Damages sought include reimbursement of costs for voided clinical laboratory tests as well as an injunction ‘to prevent Theranos and Walgreens from engaging in further misrepresentations and unfair conduct’
Theranos founder and ex-CEO Elizabeth Holmes and ex-COO/President Ramesh “Sunny” Balwani have been found guilty on multiple counts of fraud and now await sentencing in federal criminal court. But the pair’s legal entanglements are not yet over. A class-action lawsuit filed on behalf of patients who purchased Theranos clinical laboratory testing services between November 2013 and June 2016 is weaving its way through the legal system.
“The lawsuit claims, among other things, that these blood testing services were not capable of producing reliable results, that the defendants concealed the blood testing services’ unreliability, that Walgreens knew that the blood testing services were unreliable and not market-ready, that the defendants conspired to commit fraud on consumers, that Theranos’ ‘tiny’ blood testing technology (blood drawn with finger pricks) was still in development, and that the customers who were subject to ‘tiny’ Theranos blood draws by Walgreens employees gave their consent to those blood draws under false pretenses,” the news release notes.
If the defendants are found liable, plaintiffs, who could number in the hundreds of thousands, could receive money or benefits. The Mercury News reported that Arizona’s attorney general had identified 175,000 consumers who purchased tests from Theranos/Walgreens at an average cost of $60 per test.
A class-action lawsuit filed on behalf of patients who purchased Theranos blood testing services at a Walgreens or Theranos location includes as defendants company founder/CEO Elizabeth Holmes (left), ex-Theranos President/COO Ramesh “Sunny” Balwani (right), as well as Theranos, Inc., Walgreens Boots Alliance, and Walgreens Arizona Drug Company. The trial is expected to begin in 2023. It will no doubt draw the attention of clinical laboratory directors and pathologists who followed the Holmes/Balwani fraud cases very closely. (Photo copyright: The Wall Street Journal.)
Federal Court Upholds Class Certification
The Top Class Actions news site notes that in 2021 Walgreens and Balwani unsuccessfully appealed to get the class-action lawsuit against them decertified.
Class: All purchasers of Theranos testing services, including consumers who paid out-of-pocket, through health insurance, or through any other collateral source between November 2013 and June 2016.
Arizona Subclass: All purchasers of Theranos testing services in Arizona between November 2013 and June 2016.
California Subclass: All purchasers of Theranos testing services in California, between September 2013 and June 2016.
Walgreens Edison Subclass: All purchasers of Theranos testing services who were subjected to “tiny” blood draws (finger pricks) by a Walgreens employee between November 2013 and March 2015.
“The lawsuit seeks damages, including reimbursement of the amounts paid by consumers for the voided tests, as well as an injunction to prevent Theranos and Walgreens from engaging in further misrepresentations and unfair conduct,” the Lieff Cabraser website states.
In its notice to potential members of the class action, JND Legal Administration states the “defendants contend that they did not do anything wrong, and they are not liable for any harm alleged by the plaintiffs.” In addition, the notice points out, “There is no money available now, and there is no guarantee that there will be.”
Where could money come from to pay plaintiffs? Likely not from Theranos or Holmes. Though Theranos reached a peak valuation of $9 billion in 2014, it owed at least $60 million to unsecured creditors when the company was dissolved in 2018, USA Today reported. After turning over its assets and intellectual property, Theranos anticipated having only $5 million to distribute to creditors.
And Forbes reported that Holmes’ net worth dropped from $3.6 billion to $0 in 2016.
However, Balwani, who netted nearly $40 million in 2000 when he sold shares of software company Commerce One, has an estimated net worth of $90 million, according to Wealthypipo. As of 2022, Walgreens Boots Alliance is ranked number 18 on the Fortune 500 rankings of the largest United States corporations by total revenue.
The Arizona Theranos Litigation website points out that the suit does not seek damages or other relief for personal injury, emotional distress, retesting costs, or medical care costs. Any Theranos/Walgreens customer intent on pursuing such legal action would need to exclude themselves from the class action case and proceed with separate litigation. The deadline to opt out of the class-action lawsuit is September 12, 2022.
And so, though clinical laboratory directors and pathologists may have thought the saga of Theranos ended following Balwani’s conviction, it apparently continues. It is anyone’s guess what is to come.
By partnering with drug manufacturers to connect customers with clinical trials, the retail pharmacy chain believes this new venture will be the company’s “next growth engine.”
