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U.S. v. Elizabeth Holmes, et al.

On June, 14, 2018, a grand jury returned an indictment charging Elizabeth Holmes and Ramesh “Sunny” Balwani with crimes in connection with their respective involvement with two multi-million-dollar schemes to promote Theranos, a private health care and life sciences company based in Palo alto, California.  The indictment was superseded on July 14, 2020, and again on July 28, 2020.   

As alleged in the operative indictment, Holmes and Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’s blood testing laboratory services, even though, according to the government, the defendants knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests.  It is further alleged that the tests performed on Theranos technology were likely to contain inaccurate and unreliable results.

The indictment alleges that Holmes and Balwani defrauded doctors and patients (1) by making false claims concerning Theranos’s ability to provide accurate, fast, reliable, and cheap blood tests and test results, and (2) by omitting information concerning the limits of and problems with Theranos’s technologies.  The defendants knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests, including the tests for calcium, chloride, potassium, bicarbonate, HIV, Hba1C, hCG, and sodium. The defendants nevertheless used interstate electronic wires to purchase advertisements intended to induce individuals to purchase Theranos blood tests at Walgreens stores in California and Arizona.  Through these advertisements, the defendants explicitly represented to individuals that Theranos’s blood tests were cheaper than blood tests from conventional laboratories to induce individuals to purchase Theranos’s blood tests.

According to the indictment, the defendants also allegedly made numerous misrepresentations to potential investors about Theranos’s financial condition and its future prospects.  For example, the defendants represented to investors that Theranos conducted its patients’ tests using Theranos-manufactured analyzers; when, in truth, Holmes and Balwani knew that Theranos purchased and used for patient testing third party, commercially available analyzers.  The defendants also represented to investors that Theranos would generate over $100 million in revenues and break even in 2014 and that Theranos expected to generate approximately $1 billion in revenues in 2015; when, in truth, the defendants knew Theranos would generate only negligible or modest revenues in 2014 and 2015.

The indictment alleges that the defendants used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to defraud potential investors.  Specifically, the defendants claimed that Theranos developed a revolutionary and proprietary analyzer that the defendants referred to by various names, including as the TSPU, Edison, or minilab. The defendants claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick.   The defendants also represented that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods – all at a faster speed than previously possible.  The indictment further alleges that Holmes and Balwani knew that many of their representations about the analyzer were false.  For example, it is alleged that Holmes and Balwani knew that the analyzer had accuracy and reliability problems, performed a limited number of tests, was slower than some competing devices, and, in some respects, could not compete with existing, more conventional machines.

The indictment charges each defendant with two counts of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and nine counts of wire fraud, in violation of 18 U.S.C. § 1343.

U.S. v. Ramesh "Sunny" Balwani

Ramesh “Sunny” Balwani was sentenced on Wednesday, December 7, 2022 to 155 months (12 years, 11 months) in federal prison for fraud that risked patient health by misrepresenting the accuracy of Theranos blood analysis technology and that defrauded Theranos investors of millions of dollars.

Balwani was tried separately from Holmes, and in her trial Holmes was not convicted of all counts. On January 3, 2022, a different federal jury convicted Holmes of one count of conspiracy to commit fraud on investors and three counts of committing fraud on individual investors, which involved wire transfers totaling more than $140 million. The jury acquitted Holmes of the patient-related fraud conspiracy count and the three counts of fraud against individual patients. The jury could not reach a unanimous verdict with respect to three individual investor fraud counts against Holmes. An additional count of wire fraud relating to a Theranos patient had been dismissed during trial. On November 18, 2022, U.S. District Judge Davila sentenced Holmes to 135 months (11 years, 3 months) in federal prison. She was ordered to surrender to begin serving her sentence on April 27, 2023.

In addition to the 155 month prison term, U.S. District Judge Davila sentenced Balwani to three years of supervision following release from prison. A hearing to determine the amount of restitution to be paid by Balwani is to be scheduled in the future. Balwani was ordered to surrender on March 15, 2023, to begin serving his prison sentence.

U.S. v. Elizabeth Holmes

Elizabeth A. Holmes was sentenced on Friday, November 18, 2022 to 135 months (11 years, 3 months) in federal prison for defrauding investors in Theranos, Inc. of hundreds of millions of dollars.

In addition to the 135 month prison term, U.S. District Judge Davila sentenced Holmes to three years of supervision following release from prison. The parties were instructed to meet and agree on a future date for a hearing to determine the restitution amount to be paid by Holmes. No fine was assessed. Holmes was ordered to surrender on April 27, 2023, to begin serving her prison sentence.

