CEO SUMMARY: In a partnership with Walgreens pharmacies, Theranos Inc. announced that it will run clinical lab tests on “micro-samples” and collect these blood samples without venipuncture. Even as Theranos touts the patient-friendly benefits of its proprietary diagnostic technology, it has provided no information about the science that supports this testing and the clinical validations it has performed that would meet the requirements of the FDA and federal and state laws governing medical laboratory testing.
ON SEPTEMBER 9, Walgreens issued a press release with this headline: “Theranos Selects Walgreens as a Long-Term Partner Through Which to Offer Its New Clinical Laboratory Service.”
The two companies announced a long-term partnership to offer clinical laboratory testing services in all Walgreens Pharmacies nationwide. Just the fact that Walgreens wants to provide medical lab tests and specimen collection services in its thousands of pharmacies is enough to disrupt the status quo in the competitive market for laboratory testing services. This would be particularly true if the other big national retailers with thousands of pharmacies such as CVS, Walmart, and Rite Aid, followed Walgreens’ example.
k8,117 PSCs with No Capital
On that point, national lab company executives in Madison, New Jersey, and Burlington, North Carolina, are probably giving this new clinical laboratory testing partnership their full attention. In one move, Theranos, Inc., of Palo Alto, California, gains potential access to 8,117 patient service centers in neighborhoods and communities across the United States with little investment.
But the disruptive elements of this breaking news story don’t stop there. Walgreens and Theranos are ready to bend the price curve in clinical lab testing.
To this point, the press release stated “Theranos tests are low cost—always 50% of Medicare reimbursement rates or less—and are reimbursed by major insurance carriers, Medicare, and Medicaid.”
Theranos will offer hundreds of different clinical laboratory tests at a price that will be 50% or so of the Medicare Part B Clinical Laboratory Fee Schedule. It is not just the two Blood Brothers who will need to have a competitive response to this development, but also independent lab companies and the laboratory outreach programs of hospitals and health systems.
On the surface, the use of Walgreens’ national network of stores as patient service centers and a price for clinical lab tests that is 50% of Medicare rates does create the potential for Theranos to be a disruptive player in the clinical lab testing marketplace as it is structured today.
At the same time, pathologists and lab regulators are likely to ask important questions about the new proprietary diagnostic technologies Theranos is touting. So far, Theranos has decided to keep this information out of the public eye. The statements it makes for public consumption only discuss the consumer benefits of its proprietary approach to performing a lab test—but offer no scientific details.
CLIA-Licensed Lab Facility
For example, the press release noted that Theranos would use CLIA-certified laboratory services along “with the ability to run its tests on micro-samples.” It would collect blood samples without venipuncture and it says it can deliver fast turnaround time from specimen collection to test results.
On its web site, the company says, “At Theranos, we’re working to shape the future of lab testing. Now, for the first time, our high-complexity CLIA-certified laboratory can perform your tests quickly and accurately on samples as small as a single drop.”
Left unexplained is the science and the proprietary technology Theranos will use to accomplish these goals. Because this testing is for clinical purposes, pathologists and physicians will also be interested in how Theranos demonstrated that it fully meets state and federal regulations governing new diagnostic technologies and how they are to be used in clinical settings.
In 2003, company Chairman, President, and CEO Elizabeth Holmes dropped out of Stanford University and founded Theranos at the age of 19. Since then, the company has raised $100 million of venture capital and has a board of directors populated by prominent individuals. Yet, as it prepares to offer clinical lab testing to patients nationally, it has not explained its diagnostic technology in any depth.
For example, in its announcement with Walgreens, Holmes said, “For the past 10 years, Theranos has worked relentlessly to reach a point at which we could help make actionable information accessible to physicians and patients at the time it matters most.
Test Results in Just Hours
“Clinicians can now see their patients having received lab results from fresh samples in a matter of hours,” Holmes continued in the press release. “This partnership [with Walgreens] will further our goal to bring high quality, affordable lab testing to people everywhere, with our new Wellness Centers in Walgreens retail locations closest to homes and workplaces.”
All the company says about its technology is that it uses a “proprietary laboratory infrastructure that minimizes human error through extensive automation that produces high quality results.”
Seeking more information on the technology involved in this partnership between Theranos and Walgreens, THE DARK REPORT asked questions and a Theranos spokesperson responded by email.
“This month the first Theranos Wellness Center at Walgreens will open in Palo Alto, California,” the spokesperson said, adding that Theranos plans to locate its patient service centers in Walgreens stores nationwide. “Only sample collection is performed in the Theranos Wellness Centers [within these retail stores], and then specimens are sent to the Theranos CLIA-certified laboratory. Collection is performed by Theranos’ trained, licensed phlebotomists or appropriately state-certified personnel,” the spokesperson explained.
Some medical lab testing companies have an online presence and allow patients to print out test orders and bring those orders to a lab for fulfillment. In contrast, “as a laboratory, Theranos performs physician-ordered tests and results are always communicated directly back to the ordering physician for clinical decision-making, as is done in the industry today,” the spokesperson commented.
Theranos’ lab in Palo Alto is a licensed clinical laboratory that is CLIA-certified to perform moderate and high complexity testing, the spokesperson said. In this lab, “Theranos can run multiple analytes on a single specimen, accommodating a full range of typical physician-directed test orders,” the company said.
