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Crisis Paper: Theranos Elizabeth Holmes, CEO, and Chairwomen of Theranos Was “A 19-Year-Old Stanford Dropout” Who Founded This Blood Testing Start-Up Company (Bilton)

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Crisis Paper: Theranos Elizabeth Holmes, CEO, and Chairwomen of Theranos Was “A 19-Year-Old Stanford Dropout” Who Founded This Blood Testing Start-Up Company (Bilton) Crisis Paper: Theranos Elizabeth Holmes, CEO, and chairwomen of Theranos was “a 19-year-old Stanford dropout” who founded this blood testing start-up company (Bilton). Forbes named Holmes “youngest self-made female billionaire in the world” because of her $9 billion worth of her company, Theranos (Wikipedia). Elizabeth Holmes was as named as “100 Most Influential People” in 2015 by Time Magazine for her “creation” of a technology that would change the way blood is drawn forever (Wikipedia). Later after Holmes’ exposed fraudulent technology, Fortune named her “one of the ‘World’s Most Disappointing Leaders,'” and the reign of Elizabeth Holmes ended (Wikipedia). Not only was Holmes publicly humiliated and discredited, but “the Centers for Medicare and Medicaid Services banned Holmes from owning, operating, or directing a diagnostic lab for two years” because of her deceit of investors and imitation technology. What Their Technology Claims to Do Theranos is "a consumer healthcare technology company" that claims to have created a technology that was supposed to be a new way to analyze blood test results (Theranos). Having blood drawn consists of going through a process which includes drawing the blood, taking it to a lab, and lastly analyzing the results. Theranos promised the public that their new way of drawing blood did not involve using a big needle, and all it took was a simple finger prick alternatively (Theranos). Theranos has created a minilab which is “a portable device that is designed to have the capability to process and analyze tiny samples of blood” and the company also claims to manufacture all their technology in the United States (Theranos). The company also has a “Theranos Virtual Analyzer (TVA)” which is supposed “a remote server that is designed to communicate with the Theranos minilab” through a wireless connection which is intended to analyze the data from the minilab (Theranos). This company claims that their technology does a lot, but the question being discussed is whether the science behind this technology is reliable? The Process of Drawing Blood First “In theory, that blood [is] collected in a proprietary piece of technology known as a ‘nanotainer,’ a tiny container barely half an inch high, just big enough to hold a couple of drops” and many tests can be performed from just this “tiny sample of blood” said Business Insider in the Fall of 2015. The second step regards transporting the blood to a lab, which “Theranos [had] two labs where they [could] process the samples drawn at their consumer-facing locations,” the labs were in Scottsdale, Arizona and Newark, California (Loria). Lastly, the third and final step of the blood drawing process was the analysis of the blood sample itself and preparing "a tiny amount of fluid and getting an accurate result is what Theranos [needed] to be able to do if their technology really [worked],” which as of today has been proven to be a lie according to the multiple lawsuits filed against the company (Loria). “The Wall Street Journal story cast doubt on [the] claim” that a tiny sample can be accurate, and “with allegations from anonymous former employees saying that these tests were not as accurate as Theranos says, especially tests for vitamin D, prostate cancer, and thyroid hormones” the public was able to decipher for themselves whether this claim of what their technology does is accurate or a hoax (Loria). After these doubts were cast in the media, Theranos has changed how they analyzed their blood samples and stopped using the Edison machine to the more traditional ways (Theranos). Company Net Worth Theranos at one point was stated to be worth $9 billion, which was their peak because their net worth dropped to zero when Walgreens dropped Theranos (Forbes). Walgreens closed all their Arizona blood test locations run by Theranos, and Arizona was Theranos biggest customer base. This hoax led Theranos’ $4.5 billion net worth to drop to $0 according to Forbes article in June 2016. The voiding of test results by Theranos is the reason Walgreens dropped them and Theranos’ $9 billion net worth, produced because of the “Edison Machines” that stated to be “revolutionary,” dropped to $0 because of the exposed truth about their technology (Forbes). Lawsuits Against the Company Theranos was served with lawsuits claiming the company defrauded investors. Theranos, to this day, has settled most if not all, of their fraud lawsuits, including the huge one with a hedge fund company that claims to have been tricked "into making a $96.1 million investment through 'a series of lies,'” stated the company in May 2017 (Marketwatch). Theranos “used a shell company to ‘secretly’ buy commercial lab equipment, and improperly created rosy financial projections for investors” and the company then “used