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Theranos: When the Veil was Lifted

  • Writer: Malin Phelan
    Malin Phelan
  • Apr 24, 2021
  • 8 min read

Updated: Oct 2, 2021

Author: Malin Phelan '23


A woman and a company that signified a revolution in the healthcare and business world, only to result in a controversy that dominated headlines for months. Countless exposés, triggered by one written by John Carreyrou for The Wall Street Journal. The inspiration for top-rated documentaries, best-selling books, and endless speculation. A nine billion dollar company left with a value of less than zero. This is the story of Elizabeth Holmes and Theranos.


Elizabeth Holmes was nineteen years old when she founded Theranos. The mission of the company? Revolutionize blood testing, eliminate the need for laboratory work and optimize technology to do so. The backbone of Theranos was Holmes’ patent, “The Edison,” named after Thomas Edison himself (it would later be referred to as the “miniLab”). The goal of the small, compact machine was to run blood tests that required only a finger prick of blood. The tests that it was intended to run included normal, smaller scale blood tests (such as hormone levels), but it was also said to have the capacity to detect conditions such as cancer and high cholesterol. This was regarded as a medical breakthrough, an opportunity to simplify blood work and discard the vials, needles, expense, and time associated with traditional methods. “The Edison'' was a disrupter to the healthcare industry. Holmes had, theoretically, brought a revolution to preventative medicine. She described understanding one’s health as a human right, and that Theranos would permit this right to be available for everyone. All that was left was to solidify the technology behind it - a process that required a dedicated team.


The face and leader of Theranos was always Elizabeth Holmes - a woman who, at nine years old, described her ultimate dream as a world where she became a billionaire. Holmes wore the same outfit day in and day out and claimed to sleep four hours a day, as she concentrated all her time towards work, saying she was “married to Theranos.” This led her to drop out of Stanford at nineteen when she first founded Theranos in an effort to focus all her energy into it. Holmes described Theranos as a vehicle to a world where people didn’t have to say goodbye to their loved ones too soon, the technology enabling the identification of diseases early on enough to treat them properly.


Holmes was extremely dedicated, and had absolute control over Theranos from its earliest days. She made it clear to investors that she would have complete authority over every decision. Her second-in-command was a man named Ramesh Balwani, Holmes’ boyfriend at the time of the company’s founding (they would later separate), who’d had success in business before - but Holmes was clearly the head of the operation.


And Holmes’ other confidants, including the board? High-profile, careful, and calculated are just a few words to describe it. She assembled a board of advisors that put credibility on Theranos' name and encouraged others to believe in its mission. The board included, but was not limited to: George Shultz, a former Secretary of the United States Treasury Department; James Mattis, a former United States Secretary of Defense; and Henry Kissinger, a former United States Secretary of State. These people were taken with Holmes’ idea, just like the rest of the world initially was with her invention. In Holmes’ earlier days, she was revered by many and seen as iconic, especially by women in the medical and business field. Truly seen as a visionary, Holmes appeared on a never-ending upward trajectory.


The faith that many had in Holmes allowed her to draw out Theranos’ marketing and profit without revealing a final product. Constant testing and versions of prototypes of “The Edison” were continually created. Employees in testing centers were working hard to figure out “The Edison,” and continued to tell themselves, and others, that it was only a matter of time until “The Edison” was finalized. Holmes was able to avoid federal regulations under the guise of her high profile investors and board members. She fielded questions from reporters but revealed little, insisting that it was to avoid competition. And during all of this, the word was spreading. Theranos made deals with Walgreens, Capital Blue Cross, Cleveland Clinic, and Safeway. Walgreens, especially, allowed the “The Edison” to see the world - areas in pharmacies across the country were set aside for this supposed revolution in blood testing, and versions of “The Edison” began to be rolled out - although there were far more complications than were being revealed publically.


Within the company, secrecy was vital, both to Holmes and second-in-command Balwani. Their secrecy bordered on paranoia, both over employees and the possibility of confidential information getting out. They even went so far as to bring three employees to court, “claiming they had misused Theranos trade secrets” (Business Insider). Furthermore, non-disclosure agreements were required to be signed by visitors and employees, and there was constant security on company premises. Holmes and Balwani monitored employees’ emails constantly, as well as their entrances and exits into and out of the building. Holmes was not transparent about the technology with the press, and released only vague, nondescript statements about their developments as time went on. Even while hiring employees, there was little information given.


The secrecy, however, was necessary for Theranos’ reputation as behind the scenes, “The Edison” was not working in any capacity close to the way it was being marketed. It was not ready for distribution, it was not efficient and would freeze - and contrary to its purpose, it literally could not process blood samples properly. When investors would visit Theranos’ headquarters and testing labs, prototypes had to be shown in order to secure funding from these investors. So, Holmes and her team found a way around this. A finger prick of blood, as Holmes’ original vision had entailed, was taken from investors to be tested, along with a promise of a presentation of results completed by “The Edison.” However, the blood work was actually done without utilizing “The Edison.” Investors were taken for a tour, and the blood was taken by engineers who completed rapid, traditional blood testing, and would present those results to the investors as theoretically having been done by the machine. Contrary to what was presented in the public eye, Theranos was struggling. “The Edison” could only do a few tests, not the two hundred plus that Holmes had promised.


