WSJ ‘Sticks’ Theranos, Raises Serious Questions

Two front-page stories describe problems with lab test technology and issues with the FDA

CEO SUMMARY: Following months of investigation, reporter John Carreyrou of The Wall Street Journal published back-to-back reports about aspects of Theranos that the secretive company has kept from public view. Based on interviews with several employees and others with knowledge of events at Theranos, the WSJ disclosed that Theranos runs only a handful of tests using its proprietary technology. Theranos said the information in both stories was “factually and scientifically erroneous.”

FOR THE FIRST TIME, one of the nation’s questions most respected news organizations has raised serious questions about the accuracy of the diagnostic-testing technology used by Theranos and its compliance with federal and state regulations governing clinical laboratories.

The Wall Street Journal published back-to-back front page exposés about the lab company on October 15 and 16. The articles were based on a detailed investigation that reporter John Carreyrou and other staff members conducted over several months.

 Publication of these stories launched a firestorm of additional news coverage. Stories published by other media outlets included the revelations by some well-known scientists and respected business leaders that they had personally raised questions when undergoing clinical laboratory tests Theranos performed,or investigating the company for a possible investment.

 Overnight, Theranos CEO Elizabeth Holmes ceased to be a media darling. Instead, she found herself confronted with serious questions from major news organizations. Holmes and her lab company immediately launched a public communications blitz. Theranos emphatically challenged the accuracy of the information presented in the The Wall Street Journal.

Many clinical lab executives and pathologists are following these developments closely because Theranos has consistently stated that its corporate goal is to disrupt their business, the clinical laboratory industry. Also, medical laboratory professionals know how challenging it is to run lab tests quickly, consistently, and accurately using today’s complex technologies. Thus, they want to understand more about how and why the innovative diagnostic technology Theranos claims to have is capable of delivering safe, accurate, and reliable results for clinical care.

Investigation of Theranos

Based on its investigation into Theranos, the WSJ identified a number of lab operations and regulatory issues at Theranos. In its front-page story on October 15, the journal reported the following:

  • As of December 2014, Theranos was using its proprietary lab analyzer (which Theranos calls Edison) for only 15 of the lab company’s 240 tests for consumers and patients.
  • Some current and ex-employees were concerned about the accuracy of lab tests run on the Edison analyzer.
  • Information, documents, emails, and comments from individuals the Journal interviewed described questions they had about how Theranos conducted proficiency testing, including splitting PT samples.
  • An employee or other individual filed a complaint with the New York State Department of Health alleging that Theranos was “manipulating” proficiency testing. According to the Journal, the NYDOH referred this matter to the federal Centers for Medicare & Medicare Services, which declined to comment. The NYDOH confirmed it received a complaint in April 2014.
  • Employees or other individuals described how, for 60 of the 240 lab tests Theranos offered, Nanotainer-sized specimens collected via a finger stick were diluted to run those specimens on conventional lab analyzers Theranos operated.
  • About the dilution issue, the Journal wrote “some of the potassium results at Theranos were so high that patients would have to be dead for the results to be correct, according to one former employee.”

Within hours of the Journal’s publication of the article on October 15, Theranos issued a public statement challenging the information in the story. In one comment, Theranos said, “Today’s Wall Street Journal story about Theranos is factually and scientifically erroneous and grounded in baseless assertions by inexperienced and disgruntled former employees and industry incumbents.”

The complete press statements Theranos issued in response to articles in the journal are available on the Theranos website at theranos.com/news/press-releases.

A Second Front-Page Story

The following day, on October 16, the WSJ published a second front-page story about Theranos. This story described issues involving Theranos and the FDA, including the following:

  • “Under pressure from regulators, lab firm Theranos Inc. has stopped collecting tiny vials of blood drawn from finger pricks for all but one of its tests, according to a person familiar with the matter, backing away from a method the company has touted as it rose to become one of Silicon Valley’s hottest startups.”
  • A source said FDA inspectors “recently showed up unannounced at Theranos,” based on concerns about the data Theranos had voluntarily submitted to the FDA in an effort to win approval for its proprietary testing methods.
    During that inspection, the FDA said it considered Theranos’ Nanotainers to be unregulated medical devices.
    Also, following the FDA inspection, Theranos would need to resubmit data for a number of its proprietary blood tests currently under FDA review.
  • Following the FDA inspection, Theranos was audited by CMS. A CMS spokeswoman declined to comment to the WSJ.
  • A Walgreens official declined comment on these issues, referring the reporter to Theranos.
  • The Journal called a Walgreens store in Phoenix and “a blood-drawing technician at a Walgreens in the Phoenix area, reached by phone late Thursday, said Theranos had ‘temporarily suspended’ finger-prick draws and was only drawing blood from patients’ arms with needles at that store.”

