Diagnostics startup Theranos has been wowing investors and healthcare observers with its goal to disrupt the blood-testing industry, but now its core technology and practices are being questioned.
|Elizabeth Holmes, founder and CEO, Theranos|
Unless you have been exiled to live in a different planet, you are at least aware of super hot diagnostics startup Theranos founded by young Stanford dropout Elizabeth Holmes.
The Palo Alto, California-based company aims to turn the blood-testing industry on its head using its proprietary finger-prick technology and analysis machines at dirt cheap prices thereby freeing consumers and healthcare from the hegemony of Quest Diagnostics and LabCorp. As healthcare goes retail and to the home, the company has struck partnerships with the likes of Walgreens and Cleveland Clinic.
Big ambitions and multi-billion dollar valuations will lead to scrutiny, and Theranos tasted a large, bitter pill Thursday when after several months' worth investigation, the Wall Street Journal published a critical piece that called into question the accuracy of the company's testing technology and accused it of deceptive practices. Holmes shot back in an interview with Mad Money Host Jim Cramer that the accusations are patently false and some made by people who now work with LabCorp or wanted money from Theranos.
The Journal story is behind a pay wall, but here are the points it makes:
- The Edison machines that analyzes blood tests are sometimes inaccurate.
- The devices is able to run only 15 of the more than 240 tests that Theranos offers.
- Many tests are performed by traditional lab equipment and not the company's Edison devices and that hasn't been disclosed.
- Theranos may have manipulated proficiency testing by which labs developing tests and products must prove to the Centers for Medicare and Medicaid Services that their results are accurate.
The story was based on a review of internal emails and interviews with four former Theranos employees. It made a point of disclosing that for more than five months Holmes declined to be interviewed and only last week agreed to being interviewed but her schedule couldn't be fit into the publication timeline.
In a televised interview with Cramer of CNBC, Holmes countered that Theranos provided the Journal with reams of documentation countering the accusations made by former employees.
"I have to say I personally was shocked to see that the Journal would publish something like this when we had sent them over a 1,000 pages of documentation demonstrating that the statements in their piece were false, but we're doing things differently and we are working to make a difference and that means people will raise questions and that's okay," Holmes told Cramer.
She added that Theranos spoke with people that the Journal used as a source for the story and they claimed that the Journal was misquoting them or being misleading. She noted those Journal sources who didn't talk with Theranos either do business with LabCorp or demanded $2,500 to speak to Theranos regarding what they told the Journal reporter.
Meanwhile, in response to the specific charges about inaccuracy, Holmes said that Theranos offered to run its technology in the Journal offices but the publication dismissed that request. She also disputed the accusation that Theranos had never publicly disclosed the fact that it does many tests traditionally - with blood drawn from the arm using lab equipment from the likes of Siemens. Holmes said the company had expanded the test menu options to include such tests that other companies were charging exorbitant rates for and talked about this expansion to publications including Fortune and Forbes.
"Now we have a huge number of tests available through our lab but instead of charging $10,000 for those tests, we are charging $2.99," she said.
In the televised interview, Holmes appeared poised and confident, but here is the crux of the matter that sometimes small and large companies, whether public or private, fail to understand about the media.
No matter how angry you feel toward a particular reporter, it is always in one's best interests to talk to them.
When Cramer asked why she never sat down with the Journal given that the publication is respected and doesn't have the reputation of a National Enquirer, Holmes answer made it clear that she wasn't too keen on sitting down with the reporter of the story who she believes had a definite agenda.
She only agreed to the interview when more people at the Journal offered to also be present. But then she couldn't fit her schedule to the 3-day window that the Journal offered her to keep to their publication time.
Holmes scoffed at that time table, but as someone who has been on the other side for several years, I can testify that waiting five months for an interview doesn't endear you to journalists writing a tough piece or their superiors.
Even if you disagree completely with the angle being taken, it is always best to provide an interview to the reporter when it becomes clear that statements alone will not do.
Otherwise, as in the case of Theranos, there will be blood.
[Photo Credit: Theranos]
|To learn more about medical devices and trends in the marketplace, attend the two-day MD&M Minneapolis conference, Nov. 4 and 5 at the Minneapolis Convention Center. |