California paid nearly $340 per COVID-19 test in Verily sites’ first month, contract shows

California paid nearly $340 per COVID-19 test for the first month of its partnership with Verily Life Sciences, according to the state’s contract with the company.

The contract, which The Bee obtained through a Public Records Act request, provides the first detailed look at testing costs as California rapidly expands its testing capacity.

Verily charged the state about $3.4 million for the roughly 10,000 tests it conducted from mid-March through mid-April, according to the contract. The cost varied dramatically by county with the highest prices in San Mateo, where each test cost $819.

High rent at the San Mateo testing site and additional costs associated with launching the program drove up the prices, said Kate Folmar, spokeswoman for California’s Health and Human Services Agency. Since then, San Mateo County has taken on the rental fee for the site, and other local governments and philanthropic organizations also have agreed to share some costs of staffing testing sites.

“As this testing program was brought to scale, costs have decreased,” she wrote in an email to The Bee. “The state entered into its partnership with Verily at a time when testing across the country was scarce, and we are grateful for the initial development work on the testing platform that Verily did without charge.”

Under the second phase of the state’s agreement with the company, which runs from mid-April to mid-June, the cost-per-test will drop to an estimated $127.

At that price, the governor’s goal of 60,000 tests per day would cost the state more than $50 million a week.

In the meantime, Gov. Gavin Newsom says the state faces a budget deficit in the tens of billions of dollars.

Verily is just one of several vendors the state is contracting with to provide testing. The rates California is paying Verily are “in line with industry norms,” Folmar said, and the state will seek reimbursement from the federal government “as appropriate.”

The state hired the company in March because of its platform to screen potential patients and connect them to testing. Verily, a subsidiary of Google’s parent company Alphabet, had been developing the platform for several years before the coronavirus pandemic and modified it for COVID-19.

Through the platform, potential patients take an online survey to see if they qualify for testing in their area. The platform coordinates the entire process, including scheduling appointments, sending samples to the lab and processing the results.

In the first month, Verily set up sites in seven counties, including the drive-thru testing site at Cal Expo in Sacramento. Through the initial contract, the state reimbursed the company for hiring third-parties that provided services and equipment to run the sites. That covered lab work, health care staffers, and location costs like rent and internet. It also covered supplies including swabs and protective equipment.

Verily contracted with 20 different vendors to provide everything from security to safety goggles, according to the initial contract.

“To move rapidly, we just had to get those contracts done directly,” said Verily spokeswoman Carolyn Wang.

Verily itself collected only $30 per test, a “small, small fraction” of what it spent developing and managing the program, Wang said.

In Sacramento, Verily charged the state more than half a million dollars to conduct 3,191 tests for a $165 per-test cost.

But the company charged nearly three times as much to conduct just 1,909 in San Mateo.

The San Mateo costs include a nearly $800,000 bill for “rent and other site costs” at the San Mateo County Event Center, according to the one-month contract. San Mateo was the only site where Verily billed the state for rent.

The cost per test was highest at the sites Verily operated on its own in San Mateo and Santa Clara counties. The company is operating sites jointly with counties in Sacramento and Riverside, according to the contract. Counties are operating Verily’s platform in San Joaquin, Los Angeles and San Francisco.

Cost varies based on what services and equipment Verily is providing at each site, Wang said.

“We were paying a huge rent to San Mateo and that’s the primary reason that the cost was so high,” Wang said. She said she didn’t know why the rent was so expensive.

The center charged Verily its normal rate, said Dana Stoehr CEO of the San Mateo County Event Center and Fairgrounds, a nonprofit.

“Startup costs are always going to be higher on the front end,” she said. “We got it set up really quickly.”

Moving forward, San Mateo County will pay the rental costs, Stoehr said. That will bring Verily’s location costs at the San Mateo site to $120,000 per month for “rental equipment, security, janitorial and other operating fees,” according to the state’s second contract with Verily.

California has expanded its work with Verily through June 17, according to the second contract, which allows the state to spend up to $13.1 million.

This story was originally published May 5, 2020 at 10:54 AM with the headline "California paid nearly $340 per COVID-19 test in Verily sites’ first month, contract shows."