“Theranos develops and validates laboratory-developed tests and is working to additionally have those assays FDA- cleared, as appropriate,” noted the company spokesman. “Its tests are physician-directed, and the company rigorously validates the analytical and clinical performance of its tests. The company’s current test menu is available on the web (at http://theranos.com/test-menu), and this menu is updated regularly.”
Validate Lab-Developed Tests
Over the years, THE DARK REPORT has regularly predicted that technology innovations will revolutionize the methodology of clinical laboratory testing while radically reducing the cost of such testing.
Yet never before has any company burst upon the clinical laboratory marketplace with a claim that it can perform hundreds of lab assays using micro-quantities of specimens and deliver comparable accuracy, sensitivity, and specificity—all at a cost that is half of what labs typically are paid today!
For these reasons alone, Theranos is a must-watch company. Pathologists will be among those most keenly interested to learn the technical details about this new diagnostic technology.
Theranos Says It Wants to “Reinvent Lab Testing,” But Has yet to Publish or Disclose Its Science
THERANOS INC. AIMS to reinvent lab testing, the company says on its web site. How it plans to reinvent clinical laboratory testing is not well explained, although the company does say that it will draw small amounts of blood from patients without venipuncture.
“By minimizing the volume of blood required from patient draws, Theranos helps clinicians provide a new standard of care across all specialties and treatment areas,” the company said in an announcement of its partnership with Walgreens pharmacies. “Minimally invasive collection has the potential to benefit everyone, including oncology, pediatric, and geriatric patient populations that require frequent blood draws.”
A company spokesman explained the sample collection process as follows: “Blood is either taken from a tiny finger stick or a micro-sample taken from traditional methods, mitigating the need for the larger needles and numerous vials of blood required for most diagnostic lab testing. When drawn from a finger stick, blood is collected from the finger after a small lancet is used to puncture the skin, and is transported in Theranos’ nanotainer tubes.
“Theranos’ tests can be performed on smaller samples that can be collected in a less invasive manner, and have all the associated benefits (patient experience, compliance, and so forth) that span across treatment areas,” the spokesman said.
Richard Ashworth, Vice President, Corporate Operations for Walgreens, in Deerfield, Illinois, described the blood collection process, saying, “It will be more like how a patient with diabetes takes a small sample of blood for glucose testing. It’s simple in terms of the experience but very powerful in terms of technology. Theranos will warm the finger and then use gravity and a nanotainer to wick just a few drops of blood into a unit that will be used for processing on certified lab equipment in the Theranos clinical laboratory. There’s not much more to it than that.”
Goals at Theranos Evolved During its 10-Year Life
GIVEN ITS POTENTIAL TO BE A DISRUPTER in the clinical lab testing industry, Theranos has evolved its business goals during its 10-year life as the company sought a way to make money.
Theranos was founded in 2003 by Elizabeth Holmes, then a 19-year-old college drop-out who used her connections at Stanford University to raise tens of millions of dollars in venture capital funding.
Inc. Magazine published a profile of Holmes in 2006. It said “At the age of 20, she designed a device with the goal of saving the estimated 100,000 people who die each year from adverse drug reactions. With the Theranos 1.0, patients prick their fingers and place a small drop of blood on a disposable cartridge, which is then inserted into a reader that analyzes the medicine within the bloodstream. The device then sends the data wirelessly to a secure database, which makes it available online to the patients’ physicians.”
During an economic summit at Stanford University in 2010, Holmes discussed the evolution in thinking at her company. She said the company recognizes the ability of personalized medicine to transform healthcare. This is why Theranos was developing the technology to make information from blood tests more actionable.
“We have focused on the ability to integrate the various data sets to be able to understand how to individualize therapy or predict the onset of disease,” Holmes said in a video of the event. Moreover, Theranos can track “the dynamic progression of changes in these parameters over time,” she added.
“We can see these changes over time in the expression of proteins and other variables in the blood which—when sampled more frequently—can begin to describe the movie of disease progression rather than the snapshot,” Holmes explained.
Secretive Company Has All-Star Board of Directors
IN RECENT MONTHS, the San Francisco Business Journal has published a series of stories about what it calls the “Secretive Theranos.” Its reporters, particularly Ron Leuty, have done their best to crack the corporate veil and report on a company that is 10 years old and has attracted $100 million in venture capital funding.
Now that Theranos has come out of the closet—at least somewhat—with its long-term agreement to offer clinical lab testing in partnership with Walgreens, it will certainly be scrutinized by the laboratory medicine profession, along with the FDA, and state and federal medical laboratory regulators.
What pathologists and clinical lab administrators will find interesting is the make-up of the Theranos board of directors. Not only does it include a constellation of politically-influential individuals, but it seems to lack individuals with direct experience in clinical laboratory testing and anatomic pathology.
In a story published on August 2, 2013, the San Francisco Business Journal identified these individuals as directors on the board at Theranos:
- Elizabeth Holmes, Chairman & CEO
- Ramesh “Sunny” Balwani, President & COO
- Henry Kissinger, former Secretary of State
- George Shultz, former Secretary of State
- William Perry, former Secretary of Defense
- Sam Nunn, former U.S. Senator
- Gary Roughead, retired Navy Admiral
- James “Mad Dog” Mattis, retired four-star Marine General
- Richard Kovacevich, Former Wells Fargo & Co. Chairman & CEO