Theranos Is Subject of Criminal Probe by U.S | Hacker News Reader

Theranos Is Subject of Criminal Probe by U.S

wsj.com

390 pointsfmihaila216 comments

Theranos isn't even at the leading edge of blood testing. There are now hand-held FDA-approved immediate blood testing devices.[1][2][3] Most of these require smaller amounts of blood than a remote lab, although more than a drop. Theranos is still in the send-it-to-the-lab-and-wait era. Even if Theranos' technology eventually works, it may be obsolete before it ships.

[1] https://www.abbottpointofcare.com/products-services/istat-ha... [2] http://www.epocal.com/system.html [3] http://www.pixcell-medical.com/products/in-the-pipeline

The healthcare industry is quite inefficient at allocating money to things that are needed and have a decent chance of working.

For example, in the field of oncology there's very little money put into cheap accurate early screening. And an almost obsessive pour of money into trying to understand mid-to-late stage cancers. Even James Watson has criticized this.

It's a sad situation, because we now know early pre-clinical tumours leave a trace of circulating DNA in blood. And it seems like a darn important and doable inference problem to distinguish cancer from control patients.

> For example, in the field of oncology there's very little money put into cheap accurate early screening. And an almost obsessive pour of money into trying to understand mid-to-late stage cancers. Even James Watson has criticized this.

I'm in no way an expert, but isn't part of that related to increasing evidence that early detection of a tumor isn't necessarily a benefit? I recall reading many tumors stop or grow so slowly that treating them has more of a downside than an upside. This is one of the reasons why early breast cancer screenings aren't a benefit.

You're definitely right that merely detecting tumors earlier doesn't always help, because many of them are relatively slow-growing and fairly harmless. But this actually makes a very specific kind of early detection research even more important: research to help us predict which early-stage tumors will progress to becoming deadly, and which ones won't. Currently we're pretty bad at making this prediction for many kinds of cancer, but if we could detect them all early AND distinguish the really bad ones from the mellower ones, we'd know exactly who to treat aggressively.

Got it - so really, it's not "earlier", full stop, it's "identify bad tumors vs. okay tumors early".

Thanks for the clarification.

It depends on the type of cancer. For instance, a surprisingly large portion of the population likely has thyroid cancer and doesn't know it, and many have it and it isn't treated. It's a very slow-growing cancer usually, and just not worth bothering with until the tumor gets large enough to cause real problems due to its size (then they usually just cut out part of your thyroid, leaving the other part to continue working as normal, or at worst they cut out the whole thyroid and you have to take a Synthroid pill every day).

Other cancers, like pancreatic cancer, are very aggressive so the earlier you catch them the better.

I would think early screening would discriminate by type of cancer so you can see if you have something that needs immediate attention.

> a surprisingly large portion of the population likely has thyroid cancer and doesn't know it, and many have it and it isn't treated

A larger portion of the population has prostate cancer. You probably have it right now.

My mom likes to tell a story from one of her classes at medical school. The teacher had a bunch of slides of prostate material; you had to identify which prostate was cancerous. There were so many questions ("this one looks cancerous. Is this it?") from the class that he was forced to announce "look, there's a bit of cancer in everyone's prostate. Find the one with an obvious problem".

It's slow, but it will get you if nothing else does first. :/

Uh, why didn't she teach the known diagnostic criteria? I don't want my oncologist winging it based on what looks intuitively obvious on a slide.

> Uh, why didn't she teach the known diagnostic criteria?

Generally you would do this before having the lab in which students are expected to use the knowledge. It's kind of pointless the other way around. In other words, that doesn't help with the problem. Knowing the official diagnostic criteria is often not helpful for diagnosing a condition.

Your oncologist will be winging it based on their past experience.

As an addendum, here is a description of the process of diagnosing prostate cancer from a biopsy, from http://www.cancer.org/cancer/prostatecancer/detailedguide/pr... :

> Prostate cancers are graded according to the Gleason system. This system assigns a Gleason grade based on how much the cancer looks like normal prostate tissue.

> If the cancer looks a lot like normal prostate tissue, a grade of 1 is assigned.