Walgreens is launching a business to connect customers with clinical drug trials, a venture that adds another offering to the retail pharmacy giants’ growing menu of healthcare services. This new venture might also mean additional test orders for clinical laboratories and pathology groups in areas that serve Walgreens customers.
Now, Walgreens is attempting to further redefine the patient experience by partnering with pharmaceutical companies to find participants for clinical trials, a business that could result in more Americans from underrepresented racial and ethnic populations enrolling in drug-development trials. With 9,021 retail pharmacies in all 50 states, it is well-positioned to know which of its customers would be candidates for different clinical trials.
“Walgreens’ trusted community presence across the nation, combined with our enterprise-wide data and health capabilities, enables us to pioneer a comprehensive solution that makes health options, including clinical trials, more accessible, convenient and equitable,” said Ramita Tandon, Walgreens’ Chief Clinical Trials Officer, in a press release.
Ramita Tandon, Walgreens’ Chief Clinical Trials Officer, believes Walgreens can play a role in solving the issues of diversity and declining enrollment in clinical trials. “Through the launch of our clinical trials services, we can provide another offering for patients with complex or chronic conditions in their care journey, while helping sponsors advance treatment options for the diverse communities we serve,” she said in a press release. (Photo copyright: Walgreens.)
Serving the Socially Vulnerable
In an interview with Fierce Healthcare, Tandon described the clinical trials business as Walgreens’ “next growth engine” of consumer-centric healthcare solutions.
According to the company press release, “Walgreens is addressing access barriers through a compliant, validated and secure decentralized clinical trial platform built on a rigorous compliance and regulatory framework to ensure patient privacy and security. This approach leverages owned and partner digital and physical assets, including select Health Corner and Village Medical at Walgreens locations, to directly engage patients at home, virtually or in-person.”
Walgreens notes that more than half of its roughly 9,000 U.S.-based stores are in “socially vulnerable areas.”
According to the Washington Examiner, a US Food and Drug Administration (FDA) study revealed that 75% of patients who participate in clinical trials are white, while just 11% are Hispanic and fewer than 10% are Asian or black. In addition, participation in clinical trials has been declining, with 80% of trials failing to attract enough participants on time.
Tandon maintains that making the process of participating in clinical trials easier is another key to increasing diversity and participation in clinical trials.
“During the clinical trial journey, we know it’s a burden for patients to visit sites. We also know that 78% of patient-consumers in the US live within five miles of a Walgreens,” she told PharmaVoice. “If a patient can complete much of the up-front clinical trial requirements at a local Walgreens, or conduct some of the visits digitally, it would make the whole clinical trial experience that much more positive and, maybe, encourage the patient to participate in new clinical trials going forward.”
Walgreens also plans to use its treasure-trove of customer data to find potential patients for its trials business.
“Understanding this detail of customer preference and segmentation can be quite useful particularly in clinical trials, for example, to create better protocols,” Tandon told PharmaVoice. “We are sitting on so much information, but we can, and need to, do a better job of using these insights in a real-world setting, which can be translated to pharma R/D or brand management organizations. We’re all about patient-centric drug development.”
FDA Seeks Diversity in Clinical Trails
Walgreens is in discussions with several drug manufacturers as it looks to launch this new venture.
“We are working very closely with them to understand their business needs and create the solution that’s going to be sort of bespoke to their specific trial needs,” Tandon told Fierce Healthcare. “Our goal is to move that needle and start to see a larger number of US patients participating and highly diverse participants that are coming into clinical trials.”
In April, an FDA press release announced new draft guidance aimed at “developing plans to enroll more participants from underrepresented racial and ethnic populations in the US into clinical trials.”
“Despite having a disproportionate burden for certain diseases, racial and ethnic minorities are frequently underrepresented in biomedical research,” the FDA stated. “Clinical trials provide a crucial base of evidence for evaluating whether a medical product is safe and effective; therefore, enrollment in clinical trials should reflect the diversity of the population that is ultimately going to use the treatment.”
Disintermediation of Retail Pharmacies
“Walgreens has a significant opportunity to create an interconnected healthcare ecosystem where we can use the physical assets of Walgreens and connect with patients and consumers at a local level to better support healthcare and healthcare equality,” Tandon said in PharmaVoice.
