The number of virus tests that the US uses to fight the ongoing pandemic will be very sensitive to the cost of a test. Several bits of evidence suggest that the true cost per person tested is about $10.

Yet in the United States, the providers of the approved clinical diagnostic tests for SARS-CoV-2 are able to charge a significant monopoly markup over their marginal cost of doing the test. The US government pays $100 per test to labs that are using high throughput technologies.

It would not be surprising if the two dominant providers of diagnostic tests, LabCorp and Quest, oppose entry into the testing business by university labs that can offer the tests at one-tenth the price they charge. Nor would it be surprising if these powerful companies were feeding information to news organizations and to members of Congress which suggests that it would be a terrible idea to invite university labs in as new providers of test services.

More on Reopening Schools

1. What people who know the technology say

Kenny Beckman is the Director of the University of Minnesota Genomics Center. Here is what he wrote to me about the cost of a test:

There is no reason for testing to cost up to $100. The UMN runs thousands of tests a day, and we have developed home-brew methods that will deliver a test for around $6. A simple trick like sample pooling (combining several samples together and testing them as one) can drop the cost and stretch materials several-fold and has been in common use for decades. Miniaturization and simple economies of scale drop the costs even more. Scores of advanced technologies, too, such as the use of DNA sequencing as an assay read-out and rapid “LAMP” assays that are simple colorimetric tests read by eye, have been developed and provide expanded bandwidth. All service labs like mine need – and there are hundreds of such labs across the country eager to be drafted into the fight – is a guaranteed market and freedom to operate. Make the market, and capacity will follow.

2. Reports from Wuhan

I have not been able to find any published information about the cost of the 9-10 million tests that the local government of Wuhan used to wipe out the last residual carriers of the virus in the city. A personal contact in China told me that at the current exchange rate, the cost worked out to be about $13 per person who was tested.

3. Internal decisions to use more tests

If the market price of the test is much higher than the cost of doing the tests and if regulator barriers keep new firms from entering the testing business, some organizations will develop tests for internal use.

One example of this is the Stanford Medical Center, which decided to test staff and incoming patients to safely reopen for elective surgical procedures They report that they tested 11,000 staff members and an unspecified number of incoming patients. They used their own equipment and personnel.

They also went through the expensive and difficult process of getting FDA approval for their test. (See here for more detail on how difficult the process can be.)

Whatever the cost of testing the staff was, it was a cost that Stanford had to bear because it clearly could not bill insurance companies for testing its staff. As a result, we can safely infer that the doctors who run the medical center were convinced that the information they would get by testing their staff was worth more than what it cost them to do the tests.