This week’s headlines seemingly closed a chapter on the story of medical research criminality in America. Ramesh “Sunny” Balwani, former president and COO of Theranos was sentenced to 13 years in prison for fraud. That’s 2 years more than his former business and romantic partner, Elizabeth Holmes.
White crime criminal defense attorney for all things science tech, Michael Weinstein, took the opportunity to trumpet out a confident message that crime doesn’t pay in Medicine with these words, “It clearly sends a signal to Silicon Valley that puffery and fraud and misrepresentation will be prosecuted, there will be consequences and the end result is potentially decades in prison.”
The smooth talking fraudsters played a good hand for years, buoyed by a Board, asleep at the $9 billion valuation wheel, with the likes of George Shultz, Henry Kissinger, Rupert Murdoch and Larry Ellison. But attorney Weinstein and all associated with Health Tech entrepreneurship would do well to read again a classic piece of health journalism from fifty-six years ago.
On June 16, 1966, the New England Journal of Medicine published an article titled “Ethics and Clinical Research.” Written by a highly respected Harvard physician, Henry K. Beecher, the head of anesthesiology at Massachusetts General Hospital, the article referred to “troubling charges” that had grown out of “troubling practices” at “leading medical schools, university hospitals, private hospitals, governmental military departments (the Army, the Navy and the Air Force), governmental institutes (the National Institutes of Health), Veterans Administration hospitals and industry.”
Beecher then reviewed 50 distinct contemporary American clinical studies with ethical violations judged by standards at Beecher’s own Massachusetts General Hospital.
July 25, 1972 was fifty years ago this week and it is a day that all AP Science journalists know by heart. As Monday’s AP banner headline read: “On July 25, 1972, Jean Heller, a reporter on The Associated Press investigative team, then called the Special Assignment Team, broke news that rocked the nation. Based on documents leaked by Peter Buxtun, a whistleblower at the U.S. Public Health Service, the then 29-year-old journalist and the only woman on the team, reported that the federal government let hundreds of Black men in rural Alabama go untreated for syphilis for 40 years in order to study the impact of the disease on the human body. Most of the men were denied access to penicillin, even when it became widely available as a cure. A public outcry ensued, and nearly four months later, the “Tuskegee Study of Untreated Syphilis in the Negro Male” came to an end.”
Jessica DaMassa asks me about PlugandPlay’s health day, people talking to bots in health care, the rumors of Softbank dropping a wad of cash on Science37, and we can’t resist some Thernos cracks. This one also has pictures! Sadly the video somehow got corrupted so it’s not your eyes, we are looking like green martians! — Matthew Holt
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 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.Continue reading…
Huge news hit today as Theranos, its Chairman and CEO Elizabeth Holmes and its former President and COO Ramesh “Sunny” Balwani were charged with “elaborate, years-long fraud” by the Securities and Exchange Commission. The litany of supposed violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 are almost as dizzying as the detailed factual allegations of repeated, willful fraud perpetuated by Holmes and Balwani on investors who likely should have known better.
Reviewing the SEC complaint against Holmes, it’s stunning to see the extent to which Holmes and Balwani were able to pull the wool over investors’ eyes. The highlights of the SEC allegations include:
Elizabeth Holmes, the founder and chief executive of the controversial company Theranos, has been charged with an “elaborate, years-long fraud” by the Securities and Exchange Commission. The SEC alleges that Holmes and former company president Ramesh “Sunny” Balwani deceived investors into believing that its key product — a portable blood analyzer —was capable of using drops of blood to do the kinds of workups that now require much more blood—up to ten milliters per test. Holmes fooled many people including the Theranos board of board of directors, high-powered investors and high ranking members of the military including General James Mattis, a huge fan, who left the Theranos board to become President Trump’s Secretary of Defense.
Things don’t look good for the Theranos leadership in terms of the SEC charges. The company already saw a three-year partnership with Walgreen’s collapse leaving many customers wondering if they had been deceived. The technology, which Holmes and her company touted as disruptive and revolutionary, never worked. So what happened to permit so much enthusiasm and money to be spent on a useless technology?
First, the company never published on its technology. The promise of small volume blood testing sounded great and indeed is great for many reasons not the least of which a lot less misery for patients who need to get a lot of painful blood drawn for tests. But no publication, no data driven presentations at professional society meetings, a lack of transparency turned Theranos into an 8 billion dollar Dutch tulip bubble.
You’ve probably seen by now both that the WSJ’s John Carreyrou has run a well researched hit piece on Theranos and that the company, led by wunderkind Elizabeth Holmes, has somewhat muffed its reply. If you haven’t, best thing is to read the Roger Parloff Fortune piece which summarizes the pay-walled piece so you don’t have to do the painful task of sending Rupert Murdoch money. Now in the spirit of FD I need to let you know that we’ve invited Holmes to speak at Health 2.0 twice and her PR handlers have been unbelievably hard to communicate with. They’ve either flat out ignored us or taken forever to turn us down, even though she’s appeared often at (what I at least consider) much less important or relevant venues. I have no idea if she’s badly advised, wanting to stay away from sophisticated health tech audiences, or if her handlers decided that we and our 2,000 strong crowd are just not cool enough for her. Or maybe simply her calendar hasn’t allowed it. Either way I have no first hand knowledge of her or the product–although Elizabeth our invite is still out there! But I do know five things.
1) Lab business decentralizes & democratizes. Whether or not Theranos is lying, cheating, not using its own tech, or its cool stuff just doesn’t work, the trend towards comprehensive, cheap and soon at home lab testing is clear. More than 5 years ago a company called BioIQ was selling at home fingerstick based cholesterol & glucose tests. In the past year the two stage Nokia Sensing XCHALLENGE (of which we hosted stage 1 at Health 2.0 in 2013) has revealed a plethora of companies taking minute quantities of blood, pee or spit and doing complex diagnosis from them. And it’s not stopping there. The next phase is using light and other sensors to diagnose direct from the skin. Whether or not the locus of activity ends up using Theranos at Walgreens or the kitchen table using something else, the dam holding back continuous, cheap multi-faceted testing is going to burst soon.
2) Theranos and Holmes are not the most important thing in health care. There, I’ve said it. While Holmes has talked a lot about revolutionizing health care access and has given lots of transparency into Theranos’ pricing if not its testing technology, what they’re up to is getting easier access to lab tests. I think this is very important and a very good thing, but no one can seriously believe that this is the biggest change in health care. It’s part of a trend towards consumerism. But I’d argue the most important trend in health care is the redesign of chronic care management, on which we spend a shed-load more than lab testing. I may be wrong but if you insert your pet issue here, I’d bet it’s not cheaper lab testing. The media has been a tad snowed by the “youngest female billionaire” and “blonde Steve Jobs” analogies, but even if she runs the field and takes over most lab testing, it’s an incremental change not a huge revolution in health care.
How would you judge the value of your health care? A longstanding definition of treatment holds that value is the health outcomes achieved for the dollars spent. Yet behind that seemingly simple formula lies much complexity.
Think about it: Calculating outcomes and costs for treating a short-term acute condition, such as a child’s strep throat, may be easy. But it’s far harder to pinpoint value in a long-term serious illness such as advanced cancer, in which both both the outcomes and costs of treating a given individual—let alone a population with a particular cancer—may be unknown for years. And then there’s the complicating issue of our individual preferences, since one person’s definition of a good outcome—say, another few years of life—may differ from another’s, who may be seeking a total cure.Continue reading…
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