WSJ Reporter Tells All About Downfall of Troubled Theranos

Lab company ran a ‘giant unauthorized experiment'

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CEO SUMMARY: While Theranos was a darling of the business and national media, Wall Street Journal reporter John Carreyrou was hearing troubling reports about patients who got incongruent lab results that put them at risk for inappropriate medical treatments. His investigation of Theranos and its celebrated founder, Elizabeth Holmes, revealed that the company’s much-touted lab testing technology was deeply flawed and that the company had misrepresented itself to government regulators, investors, patients, and the media.

IT IS OFTEN SAID THAT PRIDE GOETH BEFORE A FALL. That phrase certainly applies to the story of Theranos, Inc., and its much-touted founder and CEO, Elizabeth Holmes. While that story alone is fascinating, the work of an intrepid newspaper reporter from The Wall Street Journal is equally appealing, in part because he scooped all prominent news outlets while publishing multiple, well-researched exposés of Theranos, its many problems, and its various alleged fraudulent actions.

Acting on a tip from a former Theranos employee, Journal reporter John Carreyrou traveled to Arizona in April 2015 seeking doctors who had ordered blood tests from the Silicon Valley startup clinical laboratory. At the time, the two-time Pulitzer-prize winning journalist suspected the company’s blood tests were putting patients at risk.

His first article on Theranos, published Oct. 15, 2015, was a blockbuster. In it, he described serious problems in the highly-touted lab testing company. Over the next several months, Carreyrou published additional detailed stories about the many problems that Theranos hid from government regulators, investors, patients, and the public. Since then, Theranos has been under close scrutiny from the federal Centers for Medicare and Medicaid Services and the Securities and Exchange Commission.

In March, the SEC charged Theranos Inc., its founder and CEO Elizabeth Holmes, and its former President Ramesh “Sunny” Balwani with raising more than $700 million from investors through what the SEC called “an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.” (See TDR, March 26, 2018.)

Theranos and Holmes agreed to resolve the charges and Balwani is contesting the charges. Last month, the company laid off all but about two dozen of its employees, Carreyrou reported for the Journal.

In a presentation in April at the annual meeting of the Association of Health Care Journalists in Phoenix, Carreyrou explained how the Journal’s investigation unfolded, focusing on how the lab company’s tests put patients at risk of harm.

Last week, Carreyrou’s book about his work on Theranos, Bad Blood: Secrets and Lies in a Silicon Valley Startup, became available for sale from publisher Alfred A. Knopf.

“If you read my book, you’ll see that it took me six more months after my Phoenix trip in April 2015 to expose what was essentially a giant unauthorized medical experiment,” he said. “The resistance the company and its lawyers put up was like nothing I had ever experienced in 20-plus years of reporting.

“But in the end, the truth came out and Theranos voided or corrected nearly 1 million blood test results in California and Arizona,” he continued. “There are some who believe that all 7-plus million of the blood tests the company returned to patients should have been declared ‘unreliable.’ ”

Numerous Unreliable Results

In his presentation, Carreyrou described case after case of physicians in Arizona who found Theranos’ test results to be not only unreliable, but dangerous to patient care.

“The collateral damage from these false blood tests is hard to assess,” Carreyrou commented. “Some patients have sued Theranos in federal court in Arizona, alleging medical battery and consumer fraud. One of them alleges that the company’s test failed to diagnose his heart disease and led him to have a preventable heart attack.

“One thing is certain. The chances that people would have died from misdiagnoses or wrong medical treatments would have risen exponentially if Theranos had expanded its blood testing services to Walgreens’ 8,134 other U.S. stores, as it was on the cusp of doing when I started digging into the company in February 2015,” he added.

Carreyrou’s work on the story began early in 2015 with a tip from a former Theranos employee who suspected some of the company’s tests were faulty. The former employee referred him to a nurse practitioner (NP) in Arizona who had complained about Theranos’ test results, he said.

The NP told him three of her patients had questionable blood test results. “One was a 16-year-old girl who had a sky-high potassium result that suggested she was at risk of a heart attack,” he said. “The results hadn’t made sense given that she was a teenager in good health.”

Providers Lose Faith

“Two other patients had received results showing abnormally high levels of thyroid stimulating hormone or TSH,” he added. The nurse-practitioner asked those patients to have their blood redrawn and retested. “The second time the results had come back abnormally low,” he said. “At that point, the nurse lost faith in Theranos’ finger-stick tests.”

Seeking more sources, Carreyrou visited the online review site Yelp. “Sure enough, I found a woman who appeared to be a doctor,” he explained. Using a Yelp feature to send messages to reviewers, Carreyrou sent the patient his contact information. She called him the next day.

A family physician in Fountain Hills, Ariz., the Yelp user was dissatisfied with her patients’ test results from Theranos. “The previous fall she had sent one of her patients to the emergency room because of a frightening lab report from the company, only to learn it was a false alarm,” Carreyrou explained.

On this same trip, he met the family physician and planned to drop in unannounced on other physicians sending patients’ blood work to Theranos. During a meeting at Starbucks with the family physician’s patient, he learned more about the patient’s frightening episode.

