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California Department of Public Health Terminates $1.7B COVID Testing Lab Contract

SACRAMENTO (CBS13) – California's troubled COVID testing lab will soon be shutting down. CBS13 has learned the state is terminating its $1.7 billion-dollar no-bid contract with PerkinElmer, the private company running California's taxpayer-funded COVID lab.

The Department of Public Health (CDPH) faced criticism for renewing the contract last year amid ongoing state and federal investigations of the lab. In a letter addressed to PerkinElmer, dated March 31, CDPH says "testing will (now) be provided through a network of commercial partners."

The state's 45-day notice cites increasing COVID testing alternatives as the reason for termination and notably makes no mention of the state and federal investigations that found lab practices posed "immediate jeopardy to patient health and safety" and were "likely to cause serious injury harm or death" to California patients.

CDPH failed to disclose those findings to patients and taxpayers for nearly a year as the deficiencies continued, according to state inspectors.

The state's PerkinElmer testing lab was the subject of a year-long CBS13 investigation, which prompted state and federal investigations that confirmed everything from contamination concerns to wrong results to hidden lab errors.

The CBS13 investigation began in February 2021 after whistleblowers revealed allegations ranging from unlicensed lab techs, sleeping on the job, to incidents of contamination, swapped samples, and wrong results during the peak of the pandemic.

The state launched an investigation into the allegations and later revealed that inspectors previously found "significant deficiencies" during an inspection of the lab in December 2020.

ALSO READ: Regulators Find 'Significant Deficiencies' At CA COVID Testing Lab – Whistleblowers Respond

What they did not reveal at the time is that inspectors had already confirmed the whistleblower allegations. During two separate inspections in December 2020 and February 2021, inspectors found that the CDPH-PerkinElmer Valencia Branch (VBL) lab was putting patient health and safety in "immediate jeopardy" and that lab practices were "likely to cause, at any time, serious injury or harm, or death."

However, in a February press release, CDPH downplayed what they referred to as "significant deficiencies" and echoed PerkinElmer's claims that "the deficiencies (had) long since been resolved."

According to inspection records, the lab's license remained in "immediate jeopardy" due to ongoing problems for at least nine more months.

Instead of pausing testing or warning the public, the California Department of Public Health allowed the lab to continue processing patient samples. CDPH concealed ongoing public health concerns as the lab began contracting with schools across the state.

ALSO READ: Delayed School COVID Results, Canceled Games and Contamination Concerns

As students finally returned to school in April of 2021, problems at the lab led to unnecessary quarantines and canceled games, which parents and students said further impacted their mental health.

First, delayed test results forced some schools to cancel coveted games then school districts across the state were forced to "close-contact" quarantine hundreds of healthy students following a spike in alleged positive results from the lab.

At least one district reported an "unprecedented number" of false-positive results from the state lab and another reported a 1,000% increase in their positivity rate when they switched from a private lab to the state lab for testing.

Data provided by the state indicated that the lab's positivity rate was more than 60% higher than California's overall positivity rate at the time.

ALSO READ: Continued Accountability: Delayed Investigation Report, Denied Interview Requests

After Health Secretary Mark Ghaly denied repeated interview requests and CDPH declined to answer questions, CBS13 asked Governor Newsom about the ongoing investigations and school testing concerns during his May-budget press tour — twice.

The Governor repeatedly implied that the allegations of problems were exaggerated and had already been resolved.

However, within days of those interviews, federal inspectors issued yet another notice of violations, and state inspectors sent this notice, with the Governor's seal, reiterating that the lab was still "not in compliance" and that "the evidence of correction was not acceptable."

Problems would continue for at least 6 more months, while patients remained in the dark.

ALSO READ: Lab Experts Criticize State's Response To Risk Of 'Serious Injury, Harm or Death' At CA COVID Testing Lab

When CDPH finally released the long-overdue inspection reports in November 2021, they buried the link to the records at the bottom of a 10-page "issue brief"  which did not detail any of the specific risks to public health and, instead, touted the lab as a model for other states and the federal government.

Lab experts across the state criticized the CDPH "brief"  and said they were shocked that the state allowed its billion-dollar coronavirus testing lab to continue operating for nearly a year in light of the clear public health risks.

In response to the findings of the CBS13 investigation, State Senator Scott Wilk introduced two new pieces of legislation that are intended to ensure accountability and transparency long after the pandemic is over.

The first is a Constitutional Amendment (SCA 7), which would require approval from the legislature before a no-bid state contract of more than $25 million could be renewed.

The Newsom administration quietly renewed PerkinElmer's no-bid contract amid ongoing state and federal investigations of the lab, despite the fact that the lab consistently failed to meet contract requirements including 48-hour testing turnaround times.

Wilk also introduced SB 947. The Whistleblower Protection Act would extend whistleblower protections for employees of government contractors like PerkinElmer, which was given a $1.7 billion-dollar no-bid lab contract and then sued one whistleblower who reported wrongdoing and threatened to sue others.

Senate Bill 947 (SB 947) has been endorsed by the National Whistleblower Center and was passed unanimously by the Senate Judiciary Committee. According to Wilk's office, the bill now moves on to the Senate Governmental Organization Committee.

In the meantime, the state sent this 45-day contract termination letter to PerkinElmer on March 31st.

In a statement, PerkinElmer said it had "been notified by the California Department of Public Health (CDPH) that, given the decrease in COVID-19 cases and need for testing, it intends to end its contract for PerkinElmer to supply and operate the CLIA licensed and CAP accredited Valencia Branch Laboratory." 

PerkinElmer said it plans to end operations on May 15th, adding it "will be working with CDPH to ensure a smooth transition period."

(UPDATE: This story originally aired on April 5, 2022. It was updated online on April, 20 and includes an additional statement from PerkinElmer.) 

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