Theranos: What We Should Learn
December 13, 2016
By Sormeh Mahjouri

I remember first hearing about Elizabeth Holmes and Theranos in 2013 when I was still working for a medical device company in Minnesota, and I found myself quite captivated by the story: A young woman and former Stanford undergraduate who dropped out of college to develop minimally-invasive technology for the collection and analysis of blood. She wanted to transform personalized medicine through a prick of blood that would yield hundreds of lab tests—how could I not be fascinated with such a story? It seemed too good to be true, and like many others in the biotech and medical device communities, I found myself drawn to Theranos.

Being a self-proclaimed biotech “nerd” and a big follower of BioSpace, I will never forget opening an e-mail update with The Wall Street Journal headline that would change the fate of Theranos: “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.”[1] I began reading the article with my natural curiosity about the how their business was struggling, only to realize that the article was an exposé on the company. The article called into question the credibility of the company after discovering that Theranos had failed to utilize its own technology in conducting blood tests.

According to the article, “At the end of 2014, the lab instrument developed as the linchpin of its strategy handled just a small fraction of the tests then sold to consumers, according to four former employees…In a complaint to regulators, one Theranos employee accused the company of failing to report test results that raised questions about the precision of the Edison system. Such a failure could be a violation of federal rules for laboratories, the former employee said.” An article in Business Insider revealed that a government agency had found problems with laboratory practices and that they posed risks to patient health[2].

Months went by and I became obsessed with the Theranos controversy. On a daily basis, I would quickly scan through my inbox to see if there had been any recent industry news headlines on Theranos, and I even created a Google news alert to stay current on the developing story. More and more articles were being published, with former employees coming forward and accusing Theranos for its lack of regulatory oversight: “Theranos is a complicated, secretive company that is caught up in a scandal because it may have broken esoteric regulatory rules, and violated fundamental guidelines for how science is done.”[3] Other articles delved into how Theranos hadn’t published any scientific data in peer-reviewed journals; how there was a lack of medical and scientific expertise on its Board of Directors; how the culture of entrepreneurship and Silicon Valley was to blame as it enabled the company through its investments.

The Theranos controversy has transcended Silicon Valley and become a widely publicized story—so much so that a Hollywood film is being made about it. Despite the media frenzy and negative publicity that has surrounded the company over the last year, I truly believe that every story has a lesson, and the story of Theranos is no exception. The nightmare that has been plaguing Elizabeth Holmes and her company serves as a model of what not to do in executing basic design control elements and developing a successful biotech company. Not only is there a lesson to be learned about the need to understand the science behind a product or solution—but it also highlights the importance of understanding and complying with federal regulations across the industry.

• For instance, it is little known that tests developed in clinical labs tests do not require approval by the FDA but rather through “another regulatory framework called the Clinical Labs Improvement Amendments, or CLIA.”³ Nevertheless, blood sampling is considered to be another bodily fluid by the FDA, which requires FDA approval.
• At one point, Theranos was seeking FDA approval for hundreds of blood tests, which would have required hundreds of clinical trials, which take years to complete.[4] As a result, the FDA issued Theranos an order to stop using its nanotainers since they were un-cleared medical devices.
• Due to the lack of regulatory oversight at Theranos, several authorities came forward to scrutinize the company’s practices. The Centers for Medicare and Medicaid Services had found serious deficiencies in the company’s Newark, California lab. The Department of Justice and Securities Exchange Commission issued subpoenas to Theranos and its business partners, and the company has been under federal criminal investigation since its exposure by The Wall Street Journal.

Amidst the excitement of capitalizing on an idea and becoming internationally recognized in the biotech space comes the price of scientific rigor and regulatory oversight—a problem that is not unique to Theranos or several biotech start-ups. Anyone can sell an idea and even package it in such a way that gives the impression of so-called “success”—but backing it up without hard, scientific evidence and oversight of the highest regulatory authorities is key to developing a successful product and eventually, a successful company. Given that we live in a digital age with easy access to FDA guidelines and regulations, we need to get educated on the regulatory landscape and defer to subject matter experts to ensure compliance.

References

[1] Carreyrou, John. “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.” The Wall Street Journal, October 2015. http://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901

[2] Ramsey, Lydia. “Here’s the single biggest mistake Theranos made.” Business Insider, January 2016. http://www.businessinsider.com/theranos-biggest-mistake-2016-1

[3] Stockton, Nick. “Everything You Need to Know about the Theranos Saga So Far.” Wired Magazine, May 2016. https://www.wired.com/2016/05/everything-need-know-theranos-saga-far/

[4] Paradis, Norman A. “The Rise and Fall of Theranos: How did the innovative blood-testing company fall so far, so fast?” Scientific American, April 2016. https://www.scientificamerican.com/article/the-rise-and-fall-of-theranos/

Sormeh Mahjouri, MPH, Manager of Technical Engagements at Neozene

Sormeh is responsible for managing activities for Neozene’s internal team of clinical, regulatory, and quality subject matter experts. She has more than 10 years of experience in biotechnology, medical devices, and pharmaceuticals as a Clinical Research and Project Management professional. Sormeh earned her Master’s in Public Health from the Keck School of Medicine at the University of Southern California and a Bachelor of Arts in Biology from Carleton College. She is currently pursuing a certification as a Project Management Professional, which is expected in 2017.

To discuss your specific needs or issues and to have more in-depth technical discussions about the services that Neozene offers, send an email to Sormeh and her team at TE@neozene.com or call the main office at (510) 746-8693 and set up an appointment.