> If the cancer looks very abnormal, it is given a grade of 5.

> Grades 2 through 4 have features in between these extremes.

> Most cancers are grade 3 or higher, and grades 1 and 2 are not often used.

> The Gleason score can be between 2 and 10, but most are at least a 6. The higher the Gleason score, the more likely it is that the cancer will grow and spread quickly.

> Since prostate cancers often have areas with different grades, a grade is assigned to the 2 areas that make up most of the cancer. These 2 grades are added to yield the Gleason score (also called the Gleason sum).

Note that this explicitly contemplates, at the low end of the scale, that it's difficult to distinguish between normal prostate cells and cancerous prostate cells.

Grades 1 and 2 are not often used because biopsies, a fairly invasive process, tend to be taken from men who are already suspected to have higher-than-average levels of cancer. If we took biopsies from a representative population sample, grades 1 and 2 would feature prominently in the results. That is the point of the med school anecdote -- even in samples artifically chosen to highlight the difference between a normal prostate gland and one with a serious problem, you just can't keep low-grade cancers out of the "normal" samples.

The point of the lab exercise is to give students practice grading cancers, and recognizing the difference between serious prostate cancer and run-of-the-mill prostate cancer. Only experience will help with this, because the diagnostic criteria are "prostate cancer runs the full continuum".

It is the norm in medicine that a question of the form "does this patient have this condition" has no truly objective answer. Surgery is well understood; internal medicine is not.

Just last week, thyroid tumors were reclassified and are no longer considered cancer. [http://www.nytimes.com/2016/04/15/health/thyroid-tumor-cance...]

From the article 'Instead of calling it “encapsulated follicular variant of papillary thyroid carcinoma,” they now call it “noninvasive follicular thyroid neoplasm with papillary-like nuclear features,” or NIFTP. The word “carcinoma” is gone.'.

Great link, thanks. This affects me directly: I had one of these thyroid nodules found recently, but they've decided it's small and nothing to worry much about, so they're just going to keep an eye on it.

From your link: "At major medical centers, many patients with encapsulated thyroid tumors are already being treated less aggressively. But, thyroid experts say, that is not the norm in the rest of the country and the rest of the world."

I guess it's a good thing I was sent to a major medical center (one large enough where my oncologist specializes only in thyroids) or else I might be getting part of my thyroid cut out for no good reason now....

There is actually now a LOT of interest in the biomedical community for circulating tumor DNA - a quick Pubmed search yields 3317 results and Illumina is practically throwing money at the field. You have to keep in mind that the sequencing technology has only recently become cheap and sophisticated enough for this kind of highly sensitive testing to be possible.

came here to post exactly this.

Maybe it's doable. Early screening methods like mammograms have huge problems with false positives. Early screening has to be extremely accurate to overcome the false positive problem for low base rate events. That's hard.

I'd reckon that part of this is related to how "easy" it is to get a drug approved for certain-death cancers. The barrier for a drug's approval is lower if the alternative is a certainty of painful death. This is sort of changing as we now seem to have plenty of those kinds of therapies, and the new goal is much more precise targeting of cancers (immunooncology is one example).

If you look carefully at the available assays from these three companies, they cover mostly the clinical chemistry arena.

Theranos was claiming to be able to perform complex immunoassays on their devices. Microfluidic immunoassays are very tough to get right, given the extremely small size of the patient sample and the even smaller concentrations of analyte in the patient's bloodstream.

I wonder how these devices address the question raised in this study [1]. Also, can you perform all tests (e.g., metabolic panel) on these devices ?

[1] http://ajcp.oxfordjournals.org/content/144/6/885.abstract

I think the reason we (maybe secretly) take so much satisfaction / schadenfreude at this story is that someone who was so hyped and the darling of Silicon Valley got so much funding and attention. While others who toil away on good ideas, without nearly so many connections and silver spoons, struggle to even get 1 minute of air time with the kind of funders and backers that she got.

That, plus seeing the cluelessness and herd mentality of the people who are supposedly the experts at judging tech potential in this area.