“The lab report this patient received from Theranos showed abnormally elevated results for calcium, protein, glucose, and three liver enzymes,” Carreyrou said. “Since she had complained of ringing in her ears, which was later determined to be caused simply by lack of sleep, her doctor was worried she might be on the cusp of a stroke and sent her straight to the hospital.”

After four hours in the emergency room while doctors ran tests, including a CT scan, the patient was discharged after new blood tests done in the hospital’s lab were normal. Also, she had two MRIs the following week and finally stopped worrying when results of those two scans were normal, Carreyrou said.

“This patient’s case was compelling because it showed the emotional and the financial toll from a healthcare scare brought on by inaccurate results,” he added. “As an independent real estate broker, this patient was self-insured and had a health plan with a high deductible. The ER visit and subsequent MRI’s had cost $3,000, which she had to pay out of her own pocket.”

Carreyrou also learned that the family physician doubted the accuracy of results for more than a dozen of her patients who tested suspiciously high for potassium and calcium, he said. “She had written Theranos a letter to complain, but the company hadn’t even acknowledged it,” he added.

Patients’ Cost Soar

As a result of seeking other doctors who sent patients’ blood work to Theranos, the reporter found three physicians in Scottsdale, Ariz. One doctor described a patient who had postponed a long-planned trip to Europe at the last minute because Theranos’ test results showed she might have deep vein thrombosis. “People with DVT aren’t supposed to fly because of the risks the clot will break lose, travel through the bloodstream, and lodge in the lungs, causing a pulmonary embolism,” he explained.

After ordering an ultrasound of the patient’s legs and getting normal blood test results from another lab, the physician disregarded the Theranos results and was leery when Theranos sent a lab report showing an abnormally-high TSH value for another patient.

The patient was already on thyroid medication, and the results suggested that her dose should be raised, the physician explained. After sending the patient to get retested at Sonora Quest Laboratories, the physician got a normal test result.

If she had increased the patient’s medication based on the Theranos result, the outcome could have been disastrous, the physician told Carreyrou. “The patient was pregnant and increasing her dosage would have made her thyroid hormone levels too high and put her pregnancy at risk,” he said.

Yet another family physician told Carreyrou he stopped sending patients’ blood work to Theranos after a bad experience with a patient who had high blood pressure. Knowing that one of the side effects of blood-pressure medications is high potassium, the physician monitored the patient’s blood work regularly.

“After Theranos reported a near-critical potassium value for the patient, the nurse in his office sent that patient back to Theranos to get tested again to make sure the result was correct,” he said. “But during a second visit, the Theranos phlebotomist made three unsuccessful attempts to draw the patient’s blood and then sent her home.” Needing to confirm test results right away, the physician sent this patient to Sonora Quest for retesting.

“As it turned out, it was another false alarm. The potassium value Sonora Quest reported that evening was much lower than the Theranos results and well within the normal range,” Carreyrou said, adding that the experience shattered the physician’s trust in Theranos.

Theranos Executives Used Silos to Operate in Ways that Kept the Real Facts Hidden

ONE QUESTION MANY THERANOS OBSERVERS have asked is how the company prevented outsiders from knowing about its operations.

“Theranos operated within silos,” Wall Street Journal reporter John Carreyrou explained. “CEO Elizabeth Holmes and CFO Sunny Balwani set it up so that the various departments of the laboratory company didn’t know what the other parts of the company were doing. That was enforced with key cards. The people who worked in engineering had their own key cards, and the people who worked in the lab couldn’t set foot in engineering because they weren’t authorized to do so.

“Eventually Theranos moved the lab rooms across San Francisco Bay to Newark, Calif., and installed fingerprint scanners there to limit access,” he added. “The shenanigans were mostly going on in the lab, and they divided the laboratory into two rooms.

“One was called ‘Jurassic Park,’ which was the room that contained the regular off-the-shelf commercial analyzers, which they used for most of their tests,” he recounted. “The conceit was that those machines were dinosaurs that would be rendered extinct by Theranos’ ground-breaking new technology. Hence the name, Jurassic Park.

“Then, there was the other lab room that had the proprietary Edison devices and the hacked Siemens instruments,” he added. “This room was called ‘Normandy.’ The analogy there was that they were going to take the lab industry by storm the way American and British troops took the beaches of Normandy in 1944.

“Essentially, the shenanigans were taking place in Normandy and no one who didn’t work in Normandy or wasn’t assigned to Normandy knew what was going on there,” Carreyrou added.

“Therefore, when my first story came out in October 2015, many Theranos employees were angry at me and at the Journal because they thought they worked for a legitimate company,” he said. “But they had no idea what was taking place in that part of the laboratory called Normandy.”

Doctors Question Results

While these physicians were questioning the results they got from Theranos, the clinical lab company itself was pursuing opportunities for growth, Carreyrou explained.

“Theranos went live with their blood tests in September 2013, first in a Walgreens store in Palo Alto, and then they expanded to Phoenix,” he said. “By the time I started digging into the company not quite two years later, they had expanded to about 45 locations in Phoenix and had something like 47 locations in two states.”