Next Court Dates

Due to the level of interest in this case, please see the following webpage for important news and information about access to proceedings and case information:

United States v. Elizabeth A. Holmes, et al. 18-CR-00258-EJD

Notice: Dates are subject to change on short notice. Please check Judge’s calendar before attending.

• Court access
• Judge's calendar

Notice for Potential Victims

The United States Attorney’s Office for the Northern District of California and investigating agencies are seeking information from those who may be victims of the Defendants’ crimes. 

If you believe you are a patient victim, please fill out this questionnaire . Please read and follow the instructions on the form and submit it no later than September 6th, 2022. Email your submission to [email protected] with US v Holmes & Balwani in the Subject Line. We are unable to accept late submissions. 

All responses are voluntary, but complete submissions will be useful in identifying respondents as potential victims and supplying the Court with the information necessary for sentencing. It is requested that respondents submit their statements via email as indicated on those questionnaires. Based on the information submitted, respondents may be contacted by law enforcement agencies and asked to provide additional information.

This Office cannot act as your attorney or provide you with legal advice. However, you may seek the advice of an attorney with respect to this or other related legal matters.

• Holmes and Balwani Indictment

Contact Information

For information or assistance with this case, please contact the Mega Victim Case Assistance Program unit at (844) 527-5299 or e-mail [email protected] .

For information and or questions relating to press inquiries please contact our Public Information officer at 415-436-7264 or email [email protected] .

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Theranos: Who Has Blood on Their Hands? (A)

By: Nien-he Hsieh, Christina R. Wing, Emilie Fournier, Anna Resman

This case covers the rise and fall of Theranos, the company founded by Elizabeth Holmes in 2004 to revolutionize the blood testing industry by creating a device that could provide from a small finger…

• Length: 35 page(s)
• Publication Date: Feb 6, 2019
• Discipline: Information Technology
• Product #: 619039-PDF-ENG

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This case covers the rise and fall of Theranos, the company founded by Elizabeth Holmes in 2004 to revolutionize the blood testing industry by creating a device that could provide from a small finger prick the same results and accuracy as intravenous blood draws. As founder and CEO, Holmes was hailed as the most successful female tech entrepreneur ever. In October 2015, however, a Wall Street Journal article exposed internal struggles and questioned the startup's trajectory. Subsequent investigations revealed that Theranos, despite commercial operations in 40 retail locations, lacked a functioning product. Set in 2017, the (A) Case opens with Theranos' motion to dismiss the class action lawsuit filed by two investors who claimed that Theranos and its officers had violated California's securities law and engaged in fraud.

Learning Objectives

Allow students to follow the development and collapse of a startup company build on star power and fraud.

Feb 6, 2019 (Revised: Feb 13, 2020)

Discipline:

Information Technology

Harvard Business School

619039-PDF-ENG

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What Can We Learn from the Downfall of Theranos?

The health company’s plummet carries valuable lessons for Silicon Valley.

December 17, 2018

Theranos founder Elizabeth Holmes epitomized Steve Jobs, which attracted Silicon Valley investors who didn’t look too closely at the health company’s claims, says John Carreyrou, the Wall Street Journal reporter who investigated Theranos. | Reuters/Brendan McDermid

One of the most epic failures in corporate governance in the annals of American capitalism.

That’s how John Carreyrou described the high-profile plummet of health technology business Theranos from heralded Silicon Valley unicorn to disgraced cautionary tale, with founder Elizabeth Holmes and President and COO Ramesh “Sunny” Balwani facing multiple current fraud charges. Carreyrou, a Pulitzer Prize-winning Wall Street Journal reporter, chronicled the downfall of Theranos in his book Bad Blood .

Carreyrou recently visited Stanford Graduate School of Business as part of a program organized by the school’s Corporations and Society Initiative . He spoke before an audience in conversation with Michael Callahan , executive director of the Rock Center for Corporate Governance, which cosponsored the event.

The Theranos story was supposed to have a very different ending. In 2003, 19-year-old Elizabeth Holmes dropped out of Stanford University to start the company, which promised something revolutionary: accurate diagnoses of health conditions using a single drop of blood. Holmes’s passion for the venture and Steve Jobs-like image (black turtlenecks and all) gained her the support of luminaries like Oracle founder Larry Ellison and former Secretary of State Henry Kissinger.

But the suspect science behind Theranos and its paranoid, secretive culture of leadership eventually caught up to the business, leading to criminal charges.

Professor Anat Admati , faculty director of the Corporations and Society Initiative, noted in her introduction for the event that “Theranos raises many questions,” and that Carreyrou could help the Stanford community by shedding light on what happened and what the audience can learn from this story.

