New lab: $1.7 billion agreement to more than double state capacity

SACRAMENTO — California has entered into an agreement worth up to $1.7 billion with a company that could process tens of thousands of coronavirus tests per day as soon as November, a step that could help the state return more quickly to normal life, Gov. Gavin Newsom said Wednesday.

The diagnostics firm, PerkinElmer of Massachusetts, will set up a laboratory that will report test results within 24 to 48 hours, Newsom said at a news conference.

The lab would reach full capacity, 150,000 tests per day, by March 1. That would more than double the state’s current testing capacity, the governor said, allowing officials to respond more nimbly to the pandemic and making it easier for businesses and schools to bring back customers and students.

California is processing about 100,000 tests a day, but results take an average of seven days, making them “quite useless,” Newsom said.

Doubling the state’s testing capacity would get California closer to the levels necessary to successfully fight the virus, according to estimates from Harvard researchers. California would need about 223,000 tests a day to mitigate the virus and about 825,000 tests a day to suppress it, according to the Harvard Global Health Institute, a research group focused on public policy that includes scientists and public health experts. The institute models how much testing is needed in each country and state to mitigate and suppress the virus.

Testing has been a major problem locally and nationally since the start of the pandemic. Initially, back in March, a global shortage of testing supplies made it nearly impossible to get tested. Later, in the spring and early summer, the state’s testing capacity greatly improved as more labs opened up to process tests. Partially due to that testing, infection rates in the Bay Area stayed relatively low.

But when cases began surging in late June and July, demand for testing shot way up, and labs struggled to process the tests quickly. Many residents were forced to wait two weeks or more for results. The delays thwarted health officials’ ability to quickly trace sick people’s contacts and prevent them from furthering the spread. Test results that take more than a couple of days are no longer as useful. By then, the person may have spread it to others, who can then pass it on.

The PerkinElmer deal would add to the state’s existing lab system for coronavirus testing, which includes public health labs run by counties, commercial labs like Quest and Labcorp, academic labs like UCSF, UC Berkeley and Stanford, and smaller private labs.

The deal “provides us the ability to have much more stability and the ability to provide more reliability to people who are at risk,” Newsom said, especially if the state faces a bad flu season this fall.

“Then we have the ability to make decisions in real time that will advance our efforts to reopen our schools for inperson education,” Newsom said, as well as “reopen our businesses in a more effective and efficient manner, and a more sustainable manner.”

Guidelines for reopening businesses that shut down when coronavirus infections began surging in June will be made public Friday, the governor said. Businesses, including indoor restaurants, barbershops and nail salons, have been awaiting those guidelines as counties where they are located begin to come off a state monitoring list for heightened spread of the virus.

Mark Ghaly, California’s secretary of health and human services, said the state would be responsible for setting up the new laboratory, as well as collecting and transporting test specimens there. The contract with PerkinElmer covers test kits, reagents, instruments and staffing necessary to process the tests.

With a greater testing capacity secured, Ghaly said the state would work to set up more collection sites, particularly in hardhit poor and minority communities that have not had equitable testing.

“This creates a degree of testing independence that we haven’t enjoyed until now,” Ghaly said.

The state is already contracting with Verily, the life sciences arm of Google parent company Alphabet, and Optum, a Minnesota company, to provide testing at dozens of sites across the state.

The contract with PerkinElmer covers up to $1.7 billion worth of tests, or about 150,000 per day for a year, according to a spokeswoman for the state Health and Human Services Agency. The state is looking at a site in Southern California to set up the laboratory.

Newsom said the deal would drive down the cost of testing. The state negotiated a price starting at $47.99 per test for up to 40,000 tests processed daily, dropping to $30.78 per test for the full 150,000 tests, and will use a thirdparty billing service to seek reimbursements from health insurance plans. Processing a test can now cost $150 to $200.

Current test costs “are jawdropping,” Newsom said. “They’re simply not sustainable.”

Fyodor Urnov, director of UC Berkeley’s Innovative Genomics Institute — whose lab is conducting coronavirus testing at no cost for vulnerable communities in the East Bay — said the state’s deal with PerkinElmer “is exactly the right thing to do.”

“The capacity projected is a robust one, and the cost of the test is lower than what other forprofit entities charge,” said Urnov, who is not involved in the state’s testing task force. “Since the lab will not be up and running until November, the state and PerkinElmer have time to address a key challenge: low availability of tests in socioeconomically disadvantaged neighborhoods . ... The extra testing capacity has to be provided to folks in the most need.”

Local health officials stressed the need to expand testing, especially in poor neighborhoods that have been hit especially hard by the virus — even as the U.S. Centers for Disease Control this week amended its testing guidelines to exclude asymptomatic people who recently came into contact with an infected person. The change, local infectious disease experts said, is misdirected and counterproductive.

“Testing is our way out of this epidemic,” Santa Clara County Health Officer Dr. Sara Cody said. “Since the beginning, testing has been the Achilles’ heel for our country and our county in getting us out. When you get a test, you know your status, you know whether you’re infectious and you need that information for two reasons. For yourself, to know whether you’re going to get more ill and to watch your symptoms; and two, you need to know whether you pose a risk to your family and friends and coworkers so you can tell them whether they need to be tested.”