This is the latest example of a billion-dollar retail pharmacy chain diversifying away from simply filling prescriptions. Two types of competitors are driving the disintermediation of retail pharmacies because they end up directing patients away from the pharmacy:
Amazon.com acquired PillPack and now sends, via mail, prescriptions to patients’ homes.
Pharmacy benefit management (PBM) companies with a business model that encourage patients to get 90 days of prescriptions at once, mailed to their home.
In both cases, retail pharmacies lose access to patients. This is what is motivating several national pharmacy chains to offer primary care within their retail pharmacies (where following an office visit with a general practitioner, the patient simply crosses the store to the pharmacy to fill his/her prescription), as well as the clinical trial matching business.
As retail pharmacy chains become an increasingly disruptive force in healthcare, clinical laboratory managers and pathologists should be preparing new strategies to meet the testing needs of a changing primary care delivery model, which likely will include lab testing being offered in nontraditional medical locations.
From infant formula to contrast dye for CT scans, ongoing healthcare product shortages highlight continuing US supply chain and manufacturing issues
Medical laboratory directors and pathologists have firsthand knowledge of COVID-19 pandemic-driven supply chain issues, having faced backlogs for everything from pipettes and transport media to personal protective equipment (PPE). But the latest shortage impacting blood collection tubes is another example of why it is important to manufacture key products—including clinical laboratory tests, analyzers, and consumables—domestically.
On January 19, 2022, the federal Food and Drug Administration (FDA) issued a Letter to Healthcare Providers and Laboratory Personnel recommending “conservation strategies” to minimize blood collection tube use because of “significant disruptions” in supplies due to COVID-19-increased demand and “recent vendor supply challenges.”
“The FDA updated the device shortage list to include all blood specimen collection tubes (product codes GIM and JKA),” the letter noted.
This announcement followed a similar June 10, 2021, Letter to Healthcare Providers and Laboratory Personnel that stated the FDA was aware “that the US is experiencing significant interruptions in the supply of sodium citrate blood specimen collection (light blue top) tubes because of an increase in demand during the COVID-19 public health emergency and recent vendor supply challenges.”
A spokesperson for Becton-Dickinson (BD), a manufacturer of blood specimen collection products, told Forbes that the COVID-19 pandemic caused “the most unpredictable demand that BD has experienced in our company’s history.” The spokesperson added, “Worldwide, BD produced nearly a half a billion additional blood tubes in 2021 versus 2020 … Like every business across every industry around the world, BD is experiencing limited availability of and access to raw materials, shipping and transportation delays, and labor shortages, which hinders our ability to ramp production.”
“It’s also a challenge because we’ve moved to just-in-time (JIT) inventory across all sectors, including labs … They outdate just like food [and] are no longer fresh. [The product] is no longer reliable and you can’t use it. So, we can’t stockpile either,” Nielsen told Forbes.
Shortages Hit Other Critical Healthcare Sectors
But shortages of supplies and equipment have spread beyond the clinical laboratory. Intravenous contrast—which contains iodine and is used to improve the accuracy of CT scans and exclude life-threatening conditions such as cancer—has been in short supply since GE Healthcare shut down its manufacturing facility in Shanghai, China, during the city’s two-month pandemic lockdown that began in early April.
“This isn’t an ancillary tool. This is something that’s used many, many times every day for both lifesaving decisions in the setting of trauma and for managing cancer patients and determining the appropriate care for them,” he added.
US Rep. Rosa DeLauro (above), lamented the fact these vital products are not being made in sufficient quantities in the US. “In the wealthiest nation on Earth, there should be no reason doctors are forced to ration lifesaving medical scans to compensate for a shortage of material,” DeLauro told The New York Times. “We are seeing supply chains break down because of consolidated industries experiencing manufacturing shortages and offshoring American jobs to China.” Clinical laboratory managers have first-hand knowledge of the severity of supply shortages. (Photo copyright: CNN.)
GE Healthcare is one of four companies that supply iodine-containing contrast to the United States, but the other three manufacturers have been unable to scale-up and offset the shortage.
By June 14, 2022, the Shanghai facility had returned to 100% production capacity following the easing of local COVID restrictions, according to a GE Healthcare statement. But shortages remain.
“There is still the challenge of bringing the contrast media across the ocean and distributing it to healthcare facilities across the nation,” Nancy Foster, the American Hospital Association’s (AHA) Vice President of Quality and Patient Safety Policy, told CNN.