Here are the main takeaways from Carreyrou’s discussion of the scandal.

Dark Side of the Valley

“The culture of Silicon Valley created the conditions for someone like Holmes to come along, to thrive,” Carreyrou said.

For example, the valley is replete with mantras like “fake it until you make it” and “fail fast.” As Carreyrou noted, “Holmes’ grave error was to channel this culture, especially the fake-it-until-you-make-it part.” Applying such maxims to a medical product with life-and-death implications was a key driver of the Theranos downfall. The technology simply couldn’t deliver as promised.

The gender factor also played a role, as Carreyrou highlighted in his book: “There was a yearning to see a female entrepreneur break out and succeed on the scale that all these men have: Mark Zuckerberg, Larry Page and Sergey Brin, Steve Jobs, and Bill Gates before them.” As a young, conventionally attractive woman, he adds, Holmes was also able to charm many of the older men who eventually backed her.

Quote The culture of Silicon Valley created the conditions for someone like Holmes to come along, to thrive. Attribution John Carreyrou

Carreyrou’s outside perspective helped him break the story. The reporter entered Silicon Valley not as a tech businessperson or even a tech reporter but as a health care reporter pursuing a tip. “The reporters who had interviewed Elizabeth Holmes over the previous two years accepted the way she framed herself as heir to the throne of Steve Jobs,” he said. “I came at it from the medical perspective with my East Coast skepticism.”

No Checks, No Balances

The Theranos board and federal regulators provided insufficient oversight, Carreyrou noted.

When two would-be whistleblowers told the Theranos board that Holmes had exaggerated revenue projections, the board considered replacing her with an experienced executive. “They decided the company needed to be led by an adult,” Carreyrou said. But Holmes talked her way out of the decision and prevented subsequent intervention by multiplying the voting rights of her shares to give her 99% of total voting rights.

The board was a who’s who of big names — including Kissinger and current Secretary of Defense Jim Mattis — that boosted Theranos’s reputation and Holmes’s credibility, but was a “make-believe” board, Carreyrou said, due to Holmes’s voting control. “This board took her at her word,” he added.

Theranos also exploited a regulatory loophole: Laboratory-developed tests like those the business offered didn’t (and still don’t) fall under the exclusive purview of the Food and Drug Administration or other health care-focused agencies. No one was truly policing the business’s processes or offerings. Of course, Theranos was actively deceiving regulators, too. “I’m not sure what law you could pass that would catch someone intent on lying,” Carreyrou said.

From Confidence to Confidence Games

“Elizabeth Holmes is not Bernie Madoff,” Carreyrou said. “I’m pretty certain she didn’t drop out of Stanford premeditating a long con.” He pointed out how much entrepreneurs have to believe in their product, even if no one else does, especially to recruit investors.

“But there’s a line between that and hyping so much you cross over into outright lies,” Carreyrou said — such as when Holmes misrepresented the sources of finger-stick tests, most of which were done on Siemens machines rather than her company’s. Those tests — and Walgreens’ adoption of Theranos technology in its stores — led to $750 million in new funding.

“The gap between what she claimed and what she had really achieved became a massive fraud,” Carreyrou said.

Culture at the Core

“The culture at Theranos was toxic,” Carreyrou said.

Would-be whistleblowers were threatened with lawsuits. Criticism of leadership or practices was unwelcome. Those who pushed “were usually either fired or marginalized to the extent that they had to leave — they had an expression, which was to ‘disappear’ someone,” Carreyrou said. “The paranoia went into overdrive.”

He added, “If the culture had been more wholesome, then maybe Theranos would have actually made some headway toward achieving Holmes’s vision.”

A Dangerous Formula

At the time of this writing, Holmes and Balwani were facing fraud charges, including making false representations to investors, doctors, and patients. “I think the public health component of the criminal charges is going to resonate,” Carreyrou said. “It wasn’t just billionaires who were misled and bamboozled.”

Perhaps the biggest takeaway from the Theranos story is the expansion of Silicon Valley from its traditional roots to a much broader range of offerings. “It’s getting into new industries, getting into self-driving cars, getting into medicine,” Carreyrou said. “When you enter industries where lives are in the balance, you can’t really just iterate and debug as you’re going. You have to get your product working first.”

Combine that reality with the “myth of the brilliant Silicon Valley start-up founder who sees around corners and can never be wrong,” as Carreyrou described it, and you have a very dangerous set of circumstances — the kind that yield a business story that starts with sky-high valuations and ends in criminal charges.

For media inquiries, visit the Newsroom .

