Additional Troubles for Theranos

By Katherine Kwong

The onslaught of bad news for Theranos, the start-up laboratory services company plagued with troubles since last October, continued this week with a new round of reports and press coverage. First, on March 28, the Journal of Clinical Investigation published an article that found that Theranos’ tests tended to produce more irregular results than those of two other laboratory services companies. Then, on March 31, an inspection report by the Centers for Medicare and Medicaid Services was released, revealing numerous problems at Theranos that led to quality control problems, possibly leading to inaccurate test results for patients. The article and report both raise additional questions about Theranos’ claims and long-term viability – a steep letdown from early hype about the company, which promised to revolutionize the laboratory testing industry. The story of Theranos’ troubles highlights how scientific flaws and regulatory mishaps can lead to serious problems for companies seeking to innovate in the health sciences space.

This week’s reports were another chapter in a saga of troubles for the company which went public in October 2015. Theranos rose to prominence on the basis of its claims that it could conduct medical tests using a finger prick’s worth of blood rather than the larger vials used by its competitors. But in October, Theranos announced that the FDA believed its unique container for holding tiny amounts of blood to be tested – a so-called “nanotainer” –  needed to go through the regulatory approval process for medical devices. The Wall Street Journal published an article about the company’s troubles, raising significant questions about many of Theranos’ claims about their proprietary equipment and processes. Theranos pushed back against the criticisms, disputing many of the article’s factual assertions. But the drum beat of negative press continued.

Then in January, CMS sent a letter to Theranos, outlining several deficiencies in Theranos’ compliance with requirements for Clinical Laboratory Improvement Amendments (CLIA) certification. News reports highlighted concerns about the implications for patient safety and the unusual seriousness of the warnings. In response, Walgreens and other companies announced they would suspend using Theranos’ laboratory testing services for their customers.

And now, after the months of troubles, the Journal of Clinical Investigation article has provided an independent review of Theranos’ measurements and found concerning results indicating that Theranos’ measurements did not match those of some of its major competitors, Quest and LabCorp, which use more traditional blood draws from veins. Theranos strongly criticized the study and urged the journal not to publish it, saying the study had “fundamental problems…. that cast serious doubts on the validity of [its] conclusions.” However, some experts responded by defending the methods used in the study and suggesting that Theranos had failed to account for important factors that might affect its measurements, skewing the results reported for patients.

Just days afterwards, the inspection report by the Centers for Medicare and Medicaid Services was released, finding a pattern of missed quality checks, failures to comply with quality control measures, poorly trained and unqualified employees running tests, and significant variations in test results. The Wall Street Journal published an in-depth article about the report, reporting that CMS is considering imposing sanctions on the company.

Theranos issued a statement saying that it had taken steps to address all of the issues in the report, including changes its personnel, procedures, and instruments. However, these changes may not occur fast enough or be significant enough to restore faith in the company. Some reports indicate that Walgreens has actively begun to seek ending its relationship with Theranos entirely.  Fortune described the company as “on the ropes” after the CMS report was released, and some commentators are now speculating, “Theranos may be the first big unicorn that has a drop in valuation to zero.”

Theranos’ fall from grace – going from an attractive example of an innovative start-up to a story of a company gone horribly wrong – provides an opportunity for reflection. How might Theranos have prevented these issues? Some commentators argue that if Theranos had published its own studies or engaged more with the scientific community, it might have avoided some of these problems. Perhaps spending more time developing the technologies and ensuring the validity of the company’s processes would also have helped. What the Theranos epic makes clear, though, is that scientific rigor and careful compliance with health care regulatory bodies are crucial to ensuring success for innovative health science companies.

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