Theranos' Last Defender Claims Federal Witch Hunt

Theranos’ Last Defender Claims Federal Witch Hunt January 20, 2017
By Mark Terry, BioSpace.com Breaking News Staff

In what seems like a massive and tone-deaf case of denial, venture capitalist Tim Draper, in an interview with AXIOS, argues that Theranos and its founder and chief executive officer Elizabeth Holmes “is the victim of a witch hunt.”

Theranos, located in Silicon Valley, was founded in 2013 with claims of revolutionizing the clinical diagnostic laboratory business. It was based on being able—it claimed—to perform a full series of laboratory tests on just a few drops of blood from a finger prick versus several vials of blood drawn from the patient’s arm. It also claimed turnaround times within hours at a very low cost.

In October 2016, Wall Street Journal reporter John Carreyrou wrote on how the company’s claims and science didn’t hold up and that investors were dumping money into a company without paying any attention to whether it could actually do what it was claiming to do. Continued investigations by the U.S. Center for Medicare and Medicaid Services (CMS) eventually led to revocation of the company’s CLIA (Clinical Laboratory Improvement Amendments) certificate.

Holmes herself was banned from owning or operating a blood testing laboratory for two years. Meanwhile, there were rumors that a feature film was going to be made starring Jennifer Lawrence as Holmes.

At one point, Theranos was valued at $9 billion. Holmes, currently 32, gained most of her net worth from company shares. If the company is worth anything at all today, which is debatable, it’s probably about $800 million, according to June 2016 Forbes reports.

Two years’ worth of company test results sent to customers have been voided, which is only about 1 percent of its blood tests. There were, however, reportedly tens of thousands of corrected results delivered to physicians and patients. In April 2016, the U.S. Department of Justice initiated a criminal investigation into Theranos. The investigation focuses on whether or not Theranos and its executives misled investors over the efficacy of its blood-testing products.

At this point, Tim Draper, a long-time Theranos investor, is one of the few remaining Theranos and Holmes defenders. In the AXIOS interview, he said, “It’s the press creating a series of events that negatively impact technology, progress and our economy. Those [federal] regulators were compelled to go in there and find something because of the Journal.”

He went on to attack Carreyrou, who reportedly received a $4 million advance for a book about the company titled Bad Blood. Draper goes on to say that the whistleblowers inside the company who assisted Carreyrou—and presumably federal regulators—were only doing so to get in on the deal.

Then Draper admitted that he hadn’t read all of the coverage of Theranos.

But just this week, The Wall Street Journal reported that the company failed a second inspection. This forced the company to close its only remaining blood-testing facility. Its Scottsdale, Arizona laboratory was cited for deficiencies by CMS in a fall inspection, which the company did not report to its investors.

In addition to closing its first lab in California in 2016, it has cut staff in October and again this January, with only 220 employees remaining. It is also facing a lawsuit by Walgreens, once the laboratory’s biggest partner. In June 2016, Walgreens formally cut ties with Theranos, citing numerous bad tests results and the federal investigation.

“In light of the voiding of a number of test results, and as the Centers for Medicare and Medicaid Services has rejected Theranos’s plan of correction and considers sanctions, we have carefully considered our relationship with Theranos and believe it is in our customers’ best interests to terminate our partnership,” Walgreens’ senior vice president and chief healthcare commercial market development officer, Brad Fluegel, told TechCrunch.

Among other things, in the lawsuit filings, Walgreens alleges that Theranos violated some of its nondisclosure and confidentiality agreements.

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