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Theranos: Who Has Blood on Their Hands? (A)

• Format: Print
• | Language: English
• | Pages: 35

About The Authors

Nien-he Hsieh

Christina R. Wing

Related work.

• February 2020
• Faculty Research

Theranos: Who Has Blood on Their Hands? (B)

Theranos: who has blood on their hands (a) and (b).

• Theranos: Who Has Blood on Their Hands? (B)  By: Nien-he Hsieh, Christina R. Wing and John Masko
• Theranos: Who Has Blood on Their Hands? (A) and (B)  By: Nien-he Hsieh and Christina R. Wing
• Theranos: Who Has Blood on Their Hands? (A)  By: Nien-hê Hsieh, Christina R. Wing, Emilie Fournier and Anna Resman

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The Epic Rise and Fall of Elizabeth Holmes

In Silicon Valley’s world of make-believe, the philosophy of “fake it until you make it” finally gets its comeuppance.

By David Streitfeld

SAN FRANCISCO — Near the end of Elizabeth Holmes’s criminal trial , her lawyers submitted into evidence her punishing self-improvement plan.

“4 a.m. Rise and thank God,” the handwritten memo began. Exercise, meditation, prayer, breakfast (whey and, as she spelled it, “bannanna”) followed. By 6:45 a.m., a time when slackers were still fumbling for the alarm clock, she was at the office of Theranos, the blood-testing company she founded in 2003.

Ms. Holmes had many rules at Theranos: “I am never a minute late. I show no excitement. ALL ABOUT BUSINESS. I am not impulsive. I know the outcome of every encounter. I do not hesitate. I constantly make decisions and change them as needed. I speak rarely. I call bullshit immediately.”

It worked. Ms. Holmes’s resolve was so forceful, and fit so neatly into the Silicon Valley cliché of achieving the impossible by refusing to admit it was impossible, that it inspired belief right up to the moment on Monday when a jury officially convicted her of four counts of fraud.

The verdict signaled the end of an era. In Silicon Valley, where the line between talk and achievement is often vague, there is finally a limit to faking it.

From Stanford University dropout to Theranos’s $9 billion valuation to conviction, it is an epic rise and fall that will be chewed over in the coffee shops and juice bars of Palo Alto, Calif., until the tech industry departs for a new life in Elon Musk and Jeff Bezos’ off-world colonies. For a decade, Ms. Holmes fooled savvy investors, hundreds of smart employees, an all-star board and a media eager to anoint a new star even, or especially, if she had no qualifications.

Just as Silicon Valley is a cartoonish version of American notions about the virtues of hard work and getting rich quick, so Ms. Holmes was a heightened version of Silicon Valley.

As her self-improvement scheme made clear, she was trying to turn herself into a machine that had no time for anything but work. This was not for her own benefit, of course, but humanity’s. She perfectly encapsulated the Silicon Valley credo that tech was here to serve us, and never mind exactly how it did it, the billions it was making or whether it even worked.

Whenever anyone — a regulator, an investor, a reporter — wanted to know a little more about exactly how the Theranos machines functioned, the company cried “trade secrets.” The real secret, of course, was that Theranos didn’t have any trade secrets because its machines didn’t work. But her answer worked for a long time.

Hiding fraud behind the imperatives of secrecy wasn’t the only way Ms. Holmes’s actions were rooted in tradition. Her self-improvement plan dated back to Ben Franklin but found its most indelible expression in F. Scott Fitzgerald’s creation of Jay Gatsby , the mysterious, alluring, handsome millionaire who also ran a few swindles.

Gatsby was practically Ms. Holmes’s brother. He, too, got where he was with a schedule and rules, in his case written inside a book when he was a striving youth:

5 p.m.-6 p.m.: Practice elocution, poise and how to obtain it

7 p.m.-9 p.m.: Study needed inventions

The parallels with Ms. Holmes extended even to Gatsby’s equally loose grasp of spelling. “No more smokeing or chewing,” he admonished himself.

Gatsby was a bootlegger but also used Wall Street to cheat. He sold fake bonds. Ms. Holmes chose Silicon Valley, the last and greatest of all human dreams. In the first decade of the century, it promised to reinvent transportation, friendship, commerce, politics, money.

Blood-testing must have seemed like a breeze by comparison, especially since Ms. Holmes was a natural salesperson, as good at bending reality as Steve Jobs himself. Here she was in an interview with the radio show Tech Nation in 2005, explaining what Theranos was all about:

“We focused on creating a customized medicine tool that could be used in the home by every patient, so that every day, a patient can get real-time analysis of their blood samples.”

Who could not applaud such an invention? Theranos was making a messy, uncertain and time-consuming medical process into something effortless and painless. “A little teeny needle that pulls a little teeny drop of blood,” she said. Software would do the rest.

