I’ve been kidding John Carreyrou on Twitter that I was going to give Bad Blood, his tale about the Theranos fraud, a one star review because he never sent me a preview copy. But it’s a barn burner, and I can’t recommend it enough, even though I spent my own $13.95 on the Kindle version!
By now the story is well known. The young blonde Stanford drop out with the baritone voice says she’s going to change lab testing forever, then hides in stealth in Silicon Valley. I caught a few whispers over the years that this company was doing something but as lab testing was a little away from the mainstream of health tech, I didn’t ever bother to look for more. And then in 2014 Holmes gets into Fortune and from a distance we are all cheering her on because she’s figured out a new way to disrupt a stodgy industry. The first Carreyrou piece is published in the WSJ in late 2015—even though Murdoch was a huge investor–and over the next 2 years massive fraud is exposed.
About when Holmes was starting to talk about stuff, and after the Walgreens deal eventually went live (mid 2014) there was the very odd series of events when Holmes appeared to agree to come talk at Health 2.0 and but shortly afterwards she and her PR team went totally radio silent on us. I was told by one PR flack that he’d heard that another conference had told her to choose between us and them (TedMed? I’m guessing) but who knows. She appeared at TechCrunch in September 2014 and had the interviewer Jon Shieber’s blood drawn with his results coming back while she was on stage—clearly faked we now know. I saw her interviewed by a fawning Toby Cosgrove at Cleveland Clinic, where she said that Carreyrou was lying. I stood at the end of a receiving line full of people asking her to sign things for their daughters as she was such an inspiration. When I got to the front I asked her why she didn’t come to Health 2.0 and invited her to come the next time. With me in line was Medcity News Editor Chris Seper who asked for an interview. After about 15 seconds of her not saying anything, a PR flack jumped in, pulled us away from her, got our cards and said she’d get back to us. I’m still waiting
But what is just remarkable about this whole thing is how little due diligence was done by investors who plunked down hundreds of millions.
No one seems to have bothered asking Novartis, Pfizer and a few others who did the original small trials what happened. All of them pulled out. And the biggest idiots of the lot are Steve Burd, former CEO of Safeway, and Jay Rosen, Medical Director at Walgreens. I met Jay Rosen a couple of times when Walgreens was doing some innovation work at Health 2.0. He used that “I’m Dr J and I used to play basketball” line with me, and frankly he appeared to be a total blowhard. (Hey I meet a bunch of those and usually no harm done!) But there was a real lab expert called Kevin Hunter on the team and everyone at Walgreens just ignored his warnings. Incredible.
Safeway had the same problem. Their medical director at the time, Kent Bradley (a good guy who’s been at Health 2.0 several times), tried to warn the boss but Steve Burd wasn’t having any of it. I suspect this tale won’t do his Burd Health consulting group much good.
Basically by mid-2013 Theranos had convinced Safeway and Walgreens to shell out more than $100m each on no data. And that was enough for the big name, but ignorant, private investors to pile in. Once that happened Holmes and Balwani, her (no one seems to be able to believe it) boyfriend, basically doubled down on the fraud.
Could anyone else have done anything? I’ve met Michael Esquivel, the well known health tech lawyer, plenty of times (even went to his birthday party as I know his brother-in-law well). I never realized that he was general counsel at Theranos in the early days, but it appears that when he figured it out, he just left and moved on. Again hard to know what else he could have done. Frankly given the treatment meted out to Tyler Shultz, Erika Chueng and whoever the actual Alan Beam is, I’m not surprised that most of the ex-employees just kept it to themselves. They were followed by private investigators, sued & threatened with ruin. And the ones who did blow the whistle ended up getting nothing out of it. Tyler Shultz’s parents are in debt for $400K of legal fees because his grandfather is an old fool. And Rochelle Gibbon’s has lost her husband, Ian, as direct consequence.
Still much kudos to the small group who did get in touch with Adam Clapper, the pathologyblawg blogger, who pointed out that what he saw was very unlikely to work. It looks like he closed down in late 2015 possibly under pressure from Theranos. Huge kudos to those who did talk to Carreyrou. And of course huge kudos to Carreyrou himself who managed to write this book and keep the whole story going for the better part of 3 years.
Meanwhile Holmes and Balwani just come over as paranoid psychopathic assholes. Boies, the well-known Democratic lawyer comes off even worse, as a paranoid psychopathic asshole bully . And he’s an idiot as he got paid in stock! Plus he lost Bush v Gore so we can blame him for that too! Now he’s moved on to Uber it’s time for the new management there to get rid of him.
As has been shown by the reaction of most of the world to Donald Trump, average people just don’t know how to react to psychopaths, and the Theranos story proves that not only ordinary employees but also some of the wealthiest people in the world are no exceptions.
On the other hand, perhaps it would have been fun for the fraud to drag on a bit longer, perhaps to an Uber-esque level of funding rounds. Given that the Waltons, DeVos and Murdoch all lost $100m+, perhaps we should be congratulating Holmes for sticking it to unpleasant right-wing billionaires, and just be sad that none of them will even notice the actual level of losses they took.
Categories: The Business of Health Care