And the tests that were able to be completed? They gave entirely inaccurate results, which when released, caused panic. This led to some cases where people were told they had health issues where they did not, or were told that they were healthy when they in fact needed help. Testing was being done on serious diseases, such as syphilis and hepatitis C, and inaccurate results put peoples’ health at risk. Tests run by “The Edison'' were abnormal - they were not lining up with lab results that used traditional methods. At this same time, Theranos’ engineers began to say that the blood needed to run tests could not just be a finger prick - venipuncture was required. This was contrary to Theranos’ whole mission. The scientists and engineers working on the project were concerned themselves - “Internally, [there] was so little faith in [the tests done by the Edison]” (HBO documentary). Theranos’ inaccuracies, growing unease, and secrecy were detrimental.


Described as a “sinking ship,” it was only a matter of time until the ball dropped. In August of 2015, an investigation by the U.S. Food and Drug Administration (FDA) into Theranos’ work process began as uncertainty spread regarding the accuracy of “The Edison.” At this point, prototypes had been distributed to Walgreens in Arizona, and tests were being run on people’s blood, prompting questions into the safety and reliability of the results. The FDA investigation found many “major inaccuracies” (Business Insider) in the scientific work of Theranos, including invalid lab protocols. The true turning point, however, was in October 2015, when John Carreyrou, a reporter for The Wall Street Journal, published an exposé on Theranos. Citing former employees, including Tyler Shultz, a former intern and the grandson of Theranos board member George Shultz, Carreyrou extracted data and quotes that indicated the many issues occurring behind the scenes. Essentially, the report found that Theranos’ claims of innovative technology were entirely false. Their technology wasn’t working, and so they had instead been using traditional blood testing machines, contrasting with their claims of novel technology. Data comparisons between Theranos’ blood work and traditional blood tests showed that tests being run on “The Edison” gave erroneous results.


After this point, Theranos broke down. Holmes, who had been featured in Fortune and Forbes among other magazines, given TedTalks, and had been viewed as an icon, fell from grace. She described the article in The Wall Street Journal as being full of false allegations and being entirely untrue. Despite her outright denial of any issues within Theranos, it was too late. By 2016, the FDA, the Centers for Medicare & Medicaid Services, and the Securities and Exchange Commission were all investigating Theranos. Their findings prompted Holmes to be banned from “the lab-testing industry for two years” (Business Insider) in July of 2016. Furthermore, “By October [of 2016], Theranos had shut down its lab operations and wellness centers.” (Business Insider). Ultimately, Holmes, Balwani, and Theranos were charged with “massive fraud” (Business Insider) in March of 2018 - however, Theranos wasn’t entirely disassembled yet. This changed in June of 2018 when it was announced that Holmes was stepping down as CEO. At the same time she, along with other top officials of the company, including Balwani, were charged with “with nine counts of wire fraud and two counts of conspiracy to commit wire fraud” (Business Insider) by a federal grand jury, solidifying the controversy. In September of 2018, Theranos announced that it was shutting down for good.


Holmes’ and Balwani’s trials are currently on hold, due in part to COVID-19 complications as well as attempts to stall by Holmes and her lawyers. Both Holmes and Balwani have pleaded not guilty. If either are convicted, they could face up to 20 years of jail time, as well as a fine of over 2.7 million dollars.


Theranos’ secrecy was its downfall. When a company uses technological developments to make determinations about peoples’ lives and puts their health at stake, honesty is vital - and Theranos wasn’t transparent, or accurate in any sense of the word. There is no denying that there was good intent behind the company. Initially, it did seek to improve lives by making an aspect of healthcare more accessible. Holmes was unable, however, to carry through with her mission in an ethical and productive way. The secrecy that followed, in an effort to maintain a facade of revolution, involved far too much deceit.


Theranos was a moment in time when Silicon Valley and the healthcare industry became intertwined. While new technology has great potential for advancement, problems arise when human lives are on the line. In Holmes’ rush to make herself a household name and live up to her convictions, she neglected to consider the lives being impacted throughout. Theranos, ultimately, was a wake up call for Silicon Valley; it had “allowed fraud to thrive” (HBO Documentary).


The future of Holmes, and her criminal charges, are still up in the air. However, one thing is certain - the exposé on Theranos showed a side of the business world that must be acknowledged, one of fraud and money-grabbing. Innovative technology receiving high praise must be investigated carefully, so as to avoid further cases like this in the future.


Sources:

HBO Documentary: The Inventor: Out For Blood In Silicon Valley


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