“The hospital association estimates that about half of all hospitals in the United States rely on GE for contrast dye to perform about 20 million scans a year, or about 385,000 scans each week,” CNN reported.
Critical Medical Products Must be Manufactured Domestically
“We’ve been having shortages throughout the pandemic. At the very beginning of the pandemic, it was PPE shortages,” Jain said. “Now, we have contrast shortages and formula shortages for babies.”
The infant formula crisis is the other headline grabbing news in recent weeks. Three companies—Abbott, Reckitt, and Gerber—manufacture 95% of the baby formula sold in the US, with Abbott controlling roughly 42% of the nation’s supply, CNN reported.
“Initially, this problem affected those who are on more specialized formulas or had nutritional issues,” Stephanie Seger, Director of Government Relations at Children’s Mercy Hospital in Kansas City, Mo., told CNN. ‘Then the gap, or the emptiness on the shelves, increased to the point where it’s now any formula. It’s now any parent of any baby.”
The Biden administration took steps in May to increase the supply of imported formula, but like the Intravenous contrast shortage, the problem has not been solved.
The COVID-19 pandemic has served to underscore the serious issues affecting supply chains for hospital, medical laboratory, and other critical supplies. While no quick fix has appeared on the horizon, the clinical laboratory industry should take steps now to work toward long-term solutions.
Retail giant now has primary care clinics at stores in five states, but the rollout has not gone smoothly
Healthcare is increasingly being driven by consumerism and one clear sign of this trend is Walmart’s ambitious plan to open health clinics at its retail locations. The retail giant set its plans in motion in 2019 with its first primary care site in a suburban Atlanta store, however, the rollout since then has presented certain challenges.
Nevertheless, the trend of placing nearly full-service primary care clinics in retail locations continues. Clinical laboratories in these areas need strategies to serve customers accessing healthcare through these new channels, particularly as Walmart and the national retail pharmacy chains continue to expand the clinical services offered in their retail stores.
“Consumer engagement is a huge part of healthcare, [yet it is also a] gap for us in healthcare,” cardiologist and Walmart VP of Health and Wellness Cheryl Pegus, MD, told Modern Healthcare. “Healthcare is incredibly complicated,” she added. “And where we are in healthcare today is not in having great treatments. It’s not in having evidence-based medicine. It’s understanding how we engage consumers.”
The company also entered the telehealth business with last year’s acquisition of multispecialty telehealth provider MeMD.
“Telehealth offers a great opportunity to expand access and reach consumers where they are and complements our brick-and-mortar Walmart Health locations,” said Pegus in a Walmart new release announcing the acquisition. “Today people expect omnichannel access to care and adding telehealth to our Walmart healthcare strategies allows us to provide in-person and digital care across our multiple assets and solutions.”
Currently, Walmart Health centers only operate in Georgia, Florida, Illinois, and Arkansas. But telehealth enables Walmart “to provide virtual healthcare across the country to anyone,” Pegus said. With both offerings, “we’re really attempting to allow people to get healthcare the way they need it without disrupting the rest of their life.” Many users of these services are Walmart “associates,” she added, using the company’s term for its retail employees.
“In this country, about 25% of people don’t have a primary care physician,” cardiologist Cheryl Pegus, MD (above), Walmart’s VP of Health and Wellness, told Medscape. “So, your options for being able to solve in real time something that will help you, they’re quite limited. What we’re trying to do is give those options. We’re not trying to take away emergency rooms, or healthcare systems, or existing primary care. We’re asking, how do we expand that infrastructure so that people get care when they need it?” And this includes clinical laboratory testing, radiology, and telehealth services as well. (Photo copyright: Walmart.)
Large Portfolio of Healthcare Offerings
Pegus joined Walmart (NYSE:WMT) in December 2020 to oversee a portfolio that now includes more than 4,700 pharmacies and 3,400 Vision Centers, in addition to the telehealth operation and the Walmart Health centers. She was previously chief medical officer at Walgreens and Cambia Health Solutions and worked in private practice as a cardiologist.
The retail giant opened its first Walmart Health center in Dallas, Ga., an Atlanta suburb, in September 2019, followed by additional centers in Georgia, Arkansas, and Illinois.
Earlier this year, it opened five new clinics in northern and central Florida with plans for at least four more in the Jacksonville, Orlando, and Tampa areas, according to a press release. Each health center is adjacent to a Walmart retail location.