Tech Nation’s host, Moira Gunn, has a master’s degree in computer science and a doctor of philosophy in mechanical engineering, but she was dazzled. “How old are you, Elizabeth?” she asked.

“I’m 21,” Ms. Holmes said.

Her age was brought up not to knock down her claims but to underline how impressive they were. “I’m gonna go tell my two children, they better get off their duffs,” Ms. Gunn exclaimed.

Ms. Holmes said Theranos’s device was in “the production phase.” She added, “We hope to release it, actually, to a pharmaceutical partner around mid-to-late this year.” Thirteen years later, when the company dissolved, it had never successfully released a device.

In 2005, however, even reinventing blood-testing at 21 was not enough, so deep were our expectations of genius. Ms. Holmes was asked about her future, and gave the stock Silicon Valley response: You ain’t seen nothing yet.

Theranos already had the “next generations” of its device in prototype, she said. It was miniaturized to make it even faster, to make it “more high-throughput.” It would be automated: “You don’t even have to touch your finger on the device.”

So in one of the first media interviews Ms. Holmes ever did, she said Theranos had a working device that would be able to analyze your health without actually touching you. No one called her on it. No wonder she and her deputy and boyfriend, Ramesh Balwani, the company’s chief operating officer who was known as “Sunny,” thought they could brazen it out in the Silicon Valley tradition until they had something that actually worked.

This is a credulous age. William Perry, a Theranos board member, was secretary of defense under President Bill Clinton, a mathematician, engineer and Stanford professor. Not, in other words, a fool with regard to Silicon Valley. Yet he told The New Yorker in 2014 that Ms. Holmes “has sometimes been called another Steve Jobs, but I think that’s an inadequate comparison. She has a social consciousness that Steve never had. He was a genius; she’s one with a big heart.”

Mr. Perry declined to comment.

Mr. Jobs, who died in 2011 , might as well have been a recruiter for Theranos. Adam Rosendorff, a lab director at Theranos, testified during Ms. Holmes’s trial that he thought the company was going to be “the next Apple.” He applied for the job after reading a biography of the Apple co-founder.

“The whole excitement around Steve Jobs was very compelling to me,” he said. “I wanted to make a more global impact on health care and I thought that joining a diagnostics company would help me do that.”

Mr. Rosendorff grew disillusioned before Theranos’s misleading claims were exposed, but Mr. Perry stuck it out until December 2016, when the start-up was forced to change its board in a futile attempt to survive.

With believers like these, Ms. Holmes’s dream must have seemed so close that she could hardly fail to grasp it. A couple more late nights from the engineering team, a few more magazine covers declaring her a genius, and it would be as good as done.

So where does this conviction leave the rest of us — her marks, her enablers, her investors and former fans?

Ripe for the next huckster that comes along, probably. Some Silicon Valley promises are so sweet we just can’t get enough of them. Immortality. Crypto . Flying cars. Mars. Digital harmony. Wealth beyond compare.

As Fitzgerald wrote, we will always be a sucker for the orgastic future that year by year recedes before us.

David Streitfeld has written about technology and its effects for twenty years. In 2013, he was part of a team that won a Pulitzer Prize for Explanatory Reporting.   More about David Streitfeld

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• Volume 24, Issue Suppl 2
• 23 Bloodlust: a case study of theranos and the embodiment of a brand’s values in a chief executive
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• Michael Denham
• Columbia University Vagelos College of Physicians & Surgeons

Objective Once a Silicon Valley startup valued at over $9 billion, Theranos aimed to provide low-cost, rapid blood testing performed with small samples of blood directly to consumers, ultimately hoping to jumpstart a new wave of preventive medicine. However, the blood diagnostics firm is now defunct, having been accused by the U.S. Securities and Exchange Commission of conducting an ‘elaborate, years-long fraud.’ Theranos’s fall was largely the result of the efforts of whistleblowers and John Carreyrou, a journalist at The Wall Street Journal and author of Bad Blood , which examines the company’s elaborate scam. However, its rise is less well understood; the logistics of its deception seem much clearer in hindsight, but much of the messaging and grand visions touted by Theranos’s CEO, despite being iterations of phenomena common in Silicon Valley, have remain unexamined in sociological research. Because sociology of expectations literature has thus far lacked extensive analysis of the promotional activities of individual firms, this research aims to contribute to this field by examining the role of the celebrity executive in promoting and embodying the brand of a firm. The primary focus of this research is to deconstruct the messages and mechanisms by which Holmes embodied the values central to Theranos and its mission.

