The whistle-blower who punctured the Theranos bubble

The scandal over Theranos, the blood-testing start-up founded by Silcon valley golden girl Elizabeth Holmes, is far from blowing over. The company, which sold a dream of cutting-edge technology that could administer blood tests for thousands of conditions using just a finger pinprick of blood, is in crisis. Holmes herself has been banned from operating blood-testing labs and has watched her estimated net worth plummet from $4.5 billion to zero, while her company shut down its facilities last month and faces both civil and criminal investigations.

Why? Because Theranos’ black box of blood-testing magic never actually worked.

That really shouldn’t be a surprise, given how complex and difficult healthcare innovation is, compared to building a new smartphone app. The real shock is how long Holmes’ pet unicorn start-up was allowed to operate without scrutiny, basking in years of glowing profiles, magazine front-covers and hundreds of millions raised in investment. It was only in October 2015 that Wall Street Journal reporter John Carreyrou began publishing investigations that questioned whether the technology worked, and within nine months, the entire house of cards had collapsed.

This week, Carreyrou has written the fascinating inside story into how it all started to go wrong for Theranos, thanks to 26-year-old whistle-blower Tyler Shultz. It reads like the plot for a Hollywood film: a young idealistic college grad joins the company of his dreams, only to realise in horror that it is based on a lie that could put people’s health at risk. He attempts to raise his concerns with his superiors (his grandfather former Secretary of State George Shultz is on the board), but is thrown down and threatened. He grapples with his conscience, and eventually risks lawsuits and family feuds to go to the authorities and the press.

I encourage everyone to go read the entire article, and to read over Carreyrou’s previous reporting on Theranos. But two things in particular stand out from this account. The first is just how dangerous Theranos’ mis-advertised technology. Carreyou writes:

“One validation report about an Edison test to detect a sexually-transmitted infectious disease said the test was sensitive enough to detect the disease 95% of the time. But when Mr. Shultz looked at the two sets of experiments from which the report was compiled, they showed sensitivities of 65% and 80%.

That meant that if 100 people infected with the disease were tested only with the Edison device, as many as 35 of them would likely incorrectly conclude they were disease-free.”

Theranos, it should be mentioned, denies the allegations and is appealing the sanctions. But there is little sense, either in its obsessive secrecy or in its treatment of Shultz, that it takes the criticisms against it and well-being of its patients seriously. Shultz e-mailed Holmes in 2014 about his concerns over doctored research and mishandled quality control tests, but he never heard back from her. Instead, he received this response from the company president Sunny Balwani:

“We saw your email to Elizabeth. Before I get into specifics, let me share with you that had this email come from anyone else in the company, I would have already held them accountable for the arrogant and patronizing tone and reckless comments.”

Shultz details the legal saga he has been embroiled in since coming forward, which has cost him and his parents $4,000,000 and driven a wedge between him and and his grandfather, who continues to be involved with Theranos. The amount of time and energy Theranos has spent pursuing Shultz, while failing to address the problems with the technology, is staggering.

There will no doubt be further revelations as Theranos is split open and the mess of mistruths and optimism that propelled it to stardom is laid bare. Keep reading – this could turn into the corporate scandal of the decade.