These centers offer a range of primary care medical services, including:
physicals,
injury care,
immunizations,
radiology, and
care for chronic health conditions.
Pictured above is one of the first health clinics established by Walmart. This location is in a western Atlanta suburb. Note that the services advertised include more than just primary care. Also offered are “labs and X-ray,” along with dental, hearing, optometry, and counseling. Clinical laboratory managers and pathologists may want to monitor whether consumers embrace primary care delivered from clinics located in retail stores. (Photo copyright: Georgia Health News.)
As Dark Daily reported in May 2020, the Walmart Health centers also offer clinical laboratory testing at cut-rate prices, such as:
$10 for a lipid test,
$10 for Hemoglobin A1c, and
$20 for a strep test.
On the Walmart Health website, patients can enter their Zip code to view a list of Walmart Health clinics in their area, including links to price lists.
Walmart’s Expansion into Healthcare Not Without Problems
However, the company’s expansion into healthcare has not gone smoothly. In 2018, the Walmart board signed off on a plan to open 4,000 health centers by 2029, Insider reported. By the end of 2021, Walmart expected to have 125 health centers in operation, but as of June 2022, the Walmart Health website listed only 25 locations, mostly in Georgia.
Citing anonymous sources, Insider reported problems that include “leadership changes, competing business priorities brought on by the coronavirus pandemic, and the complexity of scaling a massive healthcare operation.”
In Sept. 2021, Insider further reported that the clinics were experiencing operational difficulties including hidden fees and billing problems. One culprit, the story suggested, was the company’s electronic health record (EHR) software. That same month, Walmart announced it would adopt the Epic health records system, beginning with the opening of new clinics in Florida locations.
Pegus’ arrival at Walmart appears to be part of a management shakeup. In January 2022, Insider reported that she had assembled a new executive team, with David Carmouche, MD, Senior VP, Omnichannel Care Offerings, overseeing the health centers and telehealth operations. By then, the original executives leading the rollout of the health centers had all left, Insider reported. Carmouche was previously an executive VP with Ochsner Health in New Orleans.
Partnership with Quest Diagnostics
Meanwhile, in January, Walmart announced a deal with Quest Diagnostics that allows consumers to order more than 50 lab tests through The Wellness Hub on Walmart.com, which is separate from the Walmart Health website. The tests cover “general health, digestive health, allergy, heart health, women’s health, and infectious disease,” according to a press release announcing the partnership.
Consumers can order at-home test kits for certain conditions or set up appointments for tests at Quest Patient Service Centers. The tests on the Walmart/QuestDirect website include:
COVID-19 Active Infection ($119+)
COVID-19 Antibody Test ($69)
Cholesterol Panel ($59)
Complete Blood Count ($59)
Comprehensive Metabolic Panel ($49)
CRP Inflammation Marker ($59)
Diabetes Management ($69+)
Diabetes Risk ($99+)
Food Allergy Test Panel ($209)
Chickenpox ($59)
The website also offers a combined Basic Health Profile with CBC, CMP, cholesterol panel, and urinalysis for $149. “Each purchase is reviewed and, if appropriate, ordered by a licensed physician,” the press release states.
What does all this mean for clinical laboratories? “They need to recognize that the Millennials and Gen Zs are driving a consumer revolution in healthcare,” said Robert Michel, Publisher and Editor-in-Chief of Dark Daily and its sister publication The Dark Report.
“Walmart was early to recognize and respond to this, in part because it employs 1.3 million Americans, many of whom are Gen Y and Gen Z and quick to use telehealth and similar virtual health services,” he added.
Clinical laboratory leaders need to understand this trend and develop strategies to attract and serve new patients who are willing to access healthcare virtually, while still needing to provide blood and other specimens for the lab tests ordered by their providers.
Balwani’s lawyers opted not to have their client testify in his own defense and called only two witnesses, while Holmes’ defense team offered jurors the opportunity to hear her testimony
Elizabeth Holmes and Ramesh “Sunny” Balwani dreamed of revolutionizing the clinical laboratory blood-testing industry with their now defunct Theranos Edison device, which they claimed could perform multiple tests with a single finger prick of blood. Instead, they became the rare Silicon Valley executives to be convicted of fraud.