Methods This goal is carried out in the form of a case study analyzing 221 articles discussing Holmes and Theranos, ten public speeches and interviews given by Holmes, and 304 tweets posted by Holmes’s Twitter account. Drawing from literature on cults of personality, promissory capitalism, and the sociology of Silicon Valley, I uncover how former CEO Elizabeth Holmes used her role to represent the anticipatory nature of Theranos and its ethos.

Results I examine four main themes as they appear in Holmes’s external marketing: consumer sovereignty and rights language, consumer empowerment, timeliness and prevention, and persona of social transformation.

Conclusions After exploring these four themes and offering a brief normative critique of the firm’s values, I conclude by suggesting that, despite Theranos’s former ‘unicorn’ status, the framing of its vision and marketing tactics employed by Holmes as the company’s CEO were far less unique. Because such framing may have a significant impact on the way in which a culture of overdiagnosis is fostered, this marketing deserves to be critically examined by all relevant stakeholders in the diagnostics biotechnology industry.

https://doi.org/10.1136/bmjebm-2019-POD.129

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The Saga of Theranos: Crucial Lessons for Clinicians and Pathologists

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Rama R. Gullapalli , Tracy I. George; The Saga of Theranos: Crucial Lessons for Clinicians and Pathologists. The Hematologist 2016; 13 (5): No Pagination Specified. doi: https://doi.org/10.1182/hem.V13.5.6540

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In a stunning turn of events, Theranos, the company founded by Stanford University dropout Elizabeth Holmes and hailed as having one of the top 10 medical and technological innovations in 2013, 1    has come under investigation by federal prosecutors, the Centers for Medicare and Medicaid Services (CMS), and the Securities and Exchange Commission. This is a story of science versus hype, and a seemingly disruptive technology that has yet to deliver on its promises. Although readers may be acquainted with more than a decades’ worth of news stories that have recounted the highs and lows of Theranos’ prospects (Table), herein we present what you may not know about the science (or lack thereof) which lies at the heart of the company’s imbroglio.

A PubMed search for peer-reviewed articles reveals two articles coauthored by Theranos, 2 , 3    which contain no descriptions of the technology. A search with the U.S. Patent and Trademark Office reveals a number of microfluidics patents under the name of Ms. Holmes 4-7   ; however, without independent evaluation, the accuracy, precision, and specificity of these new laboratory tests are unknown to anyone outside of the company. It is also unclear whether tests using this new technology are actually occurring. Early reports describe individuals receiving standard venipunctures, 8    and a review of the CMS inspection report of Theranos’ Newark laboratory finds descriptions of standard laboratory equipment for testing of various analytes. 9  

Digging Deeper into Theranos’ Laboratory Testing

Seeking clarity about the performance of “low-volume” laboratory tests versus standard blood draws in the arena of direct-to-consumer testing, Drs. Brian Kidd and Joel Dudley and colleagues from the Icahn School of Medicine at Mount Sinai in New York City conducted a study of 60 healthy adults, comparing 22 common clinical laboratory analytes (complete blood count and differential, lipid panel, high-sensitivity CRP, serum phosphate, serum uric acid, and total bilirubin). 10    The samples were collected in Phoenix during a five-day period, with all blood drawn from each patient in a single day within a 6.5-hour window. The study design allowed for a total of 14 samples per patient (four separate blood draws with the first and fourth draws divided into six tubes each and sent to LabCorp (Burlington, NC) and Quest Diagnostics (Madison, NJ); second and third blood draws were each collected from two separate retail locations and sent to Theranos). Thus, LabCorp and Quest Diagnostics had six replicates from each patient, and Theranos had two replicates. Testing of samples at LabCorp was performed at Accupath Diagnostics Lab in Phoenix, Arizona; Quest Diagnostics samples were tested at Sonora Quest in Tempe, Arizona; and lipid panels were tested at Quest Diagnostics Nichols Institute in San Juan Capistrano, California. Theranos samples were collected and processed on site in Phoenix before shipping to Newark, California, for testing. All samples were shipped to facilities within 9.5 hours, which is typical for reference laboratories.

