Seduced by Convenience: Learning from the Theranos Fraud

Seduced by Convenience: Learning from the Theranos Fraud
Leadership / Operational

Article highlights:

  • Theranos perpetrated the largest fraud in the history of lab testing with the promise of "better, faster, cheaper" point of care blood tests.
  • Lab professionals knew it was too good to be true, but naive investors and consumers didn't listen.
  • Laboratorians must do a better job of educating the public about what they do, and about the capabilities of current technology.

Elizabeth Holmes stands to become a legend in the biotech world—not as the start-up genius she pretended to be, but as the author of the biggest fraud ever in the realm of laboratory testing. Her 2003 start-up, Theranos, promised the holy grail of the industry: speedy point of care (POC) testing that delivered accurate results using the tiniest drop of blood, achieving the innovator's trifecta of "better, faster, cheaper."

As recounted in the bestselling book Bad Blood, Holmes, a Stanford dropout, used her brains and charisma to con hundreds of millions of dollars out of investors. Along the way, she duped several famous and powerful people into lending their credibility to her board of directors, and lured high-profile customers like Walgreens to give “Edison," the Theranos device, a try (to the tune of $140 million in investment and testing centers in 40 stores). Rather than abandoning development when it turned out her lab-on-a-chip technology didn't work, Holmes directed her employees to build fake devices to show off to investors and customers, and to falsify results, potentially putting lives at risk. A Wall Street Journal investigation exposed the sham in 2015, and the company finally closed its doors in 2018, beset by lawsuits, sanctions, and criminal indictments.

Why couldn't other players in the lab testing industry, and lab leaders on the clinical side, pull back the curtain? Was the promise of unprecedented convenience just too appealing? In this new era of consumer-driven healthcare, how can we ensure that the quest for convenience never compromises quality or patient safety?

Promising the Impossible


It's not that no one noticed what was going on. “The laboratory community was skeptical from day one, and many laboratorians, both academic and nonacademic, very outspokenly expressed that concern and skepticism," says Donald Karcher, MD, professor and chair of pathology and director of laboratories, George Washington University Medical Center, Washington, D.C. “The people who invested money in Theranos were not knowledgeable about laboratory testing and were not, frankly, medically oriented people in general. People fell for a promise that they didn't really understand was very difficult or almost impossible to deliver with today's technology."

The naive investors were joined by equally naive consumers, says Steven Gudowski, administrator, Department of Pathology, Anatomy and Cell Biology, Sidney Kimmel Medical College, Thomas Jefferson University. “They found something that everybody could buy into, painless phlebotomy, small volumes, less scare of drawing blood, and it sounded like a good thing," he says. “And they ran with it, and people bought it. It's a textbook con."

Preventing the Next Con


The lab industry must do a better job of educating the public about what laboratorians do, and what technology can and can't do, Karcher says. “The idea that you needed to give less blood, and that you could give that tiny bit of blood at a Walgreens right down the street, was an amazingly attractive set of circumstances for the consumer, for the patient," he says. “Their emphasis and focus on the consumer was certainly appropriate."

But to fulfill the lab testing menu that Theranos was proposing, it would have had to use the same technology all labs currently use. Nanotechnology, the catchword that Theranos was selling, may eventually play a role in laboratory testing, but it's not ready yet, Karcher says. “My mom taught me a very important lesson in life, which is that if something seems too good to be true, it more often than not is too good to be true."

Donald Karcher, MD, FCAP

Chair, Department of Pathology

George Washington University Medical Center

Contributing Lab Leaders

Steven Gudowski, MBA, C-PM(APF), MT(ASCP)

Administrator, Department of Pathology, Anatomy and Cell Biology

Sidney Kimmel Medical College, Thomas Jefferson University

Donald Karcher, MD, FCAP

Chair, Department of Pathology

George Washington University Medical Center

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