherwise, the cases would not be counted in the national coronavirus tally.
“It was absolutely abnormal,” said a CDC lab technician, who declined to be identified out of fear of retribution. “They were totally trying to make it harder for us to report any confirmed cases.”
In secret evaluations of test kits on Jan. 10, the CDC also approved only those from the three Shanghai companies, according to internal plans and instructions obtained by the AP.
The Chinese government finally made its genomes public on Jan. 12, a day after another team published one without authorization. That opened the door for more companies to make their own test kits. However, China’s top health agency, the National Health Commission, still urged medical staff to buy the test kits from Huirui, BioGerm and GeneoDx that the CDC had validated, according to internal instructions obtained by the AP.
The evaluations and selections of test kits were conducted with the knowledge and direction of China’s top health official, Ma Xiaowei, according to a CDC post on Jan. 13.
On Jan. 14, Ma held an internal teleconference to order secret preparations for a pandemic, as AP earlier reported. After that, China’s health authorities relaxed the requirements to confirm cases and started distributing the CDC-sanctioned test kits. BioGerm began taking orders from provincial CDC staff across the country on WeChat, a Chinese social media application.
“We’ve been entrusted by the national CDC to issue kits for you,” Zhao said, according to a screenshot of one of the group chats obtained by The Associated Press.
“Quick! Give me, give me,” said one staffer in the Sichuan CDC.
But the kits from GeneoDx kept showing inconclusive results, the CDC technician told the AP, and eventually her superior ordered her to toss them aside. The kits from Huirui were also unreliable, and the only ones that worked consistently were from BioGerm, she said.
“The quality was not good. Bad, poor quality,” said a public health expert familiar with the matter, who declined to be identified to avoid damaging ties with the China CDC. “But because they had a collaboration with the (CDC) Institute for Viral Disease Control and… they paid a million yuan, they were on the list.”
BioGerm’s test kits were more dependable in part because they used chemicals from Invitrogen, a subsidiary of US biotech giant Thermo Fisher. Huirui and GeneoDx used their own mixes instead, with more unreliable results.
Much larger competitors, including Chinese genetics giant BGI and Tianlong, developed their own kits in January, which were later found to be more effective than those made by the Shanghai companies. But those test kits weren’t endorsed by the China CDC.
“No test protocol, no primers and probes, then of course there’s no way to confirm cases,” said another China CDC employee who declined to be identified for fear of retribution. “And then, all of a sudden, you tell all the CDCs: purchase from these companies, now go for it. Then – chaos and shortage. Valuable time wasted.”
Chen Weijun, BGI’s chief infectious disease scientist, also said the early products recommended by the China CDC had “quality problems.” When asked why the China CDC selected the three Shanghai companies, Chen demurred.
“You better ask the CDC this question,” said Chen, who collaborated with CDC researchers to publish the first paper on the virus. “But actually, everyone understands what’s going on, why this happened, right? You can reach your own conclusions, right?”
A day after the first test kits finally arrived in Wuhan on Jan. 16, the case count began to rise again. But test kits were scarce. Some other cities in the same province didn’t get kits until Jan. 22, and even those were often flawed.
Samples from 213 patients in February using GeneoDx tests suggested a false-negative rate of over 30 percent, a study by Shenzhen doctors found. A March clinical trial report showed that among the test kits certified at the time, GeneoDx was the worst performer, followed by BioGerm. In general, the rate of false negatives for COVID tests varies widely, from 2% to more than 37%.
Philippe Klein, a French doctor who treated foreign patients in Wuhan during the outbreak, estimated that about 20 percent of the tests turned up false negatives. Still, he said, delays in producing accurate tests kits are natural at the start of an outbreak.
“The Chinese did a lot in a short time,” Klein said. “It was a new test, so in the beginning, there was a lack of tests, of course.”
On Jan. 22, the National Health Commission quietly removed the names of the three Shanghai companies from its coronavirus guide as preferred distributors. After the Chinese government ordered Wuhan shut down on Jan. 23, the three companies faced massive logistical hurdles to getting their tests in.
On Jan. 26, officials set up a fast-track “green channel” for companies to get their test kits approved. The National Medical Products Administration approved test kits from seven companies, including BioGerm and GeneoDx but not Huirui. Li, Huirui’s CEO, said it was because his company was inexperienced in obtaining regulatory approvals for commercial tests.
But it took time for other companies to ramp up production and ship tests in, leaving Wuhan struggling to meet demand into early February and depriving many residents of treatment.
Peng died on Feb. 19. His mother now passes the days gazing blankly out her window, sobbing and lighting candles in his memory.
“In the eyes of officials, he was like a grain of sand or a blade of grass. But in our home, he was our sky, he was our everything,” Zhong said. “Without him, we can never be happy again.”
The same pandemic that killed Peng brought the Shanghai test kit companies and related scientists fame and fortune.
In September, Tan, the China CDC researcher in charge of developing test kits, was appointed the inaugural director of a new National Novel Coronavirus Center. In a nationally televised ceremony, GeneoDx’s parent firm won plaudits from President Xi for “outstanding” contributions in the struggle against COVID-19, including developing a test kit.
Huirui has expanded and is now selling commercial test kits for the first time — not in China, but in Latin America, CEO Li said. And the pandemic has allowed BioGerm to “stand out,” reaching its business targets much faster than planned, said top marketing executive Guo Xiaoling at a trade show in late August at a five-star hotel.
“Because of the epidemic, 2020 has been a really special year,” Guo said. “The country and the economy suffered major damage. But for our nucleic acid diagnostics industry, this year has actually been a bonus.”