Or maybe some folks feel relieved to have their mental models for actual reality validated. Folks who thought it smelled like vaporware at best, or BS at worst, may not be engaging in schadenfreude so much as "Ha! I knew it! I'm not crazy!"

It is possible to have not ugly reasons for finding satisfaction in seeing how this is turning out.

Thanks, I miscategorized my own feelings of validation as schadenfreude and was feeling bad about it. Now I don't have to.

Good point. For me it's not exactly schadenfreude. I'm ok with hype that turns out to be justified. And I'm mostly resigned to people who go wrong through an excess of enthusiasm and naivete. But when unjustified hype shades into negligence or fraud, I take a rich pleasure in seeing people get their comeuppance. It's not schadenfreude precisely, but more about seeing justice done, about seeing karma fulfilled.

I don't speak German, but I don't know if it ceases being schadenfreude just because you feel that the bad thing that happens is justified. Indeed, the Wikipedia page on the word freely mixes those kinds of examples in their page.

I'm not trying to be confrontational here, but recently I've been having a fairly negative reaction to the happy feelings that occur when justice is served. Sometimes I think this fuels a search for justice, where punishment is almost a desired goal from the beginning. The OP also discussed the feeling of satisfaction that their world view is justified when someone gets punished. Without trying to ascribe any intent to the OP, I get very bad vibes out of relentless searches for justice where the punishment of those caught fuels a reinforcement that a certain world view is correct.

Of course this is completely blowing these feelings up out of proportion, but from small seeds grow tall trees. I have lately wondered if justice is really something we should not try to pursue.

It might interest you to check out Better Angels of Our Nature, a book by Steven Pinker about the history of violence. He argues that it's typical for humans to fall into cycles of retributive/vengeful violence against one another, or even "Hobbesian trap" patterns of preemptive violence. This leads to astronomically high rates of homicide.

The development of governments that have a monopoly on the use of violence helped curb this. If both sides of a dispute cede their right to violence and entrust a neutral third party with dispensing justice, they can be satisfied with the outcome and save face. For obvious reasons, this leads to a much more civil society than people needing to take the law into their own hands.

In this sense, it's actually a blessing that we're inclined to feel so satisfied seeing justice done by a third party.

In this sense, it's actually a blessing that we're inclined to feel so satisfied seeing justice done by a third party.

Maybe, but the schadenfreude is going to boil over if we ever get to see Holmes being perp-walked in her black turtleneck.

Anything can go awry, but looking at the headlines I don't think we have a surplus of justice in the world. And this:

> I have lately wondered if justice is really something we should not try to pursue.

That strikes me as the perspective of somebody who leads a very comfortable life.

The OP also discussed the feeling of satisfaction that their world view is justified when someone gets punished.

If you mean me, I feel like this puts words in my mouth, words that I do not agree with. I am not a vindictive person. I am not taking glee in people being punished per se. But I have made my peace with the fact that when people pursue a bad path long enough, at some point, it is likely to get push back. It no longer bothers me that the pushback may involve what you are terming punishment.

But, so far, what I am hearing is that Holmes is being banned from a thing, not thrown in jail. She may find that painful, but I don't think telling her "We expect you to stop this shit that is potentially harmful to other people." is actually punishment. It is merely protecting other people.

If she cannot behave responsibly enough to provide a genuine service while getting rich, she has no God given right to do whatever the fuck she pleases.

To my mind, this is in the vein of "Your right to swing your fist ends where my face begins." If you or Ms. Holmes thinks that is a painful and excessive restriction, well, too bad, so fucking sad. It isn't being done to hurt the woman. It is being done to stop her from hurting others.

Sufficiently advanced satisfaction at vindication of your worldmodel due to misfortune is indistinguishable from schafenfreude.

Not at all. One is empirical where you hone the accuracy of your world model while being able to prove it to others if necessary. It can even benefit their own development and actions, but doesn't have to. An emotionless individual can also possess this trait. Even early robots in A.I. that self-adjusted had a form of this.

Whereas, schafenfreude is an emotional response tied to others success or failures. Two different things with one being clearly superior unless one is pursuing emotional highs and lows.