On July 7, ex-COO/President Balwani was convicted on all 12 counts of wire fraud and conspiracy charges in his federal fraud trial. Holmes, Theranos’ founder/CEO and former romantic partner to Balwani, avoided convictions six months ago in January on seven of the 11 counts she faced for her role in exaggerating the accuracy and reliability of the company’s Edison blood-testing device and providing false financial claims to investors.
“Once again, a jury has determined that the fraud at Theranos reached the level of criminal conspiracy,” said FBI Special Agent in Charge Sean Ragan in a press release posted on Twitter following the verdict. “The FBI has spent years investigating this investment fraud scheme with our partners at USPIS and the FDA Office of Criminal Investigations. Lies, deceit, and criminal actions cannot replace innovation and success.”
Ramesh “Sunny” Balwani (above center), former COO/President of Theranos, is shown leaving the federal courthouse in San Jose, Calif., on July 7 after he was found guilty on all 12 counts of fraud, a verdict more severe than ex-CEO and Theranos founder Elizabeth Holmes received in January for similar charges. Clinical laboratory directors and medical laboratory scientists have been closely monitoring both trails. (Photo copyright: Jim Wilson/The New York Times.)
Balwani’s Age and Experience May Have Worked Against Him
Michael Weinstein, JD, a former Justice Department prosecutor who is the Chair of White-collar Litigation at Cole Schotz, told The New York Times that Balwani’s age and his trial date—three months after Holmes’ conviction—worked against him. Balwani, 57, could not present himself as a young and inexperienced tech executive easily manipulated by those around him, as Holmes, 38, had attempted to do.
“Holmes could come off as a bit naïve, and [her defense team] tried to sell that,” Weinstein said of the former Stanford University dropout who founded Theranos in 2003 when she was 19.
In Holmes’ case the verdict was mixed, with jurors acquitting her of the patient fraud counts but unable to reach a decision on some of the investor fraud counts, Bloomberg reported.
Mr. Balwani, however, “came off as more of an experienced technology executive,” Weinstein added.
Weinstein pointed out that because the government’s case against Balwani mirrored its case against Holmes, prosecutors had time to refine their strategy before making a second appearance inside US District Court Judge Edward Davila’s San Jose courtroom.
“The streamlined presentation, the streamlined evidence, the streamlined narrative—all was beneficial for the government in the end,” he said.
Ever since opening arguments in March, Balwani’s legal team portrayed him to the jurors as a loyal partner who believed in Theranos’ technology and “put his money where his mouth is,” the Guardian noted.
Prosecutors, however, made the case that Balwani had a hands-on role in running the lab and was the source of Theranos’ overinflated financial projections.
Balwani invested about $15 million in the startup between 2009 and 2011 and never cashed in when his stake grew to $500 million. That money evaporated when Theranos collapsed.
In all, 24 witnesses testified against Balwani. He was ultimately convicted of all 12 counts he faced:
Two counts of conspiring with Holmes,
Six counts of defrauding investors, and
Four counts of patient fraud.
Major Differences in Trial Testimony
The Balwani trial made headlines due to COVID-19 pandemic related delays, but otherwise did not produce the news-generating moments that punctuated Holmes’ nearly four-month-long court appearance. Thirty-two witnesses appeared at the Holmes trial, including Secretary of Defense James Mattis, according to CNN.
Another significant difference in the two trials was that Holmes testified in her own defense. Holmes spent nearly 24 hours on the stand, CNN Business noted at that time, during which she cast the blame for Theranos’ failings on those around her, including Balwani.
ABC NewsRebecca Jarvis, host and creator of the podcast “The Dropout,” believes Balwani’s decision not to testify worked against him.
“[The abuse claims] did not come up at his trial, but during [Holmes’] seven days of testimony, they were a big portion of what she talked about,” Jarvis said in an ABC News “Start Here” podcast. “The biggest difference is that he didn’t take the stand to say, ‘I didn’t do this,’ or … raise his own objections to the claims against him.
“You think about a jury who is supposed to know nothing about any of [the defendant’s] backstory, and they’re shown these things like … case pictures of [Holmes] so much younger than [Balwani], supposedly having to rely on him for his expertise,” Jarvis added.
“You can imagine where the jury may have found that presentation more sympathetic than Sunny Balwani who had experience,” she said.
