Bloomberg Businessweek - USA (2020-05-04)

◼ BUSINESS Bloomberg Businessweek May 4, 2020

ILLUSTRATION

BY

CAROLINE

POLLET

● Scamartistsin Chinaareofferingbogus

contractsforthedifficult-to-obtaindevices

HowVentilatorFraud

WentViral

Ashospitalsandgovernmentsaroundtheworld

furiouslysearchformedicalventilatorstohelp

treatCovid-19patients,somehavebeendrawnto

thelargenumberofmerchantsinChinaoffering

tosellthelifesavingmachines.Oneaccounton

Weibo,China’sversionofTwitterandthecountry’s

mostpopularmicrobloggingsite,is offering1,

of Beijing Aeonmed Co.’s VG70 ventilators for sale.

But the listing is far from a find. First, the seller’s

price of about $51,000 apiece is roughly 50% more

than the model’s usual price. An investigation of

the seller’s history shows that the Weibo account

until recently focused on blogging about beauty

products and posting makeup photos, rather than

marketing medical equipment. Moreover, Li Kai,

a director of Beijing Aeonmed, the purported

maker of the machines in the Weibo listing, told

13

shouldstayout.AndonApril24,theSBAandthe

TreasuryDepartmentruledthathedgefundsand

privateequityfirmswon’tbeeligible.Congressalso

requiredthat$60billionoftheextra$320billion

appropriatedforPPPbesetasideforsmallbanks—

with$50billionorlessinassets—todisburse,which

shouldgivesmallerbusinessesmoreaccessthan

theygotinthefirstround,advocatessay.�Jason

Grotto,MarkNiquette,andDavidKocieniewski

THE BOTTOM LINE While fewer than 2% of the approved

applications for the U.S. small-business bailout sought loans of

more than $2 million, they accounted for 28% of the total funding.

Bloomberg News the seller can’t possibly have that

many of its products in stock. When a reporter

contacted the seller for an explanation and com-

ment, the account blocked Bloomberg News from

communicating with it.

Welcome to the buyer-beware world of pur-

chasing ventilators during a pandemic. Forged

documents, impostors pretending to be company

officials, and fraudulent contracts are some of the

moves employed by scam artists as hospitals strug-

gle to secure the respiratory aids. The reputations

of legitimate vendors are getting hit by profiteers

reselling their equipment for as much as five times

its normal price or promising machines they don’t

have, while the FBI has warned of schemes target-

ing government and health industry bodies.

Covid-19’s rapid spread has forced hospitals to

go from keeping a few ventilators on hand to sud-

denly needing hundreds of the complex devices

essential in helping intensive care patients breathe.

In the U.S., the Society of Critical Care Medicine

estimated in March that 960,000 patients would

need ventilator support because of Covid-19, but

the nation had only about 200,000 such machines.

Although China produces just a fifth of the

world’s invasive ventilators, would-be buyers of

such equipment have been turning to the country

because it’s the only major economy so far to come

close to resuming normal manufacturing.

“Governments are scrambling to try anything in

a desperate situation,” says Charlie Yin, sales direc-

tor at ventilator maker Beijing Siriusmed Medical

Device Co. “They went to whatever sources they

could find, and that’s how they got scammed.”

Yinsaysmiddlemenarehawkingventilatorsfor

400,000yuan($56,500)apiece,comparedwitha

normalpriceofabout80,000yuan.

Whilemany foreign buyershave remained

focusedontraditionalsuppliers,othershaveturned

toChina’sgiantsocialmediaplatformsofWeiboand

WeChatinsearchofproducts.“Thisis a crazymar-

ket,therearejusttoomanymiddlemen,”Yinsays.

Mechanical ventilators include invasive

modelsthatinserta tubeina patient’sairwayand

noninvasiveversionsthatusea masktodeliver

air.China’sMinistryofIndustryandInformation

Technologyestimatesthecountrycanmakeonly

about2,200invasiveventilatorsa weekif keycom-

ponentsareavailable.

Chinesemanufacturerscompeteinamarket

dominated by European and U.S. producers such

as Philips Healthcare, Hamilton Medical, and

Medtronic. But the recent spike in demand has

caused companies as varied as appliance designer

Dyson, plane maker Airbus, and automaker

● Number of U.S.

patients estimated

in March to need

ventilator support

because of Covid-

960k