Yes. But what is happening here is not "misfortune" in the sense of something undeservedly bad happening to someone.

People lying and evading the law is hardly "misfortune." This company looks like it was bungled from the start. I have, so far, refrained from spouting off on my blog about it, but, as a woman, I am personally offended at this hype fest.

All this cult of personality shit that swirled around this pretty young college drop out who was supposedly a billionaire by age 30 and now is looking like the queen of vaporware is just a huge fucking set back for women who want real careers.

If all you want out of life is to be cooed at for being a media darling, go to fucking Hollywood. Stay the hell out of the business world.

Add Theranos's governance issues to the list, too. Most Valley startups make do with non-famous directors who hold VC/angel stakes -- and are prone to riding management hard about real or imagined problems with the business. That tension is part of the deal; it's pretty inescapable.

Theranos created this alternative reality with globally famous directors in their 80s and 90s, who offered instant prestige, without being the types that would ever challenge the CEO's grasp of business details. Wow, it must a joy ride to have Dr. Kissinger on your board. Or maybe not.

When Theranos's governance proved unreal, that became sweet vindication for every Valley CEO/CFO who ever stayed up past 1 a.m. getting every last number in shape for a hectoring, detail-obsessed board meeting the next day.

FWIW, I had never heard of Theranos until they came up in the news with all these issues (and I read HN every day).

They were on 60 Minutes last year

June of 2014 there was a massive press roll out for Theranos and Elizabeth Holmes. You couldn't go anywhere, or look at a magazine rack, without seeing her face.

http://fortune.com/2014/06/12/theranos-blood-holmes/

I'm the same -- I never heard of Theranos before the criticisms on HN.

I also don't read magazines, read newspapers, watch TV, or listen to the radio.

It's appeared on HN that far back (and further), as well.

September 2013, 211 points 113 comments, https://news.ycombinator.com/item?id=6349349

June 2014, 202 points 97 comments, https://news.ycombinator.com/item?id=7951019

August 2014, 180 points 76 comments, https://news.ycombinator.com/item?id=8181339

There's even a "Theranos" user account on HN that has been posting in "who's hiring" threads as far back as May 2014: https://news.ycombinator.com/threads?id=Theranos&next=868287...

Agreed. Most tech investors are not savvy enough to make informed decisions when it comes to high-tech ventures. A lot of investors rely on other investors' opinions as a barometer for quality/value because they don't understand what they're doing.

When you have too many empty suits at the top making all the decisions, then you get into a situation of the blind leading the blind. It is shocking that it can happen at such a scale.

It's frustrating for intelligent, motivated founders who do the hard work to watch vaporware competitors getting billion dollar valuations and taking all the market share right in front of them.

Too many investors don't have a clue about what real innovation/value looks like because they've never actually seen it - Most of them probably got into their position through a combination of hard hustling and luck instead of through hard work and critical thinking.

Unfortunately, hustling doesn't advance science or human knowledge.

Yet they are propped up by a lot of smart people.

It's quite obvious that very few are disproportionally benefiting from modern tech. Unlikely to sustain much longer. Doug Rushkoff has a good talk on this - https://www.youtube.com/watch?v=87TSoqnZass There is a shorter version on BigThink.

I think part of it is that the founder comes from a very well-connected family and her connections to institutional capital (Draper is a family friend; Lucas) and ridiculously high-level advisors in business (Oracle's Ellison) and the government (Frist) are not generally available to others.

That stuff would seem to make it all the more strange.

Was she "playing business" and got in over her head?

Was it just an outright scam?

Some people have said maybe those big name directors were brought in to grease the tracks as part of a deliberate scam. Who knows?

Maybe there will be some answers if this probe turns up anything.

I don't think it was intended to be a scam. The founder raised too much capital on the back of massively inflated expectations. They couldn't deliver (didn't one of the technical team commit suicide in despair over this?) and rather than doing the honest thing and returning the capital, they've ended up creating a Kafkaesque web of shadows and lies. The fundamental issue is overfunding, and it is not limited to this one company, which is why we're in bubble territory once again.