Does it matter where laboratory tests are performed? Yes! To clarify, for clinical laboratory testing, there are preanalytic, analytic, and postanalytic variables. The authors sought to minimize preanalytic variables to focus primarily on analytic test variables. They in turn found missing data rates of 2.2 percent (Theranos), 0.2 percent (LabCorp), and 0 percent (Quest Diagnostics) based on 2,640 (Theranos) and 7,920 (LabCorp and Quest) possible measurements. The investigators calculated that the odds for Theranos missing a measurement due to a technical error, versus other laboratories, is 12.5:1, based on the missing data rates quoted above (95% CI, 6.9-22.4; p=1.5 × 10 –22 ). The percentage of measurements outside their normal reference range was 12.2 percent (Theranos), 8.3 percent (LabCorp), and 7.5 percent (Quest). Theranos tests flagged outside their normal range 1.6 times more often than the other laboratories. Mean corpuscular hemoglobin concentration, lymphocyte count, and cholesterol (total, high-density lipoprotein, low-density lipoprotein) are examples of tests that more often flagged results outside of their reference ranges. Notably, 15 of 22 laboratory measurements showed significant differences between Theranos and the other two clinical services (p<0.002).

Regulations on clinical laboratory testing are among the most strenuous of any industry and are meant to control variability in testing, to ensure the highest level of patient care. CMS regulates clinical laboratory testing based on guidelines outlined in the Clinical Laboratory Improvement Amendments (CLIA). 11 , 12    These guidelines include mandatory participation in proficiency testing from a CMS-approved program using homogenous samples distributed to laboratories. 12    CLIA, or an accrediting agency, determine acceptable criteria, including the total analytic error (TAE; method bias + total imprecision) for each analyte. 12    In the article by Dr. Brian A. Kidd and colleagues, the authors state that a TAE of +/– 10 percent would be exceeded by Theranos for cholesterol measurements once instrument imprecision is considered. Increased abnormal tests have consequences, including extra testing (and costs), extra visits to hospitals and clinics, and increased health-care service, which can potentially harm patients. 13  

Numerous questions remain about why testing by Theranos showed such unexpected variability in healthy adults. A detailed examination of the CMS inspection of the Newark laboratory, performed on November 20, 2015, reveals some potential answers. 9    This 121-page document outlines numerous deficiencies that highlight a basic lack of understanding of clinical laboratory testing. Failed freezer temperatures; expired reagents; no training documentation; failure of the lab director to sign, date, or approve procedures prior to use; and proficiency testing failures with no investigation for multiple analytes are just a few of the findings. 9    The fact that the original laboratory director was a dermatologist with no background in laboratory medicine should serve as a cautionary tale. 14    While one might think that Theranos’ board of directors could lend insight into the business of laboratory testing, a review of its members reveals an impressive group of politicians, military figures, and accomplished individuals who have served on the board, but not a single laboratory medicine physician or clinical pathologist. This was addressed in April 2016 when a scientific and medical advisory board was added to Theranos, with a well-qualified group of laboratory professionals. 15  

The (Unknown) Science Behind Theranos

The science behind the technology driving the laboratory testing at Theranos remains elusive. Naturally, this has raised concern among physicians, given the potential effects of such untested technologies on patient safety. 13    In the absence of any form of peer review of the science behind Theranos, it has become very difficult for pathologists to provide an informed opinion to clinicians and patients about the validity of the test results generated by the company. Publicly available sources such as newspaper articles and patent applications are no substitute for peer-reviewed scientific literature.

The publicly available facts regarding the testing pipeline at Theranos describe the use of a finger-stick method to obtain the patient’s blood sample into a patented collection device known as the “nanotainer.” 7 , 16    The sample is then loaded onto a proprietary analysis machine code-named “Edison,” 17    of which no specific information is publicly available. It is also believed that the sample is analyzed internally on the machine based on assay principles that also currently remain unknown. 13    The data obtained are then wirelessly transmitted to a secure database with a portal interface from which the physician and the patient can then retrieve results. 13  

Table. Theranos Timeline

The main advertising claim of Theranos is the stated fear of the founder regarding venipuncture needles used in routine laboratory testing. 16    The company patented the “nanotainer,” a 0.5-inch container device capable of storing one to two drops of blood. 16    This was advertised as a revolutionary method to obtain blood samples in a painless fashion to overcome the popular fear of venipuncture. 16    Additionally, the low volumes of blood required to test samples were also advertised as a major selling point of the technology (“A tiny drop is all we need”). One popular news report claimed that Theranos needed 1/100 to 1/1,000 of the volume of regular laboratory testing. 16 In the same article from 2014, it was reported that Theranos performed as many as 70 different laboratory tests from a single draw of 25 to 50 µL of blood obtained from the nanotainer. 16    Subsequent news articles claimed a different number (approximately 30 tests) could be run on this blood volume. In October 2015, the U.S. Food and Drug Administration (FDA) called the nanotainer an “uncleared medical device” (Table). 18    Subsequently, Theranos claimed to have stopped using the device for all of its tests except for the single FDA-cleared herpes virus test. 17    The current status of the nanotainer in routine Theranos testing methodology remains unknown.