Text May Have Been Balwani’s Undoing
Balwani’s defense team called only two witnesses:
A naturopathic physician who used Theranos’ blood-testing lab, and
A technical consultant who Balwani’s legal team hired to assess the accessibility of patient data in Theranos’ Laboratory Information System (LIS), which the defense argued could have provided evidence of the accuracy of Theranos’ test results.
“This verdict also signals the jurors did not buy Balwani’s highly speculative argument that the database Theranos lost in 2018 would have proven his innocence,” Park said.
“We are obviously disappointed with the verdicts,” he said. “We plan to study and consider all of Mr. Balwani’s options including an appeal.”
Following the verdicts, Judge Davila raised Balwani’s bail to $750,000 and set a Nov. 15 sentencing date. Holmes is scheduled to be sentenced Sept. 26.
Balwani’s own words may have been his final undoing. During closing arguments, prosecutors again showed jurors a text message Balwani sent to Holmes in 2015, The New York Times reported.
“I am responsible for everything at Theranos,” he wrote. “All have been my decisions too.”
Clinical laboratory directors and medical laboratory scientists will no doubt continue to monitor the fallout from these two extraordinary federal fraud trials. There’s still much to learn about CLIA-laboratory director responsibility and how the government plans to prevent future lab testing fraud from taking place.
Theranos ex-COO and President Balwani will be sentenced on Nov. 15, while former CEO Elizabeth Holmes has her sentencing on Sept. 26
Observers within the clinical laboratory industry likely were not surprised to hear that Ramesh “Sunny” Balwani was convicted on Thursday of 12 counts of fraud related to his work at disgraced medical laboratory testing startup Theranos.
After all, Balwani’s conviction comes six months after a similar verdict for Elizabeth Holmes, the former founder and CEO of Theranos. The two were romantically involved during their time at the company.
A jury in San Jose deliberated for several days before reaching the guilty verdict against Balwani, 57, on a dozen counts of wire fraud and conspiracy to commit wire fraud. He is the former chief operating officer and president at the Theranos. Holmes was convicted of four counts in January.
“The jury concluded that Balwani perpetrated frauds on unsuspecting patients,” Stephanie Hinds, US Attorney for the Northern District of California, told the press after the verdict.
Balwani didn’t provide any comments to the two dozen or so reporters and photographers who followed him as he left the courthouse.
Ramesh “Sunny” Balwani leaves the courthouse after being convicted on 12 counts of fraud during his Theranos trial.
Balwani, Like Holmes, Faces 20 Years Behind Bars
Balwani will be sentenced on Nov. 15, reported NBC Bay Area. Holmes is scheduled to be sentenced on Sept. 26. She and Balwani each face up to 20 years in prison on each count, although a judge could allow those terms to run concurrently for each individual.
At the core of Balwani’s trial was whether he knew that Theranos allegedly defrauded patients and investors about its proprietary Edison blood-testing machine. The government argued that Balwani realized the Edison analyzer did not work and that he should have informed investors about the poor accuracy of the equipment.
In the end, the jury did not believe Balwani’s contention that he was merely an investor who let Holmes steer business matters at Theranos. Jurors saw text messages between Balwani and Holmes that defied that defense strategy.
For example, in one text to Holmes, Balwani wrote, “I am responsible for everything at Theranos,” NBC Bay Area reported during the trial.
A profile on Balwani published in March 2022 by The Cut, a website affiliated with New York magazine, also pushed the idea he had influence. “While many questions remain about Balwani’s role in the Theranos scheme, he definitely wielded a lot of power at the company,” The Cut reported.
Balwani and Holmes were indicted by federal prosecutors in June 2018. The indictments followed a three-year investigation by the government, which occurred after a blockbuster series of articles by the Wall Street Journal that detailed complaints from whistleblowers who formerly worked at Theranos.
Balwani never took the stand in his own defense. However, during closing arguments, his attorney, Jeffrey Coopersmith, JD, said Holmes’ charm influenced Balwani, much like it did Theranos investors.
“There’s no reason why he wouldn’t have seen the exact same thing: the charisma, the drive, the vision, the goal to change diagnostic testing. And he bought into that vision,” Coopersmith told the jury, as reported by Bloomberg. “He bought into that vision not only with his time but also with his own money,” investing $4.6 million in Theranos.
Compared to Holmes’ trial, which attracted huge media attention from around the world, Balwani’s proceedings occurred to much less hype and fanfare, given he was not as well known as Holmes to the general public and press.
—Scott Wallask
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