In 2003, a 19-year-old Stanford student named Elizabeth Holmes dropped out of college with a big idea. She would build a machine that could run a wide range of medical tests on a few drops of blood from a finger prick, instead of the vials drawn from your arm at a lab.
She called the company Theranos, a blend of “therapy” and “diagnosis.” By 2013 and 2014, it had raised more than $700 million and was valued at about $9 billion. Holmes, who favored black turtlenecks like Steve Jobs, was on magazine covers as the youngest self-made female billionaire in America.
There was just one problem. The technology did not do what the company said it did.
The Edison and the Nanotainer
Theranos’ blood-collection tube was called the “nanotainer.” Its analyzer was called the “Edison,” after Thomas Edison. Holmes reportedly explained the name by saying they had tried everything else and it had failed.
The company built a board of directors that was among the most famous in corporate America, filled with former Cabinet officials and retired military leaders. It signed a deal with Walgreens and, in 2013, began offering its blood tests at more than 40 Walgreens locations, mostly in Arizona.
For ordinary customers, it sounded great: cheap, fast blood tests at the corner drugstore, with no big needle.
The Questions Begin
In February 2015, Stanford professor John Ioannidis pointed out in the Journal of the American Medical Association that Theranos had not published any peer-reviewed research showing its technology worked. For a medical device company, that was strange.
Then, in October 2015, Wall Street Journal reporter John Carreyrou published a bombshell. Theranos, he reported, was running most of its tests not on its own Edison machines, but on traditional blood-testing machines made by other companies. And the Edison devices, according to former employees, might be giving inaccurate results.
One of Carreyrou’s key sources was a young former employee named Tyler Shultz, whose grandfather was on the Theranos board. Shultz had raised concerns inside the company. When that went nowhere, he talked to the reporter and also reported the company’s lab, under an alias, to New York state health regulators.
“Immediate Jeopardy”
Federal regulators moved in. In January 2016, the Centers for Medicare and Medicaid Services sent Theranos a letter based on an inspection of its lab in Newark, California. The agency said conditions there posed “immediate jeopardy to patient health and safety,” citing a test used to set doses of the blood thinner warfarin.
Think about what that means. Patients on a blood thinner rely on accurate test results to know how much medicine to take. Too much can cause bleeding. Too little can cause clots.
In May 2016, Theranos voided two years of results from its Edison devices. That meant tens of thousands of test results that patients and doctors had already used were withdrawn. In July 2016, regulators revoked the lab’s certification and banned Holmes from owning or operating a lab for two years. Walgreens ended the partnership and closed the in-store Theranos centers.
The Fall
In March 2018, the Securities and Exchange Commission charged Theranos, Holmes and former company president Ramesh “Sunny” Balwani with an “elaborate, years-long fraud” that deceived investors about what the company’s technology could do. Holmes settled with the SEC, paying a $500,000 penalty, giving up control and accepting a 10-year ban from leading a public company. She did not admit or deny the allegations.
Three months later, a federal grand jury indicted Holmes and Balwani on wire fraud and conspiracy charges. What was left of Theranos dissolved in September 2018.
The Verdicts
Holmes’ trial began in August 2021. On January 3, 2022, the jury found her guilty of four counts of defrauding investors. She was acquitted of the counts involving patients, and the jury could not reach a verdict on several others. In November 2022, she was sentenced to 11 years and 3 months in federal prison. She reported to a federal prison camp in Bryan, Texas, in May 2023.
Balwani, tried separately, was convicted on all 12 counts against him in July 2022 and sentenced to 12 years and 11 months.
How to Know Your Lab Test Is Legit
Patients rarely think about who runs their blood tests, but you can check.
In the United States, labs that test human samples for medical purposes must be certified under the Clinical Laboratory Improvement Amendments, known as CLIA. The Centers for Medicare and Medicaid Services oversees that program and inspects labs. Theranos’s California lab was cited during one of those inspections.
Many tests themselves must also be cleared or approved by the Food and Drug Administration before they can be sold, especially home tests and new devices.
If a company advertises a revolutionary test, ask your doctor whether it is FDA-cleared and which certified lab runs it. And be wary when a result seems wildly different from your history. A retest at a second lab is cheap insurance.
Why It Still Matters
Theranos is often told as a Silicon Valley story about hype and investors. But the most disturbing part is what happened to ordinary people who walked into a drugstore and trusted the results.
The lesson for patients is practical. If a test result surprises you or your doctor, especially one that would change your medication, ask for a retest at a different, accredited lab. Ask which lab ran the test. A lab’s certification and accreditation are matters of public record.
And the lesson for everyone else is older than Silicon Valley: when someone refuses to show you proof, the problem is usually not that the proof is too secret. It is that it doesn’t exist.
Photo: Kevin Krejci via Wikimedia Commons, CC BY 2.0 (Elizabeth Holmes at TechCrunch Disrupt SF, 2014)
Sources
- The Wall Street Journal, John Carreyrou, “Hot Startup Theranos Has Struggled With Its Blood-Test Technology” (Oct. 16, 2015): wsj.com
- U.S. Securities and Exchange Commission, “Theranos, CEO Holmes, and Former President Balwani Charged With Massive Fraud” (March 14, 2018): sec.gov
- U.S. Department of Justice, Northern District of California, “Theranos Founder Elizabeth Holmes Sentenced to More Than 11 Years” (Nov. 18, 2022): justice.gov
- Wikipedia summary with full citations, “Theranos”: wikipedia.org
