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The health tech industry needs to rebuild trust with financial companies and the general public, after Elizabeth Holmes, the founder, and CEO of Theranos was found guilty of three counts of wire fraud and one count of conspiracy to defraud investors.
A jury found Elizabeth A. Holmes is guilty of one count of conspiracy and three counts of wire fraud in connection with a multi-million-dollar scheme to defraud investors in Theranos, Inc., announced United States Attorney Stephanie M. Hinds; Federal Bureau of Investigation (FBI) Special Agent in Charge Craig D. Fair; Food and Drug Administration (FDA) Acting Commissioner Janet Woodcock; and U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez. The verdicts follow a 15-week trial before the Honorable Edward J. Davila, United States District Judge.
“The jurors in this 15-week trial navigated a complex case amid a pandemic and scheduling obstacles,” said U.S. Attorney Hinds. “I thank the jurors for their thoughtful and determined service that ensured verdicts could be reached. The guilty verdicts, in this case, reflect Elizabeth Holmes’ culpability in this large-scale investor fraud and she must now face sentencing for her crimes.”
Holmes being found guilty is the news that made the headlines earlier in January, but the real story is the breach of trust Theranos caused within the industry, and who gets hurt as a result. And those, of course, are real innovators in the field, on one hand, and patients who will have to pay more and wait longer for blood test results, on the other.
“Elizabeth Holmes chose fraud over business failure. A jury has determined, beyond a reasonable doubt, that she intentionally misled investors,” said Special Agent in Charge Craig Fair. “I want to thank the FBI San Francisco agents and analysts who spent years investigating allegations of fraud within Theranos to uncover the truth and ensure justice in this case.”
“The FDA’s Office of Criminal Investigations (OCI) will continue to investigate and help bring to justice individuals and companies responsible for putting the public health at risk,” said FDA Assistant Commissioner for Criminal Investigations Catherine A. Hermsen. “FDA-OCI is proud to have partnered with the United States Attorney’s Office and its law enforcement counterparts to bring this prosecution.”
Patients who were reluctant to undergo diagnostic testing and could have benefited from innovations such as those Holmes pretended Theranos had developed, are the first to be hurt after this whole business. They now have even more reasons to doubt the medical-innovation establishment that claims to want to help them. Blood testing was supposed to become easier, less expensive, and less invasive. And, where Theranos was concerned, it was all a scam.
Holmes, 37, of Woodside, Calif., founded Theranos in 2003. Theranos was a blood-testing company based in Palo Alto and Newark, Calif. Holmes used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to induce investments. She claimed Theranos had developed an analyzer, variously referred to as, among other things, the Theranos Sample Processing Unit (TSPU), Edison, or minilab. She claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick. She also falsely claimed that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods—all at a faster speed than previously possible.
Not only did patients have more trust issues after Theranos’s transgressions. Investors are more cautious now, to ensure health tech companies have real science backing up their innovative claims.
And real science is of utmost importance, since 70% of today’s medical decisions depend on laboratory test results, showing the important role of clinical laboratories in today’s healthcare system. 260,000 CLIA-certified laboratories across the country represent the cornerstone of diagnostic medicine today. 14 billion laboratory tests are ordered annually—safety, quality, and cost effectiveness in laboratory testing are required for effective diagnosis and treatment of disease.
Threats to national security and health can happen at any time, such as disease outbreaks, as the coronavirus pandemic we are still facing, bioterrorist attacks, or chemical or radiological releases.
Reliable tests are key to establishing what patients are suffering from. Experts estimate that 40,000–80,000 deaths occur annually from preventable diagnostic errors. Patients in rural areas often experience barriers to healthcare and laboratory services that limit their ability to receive the care they need. So, reliable testing is key to a proper diagnosis, which is crucial for treatment and recovery.
But being reliable is hard to prove, after Theranos. Even established players and entrepreneurs are now facing more public scrutiny over the claimed benefits of their work, which is a good thing for the industry and the patients.
Truvian, for instance, has been working on developing a compact and automated system that can run a series of lab tests on a single blood sample in about 20 minutes. Inevitably though, parallels are going to be drawn between them and Theranos, although Theranos’ platform was based on collecting just one sample of blood compared to Truvian’s seven. Another similar company that developed a blood testing platform allowing patients to test for celiac disease & rheumatoid arthritis from the comfort of their homes is Imaware, and you can listen to Jani Tuomi, one of the co-founders, talking about their technology.
What all players in the tech health field must understand, is that failure is not an option, when lives are at stake. Innovation is evidently needed, but innovators must stay grounded in three key values: caring for people first and foremost, always leading with science, and ensuring understanding and transparency of their methods. Scientists or tech enthusiasts, innovators must not forget about the Theranos debacle and learn from it, in order to ensure patients really benefit from new blood-testing technologies and get the care they need.