A cursory evaluation of the testing menu on the Theranos website shows availability of approximately 240 tests. However, there are no references to the exact collection method used in testing on the website. A review of the offered tests reveals that the testing menu at Theranos falls mostly into four different categories, including clinical chemistry, immunology, DNA testing, and cell-based assays. Current point-of-care testing (POCT) methods use finger-stick–based techniques to obtain the necessary blood samples to enable POCT testing in clinics and homes. However, POCT tests represent a limited subset among the menu of tests available through routine laboratory testing needed in day-to-day clinical practice. A majority of laboratory testing uses venipuncture-based access to obtain the required blood samples. The test validation performed by laboratory scientists also relies on the use of venipuncture-based sampling methods to ensure repeatable results.

Pertinent to this issue of sample collection (venipuncture vs. finger stick), a recent article by Dr. Meaghan M. Bond and colleagues 19    examined the issue of drop-to-drop variation in the cellular components of blood. The authors analyzed the drop-to-drop variability of standard laboratory tests including hemoglobin, WBC count, WBC differential, and platelet count in six successive drops of blood collected from a single finger stick from 11 different donors. 19    For example, the authors observed a significant difference in the coefficient of variation of the platelet counts obtained from finger stick compared with venipuncture (19% vs. 4.8%). 19    This study illustrates the drop-to-drop variability of the finger-stick method for easy-to-perform laboratory tests. To our knowledge, no such analysis of the impact of finger-stick sampling on the other classes of tests offered on the Theranos menu (clinical chemistry, immunology, and DNA-based testing) has been performed. We believe a thorough peer-reviewed scientific analysis of finger stick sample reliability for analyte detection is critically important before it can be offered to patients in routine practice.

In the current discussion, we have focused on the preanalytic components of the testing process such as sample collection and reliability. Equally pertinent are the analytic and post-analytic components of any laboratory testing process. In the absence of reliable peer-reviewed data, it is difficult to determine the efficacy of the microfluidic-based testing approach that Theranos claims to use.

The idea of a “lab-on-a-chip” is not a new one. Groups around the world have been working throughout the past two decades to develop such technologies, with varying degrees of success. A problem inherent to many microfluidic-based approaches is the lack of a scalable standardization of the microfluidic manufacturing processes, as well as the lack of reusability of the microfluidic chips. These two factors increase the costs of microfluidic technology for routine clinical implementation. Laboratory medicine surely could benefit from innovative approaches such as microfluidic-based testing. However, these technologies should be implemented in clinical testing only after extensive peer review of the testing methodology. A previous College of American Pathologists study estimated that 70 percent of a clinical decision is directly correlated with the laboratory results provided, illustrating the seriousness with which laboratory testing needs to be taken. As this edition of The Hematologist goes to press, Elizabeth Holmes gave a highly anticipated invited presentation at the annual meeting of the American Association of Clinical Chemistry on August 1, 2016. At this first scientific conference for the Theranos CEO, healthy skepticism abounded as to whether substantive data would be presented. AACC President Patricia Jones echoed this in her introduction of Elizabeth Holmes: “We're all aware that there have been some questions about whether we will see any science here today and the viability of Theranos' technology.” In fact, the presentation lacked any details regarding the original “Edison” testing platform. Instead, a new device, the “miniLab” was introduced to the public, with preliminary information provided about the inner components of the machine and an overview of data on precision and comparison studies. In the authors' opinion, there is nothing unique about the spectrophotometer, luminometer, and basic hematology technology at the heart of the new miniLab device, which represents a miniaturization of various detection modules used in a standard clinical laboratory. The isothermal amplification used for the molecular biology assays and the slide-based cytometer used for assessing lymphocyte subsets are newer technologies that have not been robustly tested in the clinical laboratory. While data presented appear to be robust and follow appropriate guidelines, the performance characteristics of this device at microfluidic volumes in real-world clinical applications are still uncertain and require validation. Thus, the aforementioned criticisms still stand and must be addressed in a thorough, transparent, and comprehensive manner. Theranos seems to be taking steps to redress multiple shortcomings of their original testing model, including the need for mandatory scientific peer-review. The introduction of a new scientific and medical advisory board, 14    should also provide much-needed guidance. The ongoing travails of Theranos serve as an important case study in the need for physicians to have a firm understanding of the scientific principles of laboratory testing in order to provide the best level of health care for patients.

Competing Interests

Dr. George and Dr. Gullapalli indicated no relevant conflicts of interest. Editor-in-Chief Dr. Jason Gotlib collaborated with Theranos on a pilot study whose results were published in 2014 (see reference 2). He received no funding.

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