Half-Hearted Attempts at Transparency Aren’t Enough at Theranos

In the January/February issue of MPO, I wrote about the problems with cultivating a cult of personality in the business world, as well as the problems with treating a medical technology company the way one would a consumer tech company. In April, Theranos Inc. CEO and Founder Elizabeth Holmes was in the news again to atone for past sins, asking forgiveness for compliance issues and problems with the company’s blood tests.

“Anything that happens in this company is my responsibility at the end of the day,” Holmes said on NBC’s Today show. “We stopped testing and have taken the approach of saying, ‘Let’s rebuild this entire laboratory from scratch so that we can ensure this never happens again.’”

Toward the goal of redemption, the Palo Alto, Calif.-based company also rebuilt its scientific and medical advisory board in order to build confidence in the company’s attention to issues with the science of its secretive blood test processes. The board was expanded after the company hosted three scientific review sessions with laboratory and medical experts who were invited to review the company’s proprietary technologies. According to Theranos, the company provided the experts full exposure to its systems, devices, and data. The independent experts reviewed development and validation reports for tests performed on small volume samples, including finger-sticks, using Theranos’ proprietary technologies for a variety of assays, including tests of their choice.

Industry experts as well as the public have lost confidence in Theranos’ bombastic promises of a “revolutionary” blood test that will change the way disease is diagnosed. However, David Helfet, M.D., director of the Orthopedic Trauma Service, Hospital for Special Surgery, and New York-Presbyterian Hospital, and a co-chair of Theranos’ new advisory board, said, “It is clear that Theranos has done what people thought was impossible. Theranos invited groups of independent experts in the fields of pathology and laboratory medicine and literally took the lid off of the box. Experts were shown Theranos’ technology, met with Theranos scientists, and had access to any data. Theranos’ technology is a groundbreaking feat of science and engineering, making it possible to accurately analyze micro amounts of blood for the same tests routinely done today with traditional venipuncture.”

It’s smart of Holmes and Theranos to hire indisputable medical experts to advise them as well as to look inside the black box of their technology (still not transparent to the public). The question is, however, is it enough?

Holmes has not learned the lesson of transparency as well as she wants us to think. The New York Times reported this month that she declined a request for an interview; and that instead, Theranos’ lawyer spoke to the newspaper, saying, “The board is right now in the process, and Elizabeth Holmes is in the process, of adding significant talent to the company.” This is presumably in addition to the new members already added to the scientific and medical advisory board.

Another adviser to the company, Richard Kovacevich, a former CEO of Wells Fargo, acknowledged the limited role played by anyone other than Holmes. “She doesn’t have to answer anything she doesn’t want to,” he told the Times. Of course, this is part of Holmes taking responsibility for all the company’s problems. But making the company a one-woman show only contributes to the lack of accountability that caused much of Theranos’ woes in the first place.

And now, Holmes and her baby are facing real trouble. The Wall Street Journal reported that the company is facing a criminal probe from federal prosecutors investigating whether it misled consumers and investors about the state of the company and its technology. The newspaper’s sources said that Walgreens, a key player in the blood-testing failure drama last year and Theranos’ main channel to consumers, as well as the New York State Department of Health, have received subpoenas requesting documentation and testimony regarding what Theranos told them. In addition to the criminal probe, the U.S. Securities and Exchange Commission is examining whether Theranos made deceptive statements to investors when it solicited funding, according to people familiar with the matter. Theranos was valued at $9 billion in a funding round in 2014 and the majority stake of Holmes at more than half that.

No one within the medtech industry is rooting for Holmes to fail (but I reserve comment on a schadenfreude-laden public). Ours is an industry that is fueled by a genuine desire to improve and save lives. The life sciences thrive on innovation, and innovation like what Theranos promised is exciting for everyone. But if Holmes continues to bolster the iron curtain while not improving the product, Theranos will fail.