 The same day as publication of this second story, Theranos released another public statement. It said: “As we continue with our transition to all FDA-cleared or approved tests, we are now operating only under full FDA quality standards and systems. It’s the right choice and the highest standard. And as of this exact moment, that means temporarily using a different tube-tubes for venous blood-so we can maintain the quality standards we have in our labs as we complete the clearance process on the Nanotainer. Still smaller tubes, smaller samples, lower costs. So right now we are taking samples, transporting them, and running the tests. That is an FDA-cleared process. That is our process.”

Interview at WSJ Conference

Five days later, on October 21, Elizabeth Holmes answered questions from a senior editor at the journal during the WSJD Live global technology conference in Laguna Beach, California. The next day, the journal published a third article, based on the interview, highlighting these key points:

  • Holmes stated Theranos is now in a “pause period” while it works for clearance from the FDA for its proprietary diagnostic technology.
  • Holmes confirmed the “unannounced” inspection by the FDA in August, as reported by the journal.
  • Holmes confirmed Theranos is using the finger stick collection and Nanotainer device only for the single FDA-cleared HSV-1 test. Theranos took this step following the FDA inspection in August. It is using venipuncture to collect specimens for all other lab tests.
  • Holmes acknowledged Theranos currently uses an alternative process for proficiency testing, as allowed per federal regulations.
  • Holmes asserted Theranos never diluted the Nanotainer-sized specimens to allow testing on its conventional lab analyzers.

Theranos Statement

On the day following this conference, Theranos issued another public statement. In part, it said, “We are confident in the reliability of our tests, because we comprehensively validate the accuracy of every test we run. In addition, we are the only laboratory that has committed to submitting all of our laboratory-developed tests, including our technology, procedures, and methods, to FDA for review and clearance. FDA has already cleared one of those tests, including our underlying test systems and Nanotainer tubes, for use in detecting the herpes simplex virus (HSV-1). The decision summary, which describes the rigorous science behind the clearance, is available online.”

The most recent development in the story involving Theranos and The Wall Street Journal came on October 23. On that day, the WSJ published information about the Walgreens Boots Alliance Inc. relationship with Theranos. The key points described in this story were:

  • The previous day, executives from Walgreens Boots Alliance Inc. met with senior Theranos staff in Palo Alto, California.
  • A Walgreens official said the company would open no additional Theranos Wellness Centers in its stores until questions about the company’s diagnostic technology are “resolved.” Also, there are “no concrete plans at this stage” to expand the partnership with Theranos.
  • Walgreens executives were unaware—until publication of the WSJ stories—that Theranos had not been using finger stick collections and Nanotainer-sized specimens for 239 of its lab tests and that only the FDA-cleared HSV-1 lab test involved this collection method and specimen.
  • The Walgreens’ board of directors created a team to examine the “scientific and legal questions raised by the two Journal articles.”
  • A person familiar with the matter told the journal that Walgreens has an equity stake in Theranos.

The following day, Theranos General Counsel Heather King responded to the Journal’s coverage of Theranos and Walgreens. She stated, “Walgreens is our business partner and we meet with them regularly. We would not comment on ongoing discussions with any business partner, of course. Our partnership with Walgreens has been a positive one, realized through our program in Arizona, and we are continuing to work with them on future opportunities and arrangements.”

More News Coverage

Using recent news coverage as a gauge, it appears that, going forward, Theranos will probably get more scrutiny from journalists and investors alike.

Holmes Says It’s Lab Industry Who ‘Are Seeding the Press With Negative Stories about Theranos’

IN THE DAYS FOLLOWING PUBLICATION of these stories about Theranos by The Wall Street Journal, many business publications and media organizations have published their own stories about this situation. There is a healthy scepticism in this news coverage that has been absent in many of the stories that profiled Theranos and Elizabeth Holmes in recent years.

An example is a commentary posted on October 15 by Matthew Herper, Senior Editor for Pharma & Healthcare at Forbes. He interviewed Holmes during her appearance at a conference in Philadelphia the previous week.

Herper reported that, when he asked Holmes about those criticizing Theranos, she replied that it was laboratory companies “which she says are seeding the press with negative stories about her.” She stated, “To be clear, the commentary in the press is 100% instigated by the lab industry and it showed up in the press about us last year and it’s just been repeated. What I would say is that we’re the only lab company that is really focused on transparency.”

In his commentary at Forbes.com, Herper wrote, “…Holmes and Theranos need to stop blaming every question that’s asked them on a conspiracy. Of course their competitors say bad things about them. That’s what competitors do. But how many Theranos tests are conducted using Edison? How does accuracy compare to other tests? What, praytell, is factually inaccurate and erroneous in the Journal story? These are fair questions, and deserve a better answer than simply that Theranos has submitted 130 tests to the FDA (reminder: only one is approved) and that it is under attack from the laboratory industry.”

He continued, “Great companies aren’t paranoid about their competitors. They’re paranoid about their products, and they know that if they did everything right, their competitors can’t touch them. It’s time for Theranos to provide some answers. Holmes is scheduled to be interviewed at the Forbes Healthcare Summit on December 3, but I, for one, would like some factual responses sooner than that.”

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