the commercial technology it purchased to stage demonstrations of how its blood tests worked, or theoretically worked” which is the reason for the company being sued by many investors (NYmag). Timeline of Events (Investigations) The timeline of events is long and complicated but giving the citation (credit) to the New York Times, below is a timeline, from their article, of the most important events that led up to the revelation of the company, Theranos’, “bogus blood testing.” • July 2010- Theranos claims it has raised $45 million by selling equity, warrants, and other securities • July 2013- Richard Kovacevich, former chief executive of Wells Fargo and General James Mattis, a retired military commander, are added to Theranos’ board • September 2013- Company announces partnership with Walgreens • February 2015- Stanford School of Medicine professor criticizes the company for trying to “change the entire health system” without publishing anything in peer-reviewed biomedical journals • July 2015- FDA approves Theranos’s tests to detect if someone has been infected by herpes simplex virus 1 • October 2015- investigation by Wall Street Journal raises questions about whether company’s technology works - Concern from the FDA halts Theranos practice of collecting blood • January 2016- Center for Medicare and Medicaid says company violated several clinical standards • March 2016- inspection report from federal regulators says Theranos was plagued by quality control problems • April 2016- company says that Justice Department has requested documents and that the S.E.C. was investigating • June 2016- Walgreens ends its partnership with Theranos after claims Technology is bogus • July 2016- Company announces that regulators have imposed sanctions • 2017- CEO, Elizabeth Holmes, reportedly owes Theranos $25 million Company’s Response to Critique In response to the timeline of events above and the claims made against the company, Theranos drove themselves into a PR disaster. A Wall Street Journal article investigated Theranos, and John Carreyrou stated that “the blood testing startup wasn’t all that it seemed,” after a whistleblower approached him. Theranos responded on October 15, 2015, with: Factually and scientifically erroneous and grounded in baseless assertions by inexperienced and disgruntled former employees and industry incumbents… The sources relied on in the article today were never in a position to understand Theranos’ technology and know nothing about the processes currently employed by the company. We are disappointed that… this reporter relied only on the views of four ‘anonymous’ disgruntled former employees, competitors and their allies, instead of reaching out to many of the scientific, healthcare and business leaders who have actually seen, tested, used and examined our breakthrough technologies. (Fortune) For the company to call out this Wall Street Journal writer and to discredit their former employees, who worked directly with the technology, showed the company’s willingness to mask their lies by throwing anyone under the bus. The company’s responses were all lies, as later proved by the truth coming out, making this is a PR disaster because the company has still not come out with the truth themselves or an apology to the public. The company paid financially for their lies not only to the public but the lies about what they claimed their technology did. How Theranos PR Could Have Stopped this Crisis Theranos started their 2017 year by “firing 155 employees to leave a ‘core team’ of just 220,” and this news has been confirmed by the company (Vincent). The company in last October “fired 340 staff members” and later closed all of its labs, the company claimed to be “restructuring,” but we all know these firings were due to the company’s billion-dollar loss (Vincent). Theranos employees played a significant part in the company’s PR crisis because they were the ones to file complaints and break the seal on what was happening in the business. Theranos could have stopped this crisis by halting blood analyzations when they realized their technology was faulty, but instead, the company instructed employees to “continue to test patients’ blood using Theranos’ devices even though there was evidence of ‘major stability, precision, and accuracy’ issues” (Jacobs). Stopping the tests and reviewing the technology would have saved the company its discredit and trust, and could have been a better fix than faking it for investment sales. Company’s Financial Loss Theranos was a private company which meant they did not have a public stock symbol. The company as stated above went from being worth $9 billion to $0, and this happened in six short months. The downfall of Theranos started when several different media sources claimed not to trust the technology the company claimed to have. Theranos crisis, the bogus blood testing, did create a greater distrust in the entire industry. According to the US National Library of Medicine National Institutes of Health, “distrust of the health care system is relatively high in the general; population in the United States” and this Theranos scandal did not help with this already present problem.
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