Analysis on the unfolding case of Elizabeth Holmes and her health tech venture Theranos by contributor John Bacon.
Jury selection for the Elizabeth Holmes, founder of the blood-testing health-tech start-up Theranos, began this month for a trial expected to take several weeks. Holmes is facing nine charges of fraud with the potential for a 20-year jail term.
Also charged is her former boyfriend and Theranos co-president Ramesh ‘Sunni’ Balwani, who joined the company early on and whose romantic relationship with Holmes was kept from investors.
The pair were originally charged as co-conspirators, but suspicions that Balwani’s separate trial next year was a sign of the defendants turning on each other were fuelled further when court filings showed that an expert for Holmes’s defence specialises in domestic violence (press reports suggest Balwani is a potentially volatile character).
On the face of it, there is plenty of evidence showing Theranos’ health tech being far from fit for purpose.
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The trial will provoke massive coverage as Holmes’s rise was meteoric; founder of Theranos, the start-up which during its 14-year duration was valued at US$9bn, with Rupert Murdoch and Henry Kissinger among many high-profile investors.
Holmes herself projected a vision of entrepreneurial founder straight out of central casting – clad in black a la Steve Jobs, loaded with charisma and having a powerful ‘why I do this’ back story involving health-related family loss. Holmes was a Stanford drop-out at 19 who was seemingly destined to shake up the health tech world.
The charges centre around the defrauding of both investors and consumers as Theranos promised revolution in the blood testing field.
Theranos’ main innovation would have revolutionised blood testing using its patented Edison Minilab system; a printer-sized black box into which a pinprick of blood was inserted via plastic cartridge.
In the early years, Theranos kept away from consumers focusing on research and fundraising. This changed in 2013 when it began to monetise its Edison box by partnering with US pharmacy Walgreens to reach consumers directly.
The initial partnership concentrated on 40 stores housing the Edison prior to national rollout. Holmes went into a publicity overdrive as the centrality of blood tests in many medical procedures meant that a massive market worth billions awaited.
The extent of the problems with the Edison were seemingly legion. Even before the test themselves, finger-pricked blood samples are traditionally seen as being less pure than vein-drawn as the sample is contaminated with fluids from tissue. Former employees have stated that pieces of the machine fell off, panels didn’t close and temperature regulation was faulty.
Glossy promotional promises of the Edison performing blood tests all within its own high-tech confines met with the stark reality of its limitations.
Out of 100+ tests that the Edison menu promised to Walgreen consumers – the Wall Street Journal claimed just over 10 were performed on the Edison machine using Theranos technology.
The vast majority of the tests were performed on commercially available blood testing machines at the Theranos lab. The blood sample was couriered round from Walgreens after being removed from an Edison side panel.
Because Theranos heavily advertised the small amount of blood taken – consumers samples were diluted to allow commercial testing on other machines, causing decreases in testing accuracy.
According to one former lab employee, some of the potassium results were so high that patients would have to be dead for the results to be correct.
However, this damning performance assessment of the Edison could prove difficult to use in the case against Holmes.
The prosecution asked for three years of lab data and the subsequent file passed over required two passwords to open – one of which was missing.
Before prosecutors realised this, Theranos had dismantled its database including the missing password. Leaving the prosecution with neither the lab data itself nor -due to a judges ruling -can the data destruction be brought up unless the Holmes defence team raise it first
Most defendants come to a plea deal agreement prior to trial as over 80 per cent end in conviction. Everything about Holmes suggest a character comfortable with high risk with the biggest decision the defence team face is whether to put her on the stand.
John Carreyrou of the Wall Street Journal has followed Holmes for six years – his initial reports have been credited with bringing down Theranos and has often commented on the supreme self-confidence possessed by Holmes.
Carreyrou wonders if Holmes recent marriage and new-born could be read as an appeal to clemency.
The lab data loss and abusive control defence suggest that the case could be more closely contested than first thought