Previously High-Flying Theranos Provides Clinical Laboratories and Pathology Groups with Valuable Lesson on How Quickly Consumer Trust Can Be Lost

Affected patients speak about emotional, financial, and medical costs of receiving inaccurate results from the startup’s faulty Edison ‘finger-stick’ blood draw testing device

Healthcare consumers trust America’s clinical laboratories and anatomic pathology groups to provide accurate test results. When those test results are inaccurate, the loss of public trust can trigger a sharp decline in referrals/revenue and draw an avalanche of lawsuits by those harmed by inaccurate results.

The most recent example of this object lesson is disgraced blood testing company Theranos, previously estimated to be worth $9 billion but now struggling to stay afloat. The once high-flying startup has been brought to the edge of bankruptcy in the aftermath of a fraud settlement with the Securities and Exchange Commission (SEC), sanctions from the Centers for Medicare and Medicaid Services (CMS), investor lawsuits, consumer lawsuits, and a settlement with Walgreens over claims about Theranos’ Edison portable blood analyzer.

Theranos first made its unproven finger-stick blood draw device available to consumers in September 2013, when it announced a partnership with drugstore chain Walgreens (NASDAQ:WBA). At its height, Theranos operated 40 “Wellness Centers” in Walgreens stores in Arizona and a single location in California, which were the source of much of its revenue. USA Today reported the metro Phoenix-area centers alone sold more than 1.5 million blood tests, which yielded 7.8 million tests results for nearly 176,000 consumers. Theranos shuttered the wellness centers in 2016 after CMS inspectors found safety issues at Theranos’ laboratories in California and a Wall Street Journal (WSJ) investigation raised questions about the company’s testing procedures and accuracy claims. Ultimately, Theranos voided the results of all blood tests run on its Edison device from 2014 through 2015.

Breast-cancer survivor Sheri Ackert (above) told the WSJ she panicked when blood-test results from Theranos indicated her cancer may have reoccurred or were indicative of a rare type of tumor. After being retested by a different clinical laboratory, her results were found to be normal. Click here to watch a WSJ video about Ackert’s experience. (Photo/video copyright: Mark Peterman/Adya Beasley/Wall Street Journal.)

USA Today outlined the impact Theranos’ supposedly low-cost, cutting-edge technology had on several customers:

A woman inaccurately diagnosed with the thyroid condition Hashimoto’s disease changed her lifestyle, made unnecessary medical appointments, and took medication she didn’t need;
A woman inaccurately diagnosed with the autoimmune disease Sjögren’s syndrome was checked for food allergies before being retested and found not to have an autoimmune condition; and,
An Arizona resident who had heart surgery visited a Theranos clinic five times to monitor the results of blood-thinning drug warfarin and was switched to a different drug. He had to have a second heart surgery to drain blood from the pericardial sac and believes more accurate test results could have averted the follow-up operation.

Arizona resident Steven Hammons visited a Theranos clinic several times to have his blood tested. He’d been placed on blood thinners following heart surgery. He was taken off the blood thinners presumably based on the results of those tests. However, as USA Today reported, one test result was later found to be inaccurate. Hammons, who underwent a second procedure to remove blood that had built up around his heart, told USA Today he was concerned about the safety of his fellow citizens.

“That makes me very concerned and worried for the safety of other Arizonans,” said Hammons, who once worked in the medical services division of a private health insurance company. “Government had a role in patient safety. The powers that be dropped the ball.”

Arizona Attorney General Mark Brnovich spearheaded a lawsuit against Theranos under the state’s Consumer Fraud Act, which led to a $4.65 million settlement covering full refunds for every Arizona customer who used the company’s testing services.

“Theranos may have not only had some erroneous test results, but they may have misread my rising blood pressure level as well,” Brnovich told The Republic in a 2017 article announcing the state’s fraud settlement with Theranos. “They said that about 10% of the results were inaccurate. The problem is, as an Arizona consumer, you don’t know whether you were part of that class or not.”

Downfall of a Once-Vaunted Clinical Laboratory Company

Dark Daily and sister publication The Dark Report have written extensively about these events. Former CEO Elizabeth Holmes founded Theranos in 2003 when she was just 19-years old. By 2013, Holmes had become a media sensation based on her claims that “Theranos had developed a medical technology that could do what seemed to be impossible: Its secret machines could run thousands of medical tests using the blood from a tiny finger-prick, and do so quickly and cheaply,” Bloomberg reported in a recent article outlining Holmes’ fall from grace.

While Holmes continues in the role of Chairman of Theranos’ Board of Directors, she was stripped of control of the company as part of the SEC settlement in 2016. The SEC found Holmes and then-company President Ramesh “Sunny” Balwani had fabricated claims Theranos technology had been validated by the Food and Drug Administration (FDA) and pharmaceutical companies and battle-tested by the US military in Afghanistan.

As a result, the SEC also barred Holmes from serving as an officer or director of any public company for 10 years. In October 2016, Theranos announced it would be closing its laboratory operations and focusing on its effort to create miniature medical testing machines, which it did. Nevertheless, the fallout continues.

As pressures on medical laboratories and pathology groups to cut costs while delivering quality care and value increases, laboratory leaders must not lose sight of the fact that accuracy of results remains the key to maintaining trust with healthcare consumers and a financially viable business.

—Andrea Downing Peck

Related Information:

Theranos, CEO Holmes, and Former President Balwani Charged with Massive Fraud

Theranos Receives Notice of Sanctions from the Centers for Medicare & Medicaid Services

Two More Investors Sue Theranos and Elizabeth Holmes for Fraud

Theranos Hit with Consumer Lawsuit over Faulty Blood Tests

Theranos, Walgreens Reportedly Reach a Deal to Settle Suit for under $30 Million

Theranos Selects Walgreens as a Long-Term Partner Through Which to Offer Its New Clinical Laboratory Service

An Open Letter from Elizabeth Holmes

How Startup Theranos Has Struggled with its Blood-Test Technology

Theranos Reaches $4.65 Million Fraud Settlement with Arizona

As Theranos Drama Unwinds, Former Patients Claim Inaccurate Tests Changed Their Lives