The recent negative press about Theranos was initiated last Friday when the Wall Street Journal published a hard-hitting investigative piece by John Carreyrou about the company (see: Hot Startup Theranos Has Struggled With Its Blood-Test Technology). He was able to interview former Theranos employees who indicated that the company was having difficulty deploying its secretive analytic technology which supposedly requires only small aliquots of blood. The device was named for the first time in the article as Edison. The article claimed that the company was using "standard" analyzers from Siemens for most of its testing. The article also indicated that the company was struggling with its lab proficiency testing. Here's a quote from it:
Whether labs buy their testing instruments or develop them internally, all are required to prove to the federal Centers for Medicare and Medicaid Services that they can produce accurate results. The process is known as proficiency testing and is administered by accredited organizations that send samples to labs several times a year. Labs must test those samples and report back the results, which aren’t disclosed to the public. If a lab’s results are close to the average of those in a peer group, the lab receives a passing grade.In early 2014, Theranos split some of the proficiency-testing samples it got into two pieces, according to internal emails reviewed by the Journal. One was tested with Edison machines and the other with instruments from other companies. The two types of equipment gave different results when testing for vitamin D, two thyroid hormones and prostate cancer. The gap suggested to some employees that the Edison results were off, according to the internal emails and people familiar with the findings.
A follow-up article in the Wall Street Journal indicated that Theranos was now performing only one test from its very large test menu with the Edison device (see: Hot Startup Theranos Dials Back Lab Tests at FDA’s Behest):
Under pressure from regulators, laboratory firm Theranos Inc. has stopped collecting tiny vials of blood drawn from finger pricks for all but one of its tests, according to a person familiar with the matter.... As a result of the halt, Theranos is operating more like a traditional lab that draws blood with needles from patients’ arms....During the inspection, FDA officials indicated to Theranos that the agency considers the “nanotainers” made and used by the company to collect finger-pricked blood an unapproved medical device, the person familiar with the matter said.
To the uninitiated, it may seem strange that the FDA would pick the sample collection device as a regulatory target. Why not focus on the innovative and high-tech Edison device? I think that reason for this choice is that the tests performed by Edison fall under the rules of a laboratory developed test (LDT) and are thus given greater latitude under the current FDA regulations. By referring to the nanotainers as an unapproved medical device, the FDA has an opportunity to ask questions about the broader Theranos operations. Elizabeth Holmes, the company founder and CEO, commented on the company's relationship with the FDA in a recent interview (see: A comprehensive guide to Theranos’s troubles and what it means for you). Below is an excerpt:
“We believe the model for the lab of the future is to take all tests through FDA review,” the company said in a statement. “The FDA is putting our tube that transports the blood for our devices through its rigorous review process. That’s what we are advocating for. During this process, we also made the decision to move our existing quality systems operations over to FDA quality systems completely, while we work with FDA for clearance on our tubes.”
In the opinion of many people, Theranos has been viewed with an uncritical eye by the press thus far, partly because of its Silicon Valley credentials and the charisma of its young founder (see: The Theranos Affair: When Silicon Valley hype outpaces reality). Moreover, the Theranos board of directors has always been perceived as atypical for a reference laboratory. It's made up of former high-level federal officials like Henry Kissinger and retired generals who seemingly would have little knowledge about the clinical lab industry (see: Theranos' board: Plenty of political connections, little relevant expertise). However, even this Board with all of its political connections should have understood that that the FDA would not take kindly to being embarrassed in the light of recent questions about Theranos test quality (see: The Dispute between the FDA and 23andMe; What's Really Going On?). It's also of interest that Theranos has now turned to Washington insider attorney David Boies for help. His billing rate is very high so he tends to be called in only when a company has a very big problem.
Why have questions about test quality at Theranos been so explosive? Did the business model not contain other innovative ideas like direct access testing (DAT) and locations inside Walgreens drug stores (see: Theranos Trouble: A First Person Account)? Much of the Theranos hype has been based on interviews with founder Elizabeth Holmes' who is needle-phobic and has stressed the fact that a finger stick and a small blood sample would be less traumatic for the patient (see: Theranos Isn’t the Only One Chasing Needle-Free Blood Tests). Multiplexed lab testing should also be cheaper to perform than standard testing because little reagent is used and many more test results are generated per sample. As a result, Theranos has trumpeted its low lab test prices -- no more than half of Medicare reimbursement fees. The secretive, Edison technology has also been perceived as being innovative and thus worthy of Silicon Valley attention and financial backing. Ergo, if Edison turns out to be a bust, so may Theranos.