Might Lawsuits Come Next in the Theranos Story?

Grocery store operator Safeway spent $350M to build Theranos blood collection centers in 800 of its stores

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Tailored to the needs and interests of lab administrators and pathologists, THE DARK REPORT provides new insights into the continuing saga of Theranos. A stream of headline stories in recent weeks has painted the controversial lab testing company in an uncomplimentary way, and TDR puts you front and center in these important developments.

Have you been concerned about a threat from Theranos to your clinical lab or pathology group? What do you believe will be the impact on the industry from these latest developments? Please share your thoughts with us in the comments below.

Recent disclosures in the news indicate that an agreement between Theranos and Safeway has gone sour — after Safeway spent a third of a billion dollars to fulfill its part of the collaboration! Some experts believe Safeway would be on firm ground to file a lawsuit against Theranos in this matter.

Meanwhile, more journalists are investigating Theranos and uncovering new facts. In response to The Wall Street Journal’s reporting, Theranos said it was “inaccurate and defamatory.”

For two years, both CEO Elizabeth Holmes and Theranos, her lab testing company, have been the darlings of the national media. A procession of cover stories in prominent magazines hailed her as an entrepreneurial genius who developed revolutionary diagnostic technology that would enable her company to disrupt the entire clinical lab industry. That positive news spin may have ended on September 15, when The Wall Street Journal published the first of several front page exposés that described serious issues inside the highly-secretive Theranos. In response to the facts and questions about Theranos raised by reporter John Carreyrou in his investigation, a number of additional issues and concerns about Theranos have been published by major newspapers and business publications. Theranos and Holmes have scrambled to respond to the negative news coverage. They vigorously challenge the accuracy of the reporting and those statements can be found on the Theranos website at www.theranos.com.

In our previous issue, we provided a useful overview of issues concerning Theranos that are of specific interest to pathologists, lab administrators, and hospital executives. Carreyrou identified these points in his stories published between September 15 and October 23. (See TDR, October 26, 2015.) Last week, Carreyrou and the Journal published another bombshell about Theranos. On November 10, the Journal published a story that claimed Safeway had spent $350 million to build blood collection centers in as many as 800 of its grocery stories across the United States as part of an agreement it had with Theranos.

$350 Million Price Tag

Carreyrou wrote, “The plan called for Safeway to build upscale clinics that would house Theranos’s blood analyzers and provide patients with rapid test results, according to current and former Safeway executives. The $350 million price tag was equivalent to more than half of Safeway’s net income of $596.5 million in 2012. Safeway had revenue of $44.21 billion. Safeway also invested more than $10 million in Theranos, one former Safeway executive said.”As part of this story, the Journal published a response by Theranos about the report of an agreement between Theranos and Safeway.

The WSJ noted, “In an email Tuesday, Theranos’s general counsel, Heather King, said: ‘We don’t comment on discussions with other companies. The questions and information you have presented… are inaccurate and defamatory.’ She declined to comment on the claims by former Safeway executives.” A spokesperson from Safeway declined to comment to the Journal.The Journal made another stunning claim about the perceived failure of Theranos’ proprietary lab testing technology to produce accurate and reproducible lab test results for specimens collected from Safeway employees.

Drawing Blood Twice

Carreyrou wrote, “In an initial phase of the project, Safeway had Theranos conduct blood testing at the headquarters clinic [in Pleasanton, California], current and former Safeway executives said. Theranos often drew the same employee’s blood twice, first with blood from a finger prick and then the traditional method of a needle in the arm, according to one former Safeway executive.”

This description of how Theranos collected two specimens — a capillary blood specimen by fingerstick and a venous blood specimen by venipuncture — from Safeway employees mirrors the experience of THE DARK REPORT’S editor when visiting the Theranos Wellness Center in the Walgreens in Palo Alto, California last May. (See TDR, May 11, 2015.)The Journal further described issues associated with the lab tests Theranos performed for employees at the Safeway corporate clinic. It stated that “the former [Safeway] executive said he worried that Theranos’s finger-prick process was still a work in progress. ‘If the technology is fully developed, why would you need to do a venipuncture?’ this person said, using the term for a traditional blood draw.”

Different Test results

The Journal continued, “The concerns deepened when Theranos’ test results for several Safeway employees differed from the results the same employees got from other laboratories, according to the former executive. Another former Safeway executive confirmed those recollections.

One Safeway executive got a frighteningly high result from Theranos on a test to gauge his prostate-specific antigen [PSA], according to two former Safeway executives. They said the test suggested that the executive had prostate cancer. Retesting by another lab came back normal,” wrote the Journal.Carreyrou made another notable disclosure involving Theranos’ reluctance to put its proprietary lab test analyzer into Safeway stores.

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