The Theranos partnership with Walgreens raised more questions. “How did the retail partner Walgreens not do its due diligence by asking more questions or having more supervision over this partnership?” asked Carreyrou. “In part, the answer to that question is that the people at Walgreens who were in charge of this partnership were just not very good people to have in charge.

“One had a drinking problem and been charged with driving under the influence and another was ‘completely starry-eyed with Silicon Valley and Silicon Valley innovation,’ ” he said.

Another question Carreyrou wanted to answer is how Theranos avoided closer scrutiny from regulators. One reason is that the laboratory industry and blood testing itself are complex, and another reason is how Theranos used the lack of regulation for lab-developed tests (LDTs) to its advantage, he said.

“For decades, the FDA has not actively policed this part of the business, which technically falls under the jurisdiction of CMS, but CMS hasn’t policed it either,” he explained. “So, Theranos was operating in this gray area because it was using its own proprietary device for at least some of its tests, but didn’t commercialize it. Therefore, it was avoiding close FDA scrutiny by not commercializing the equipment.

“Then when state inspectors enforcing CLIA would come by, Theranos would outright mislead them and not show them the part of the lab downstairs where they had their proprietary devices,” he said. “So the state inspectors would just see a normal-looking lab with Siemens instruments.

“In addition, they lied,” he added. “They outright misled CMS and the FDA. And so when you’re being lied to, well, you can only blame the regulators so much.”

Compared Two Labs’ Results

Carreyrou’s own experience also led him to distrust Theranos’ test results. While in Arizona, he asked a family physician to write him a lab test requisition that he took to a Theranos Wellness Center at a Walgreens pharmacy. The family physician gave him two requisitions, one for Theranos and one for Laboratory Corporation of America. The family physician also planned to get two sets of tests so they could compare the results from both labs.

At Walgreens, Carreyrou learned first-hand that some of the tests on the physician’s order required a venous draw. Previously, a former Theranos employee had explained that, of the more than 240 tests Theranos offered on its menu, only about 80 were performed on small finger-stick samples and about a dozen of those tests were performed on its Edison machine, a proprietary instrument Theranos used. “The other 60 to 70 tests were run on hacked Siemens machines,” the employee said.

After leaving Walgreens, Carreyrou took the second requisition to a LabCorp patient service center. A few days later, he got the results. “As I scanned my results, I noticed a number of discrepancies,” he said. “Theranos had flagged three of my values as abnormally high and one as abnormally low. Yet on LabCorp’s report all four of those values showed up as normal.

“Meanwhile, LabCorp had flagged both my total cholesterol and my LDL cholesterol—otherwise known as bad cholesterol—as high, while the Theranos report described the first as ‘desirable’ and the second as ‘near optimal,’” he explained.

While those differences were alarming, the results the family physician got were more troubling. “According to Theranos, the amount of cortisol in the patient’s blood was less than one microgram per deciliter,” he commented. “A value that low is usually associated with Addison’s disease, a dangerous condition characterized by extreme fatigue and low blood pressure that could result in death if untreated.

“Her LabCorp report, however, showed a cortisol level of 18.8 micrograms per deciliter, which was within the normal range for healthy patients,” he said. “She had no doubt which of the two values was correct.”

Silicon Valley’s Business Ethos May Have Contributed to Theranos’ Eventual Downfall

ONE PROBLEM THAT TAINTED THERANOS almost from its start was the environment inherent in Silicon Valley, reporter and author John Carreyrou explained. CEO Elizabeth Holmes founded Theranos as a tech company in Palo Alto, Calif. “Palo Alto is the heart, the center of gravity of Silicon Valley and, as my book explains, Steve Jobs and Apple were her idols,” he commented. “Obsessed with being the second coming of Steve Jobs, she lost sight of the fact that her company and her endeavor weren’t a traditional tech venture. What she was building first and foremost was a healthcare company, a company that made a medical device. “She conflated those two things and channeled the ‘fake it until you make it’ ethos of Silicon Valley,” he said.

In the 1980s, workers in Silicon Valley coined the term “vaporware” to describe software or hardware that tech companies announced with great fanfare, but that never materialized or that fell well short of what was promised, he added.

“Ever since then, that ‘vaporware’ ethos has been part of the DNA of Silicon Valley,” Carreyrou commented. The drive to innovate leads to hype that leads venture capitalists to fund projects that may not be worth such investments, he added. “To get funding, companies often exaggerate where they are and hope that reality catches up,” he explained. “That’s essentially what Elizabeth Holmes did.”

At its height, Theranos claimed a value of more than $9 billion, and Holmes owned more than half of its shares, so that her net worth was almost $5 billion.

“Ironically, there’s another part of San Francisco Bay—not far from Palo Alto—which is South San Francisco, and, along with San Diego, is the hub for the biotech industry,” commented Carreyrou. “Real medical science takes place in this South San Francisco hub. Instead of basing her company there and emulating the people from the biotech industry, she chose to emulate what was essentially the computer industry. The result is this disaster.”

Contact John Carreyrou at 917-536-7824 or


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