Yeah, I'm not particularly well-versed in this, but I'm inclined to agree. As others have mentioned they were probably just believing there own hype.

There is the question though of at what point did they realize what they were attempting was pushing up against some fundamental limits and just wasn't going to work? Did they think they were going to pivot?

At some point a 'web of shadows and lies' would have to be construed as a scam, wouldn't it? Even if that wasn't the initial intent.

I tend to agree. From what I've read about her (and not in the puff-pieces at the height of the Theranos hype) she was indeed a much smarter than average young lady - but probably the team was not able to deliver on the original vision/ idea, and rather than admit defeat, they tried to cling on it for as long as possible.

No doubt she is a bright well-educated driven person. Zuckerberg-esque, no doubt. But zuck pulled it off because Facebook didn't need any next-gen tech to launch and get big-- just elbow grease and investment/marketing connections. You can't wing it to launch a new blood diagnostics.

But they never had the tech! This wasn't a genius scientist who got investment to productonize an idea. It was a BS company set up by the parents and their uberwealthy/connected friends, with the kid as the media friendly face, like a teen pop star, or like when someone with a journo friend promotes the "my 8 year old wrote an app!" gimmick every year or so.

They streamrolled a bluff into billon dollar deals, either as a complete scam, or hoping to quietly buy the tech from a real inventor eventually.

It was concept we would have loved to have worked out- super efficient blood testing. Alas, it was too good to be true, or ahead of its time. Now the serious question is why the founder or board abandon the approach when it did not succeed. That whey the company became shady.

What if it actually does work?

All of the accusations I've read revolve around everything but the the actual science, e.g. not classifying their containers as Class II, instead of Class I.

It's satisfying to see enforcement against frauds, especially when they are so close to your own industry.

I've seen people do sketchy stuff which seemed obviously wrong and publicly apparent for many, many years. Sometimes it finally catches up with them, but other times it does not, and they cash out, are rewarded, and praised by others who have great respect. That is deeply unnerving.

interesting point. enforcement came via government.

That's one of the few things legitimate Government is for: prosecuting people for fraud.

It's also because she's blonde.

I take satisfaction in it because of her incredibly irresponsible conduct. Medicine is a serious field where failure can cost lives.

If your Twitter clone doesn't work, no one notices. If your "revolutionary" blood-testing device reports a false positive or false negative, it can lead to a misdiagnosis.

cluelessness and herd mentality

The guy[0] who pointed out how ridiculous the Rolling Stone UVA rape story was while the press was eating it up, made the point that when people are told what they want to hear they don't ask many questions.

I wonder how much the Grrlpower element around this story dissuaded some obvious questions in the initial reporting around this mess.

[0]http://richardbradley.net/

Not to immediately jump into your assertion as correct in this instance, I do recall such an element being used as an initial defense by GoldiBlox after they sued the Beastie Boys. It was a real horror show. Still wish it had gone to court for some legal clarity, oh well.

I'm not making a secret out of it

Man, the shoe fell really, really quickly. Also - huge congratulations to the reporting team of the WSJ, that did an incredible job of unconvering this story back when Theranos was still considered a golden goose. John Carreyrou in particular did some exceptional reporting.

Uncovering? They pissed off (justly) somebody very important, probably in the military, and they used WSJ to orchestrate this.

No, the other way around. They were all set to get it in at a high level into the military, when some pesky medical lower ranking officer said, hey, doesn't this need FDA approval? Theranos tried to squelch that, but to no avail.

Is it possible both of you are right?

> Is it possible both of [them] are right?

Absolutely. However, they give 0 attribution to their baseless assertions. I follow Theranos enough where neither of these statements are so obviously common knowledge that they don't need to reference something at least in passing.

Mostly, I am curious how this ended up happening.

Attribution: http://www.fiercemedicaldevices.com/story/theranos-asked-mil...

"But things didn't shake out that way. A military regulatory expert contacted the FDA with concerns about Theranos' technology without telling the company first, stalling the project and prompting Holmes to reach out to Mattis for help.

"I would very much appreciate your help in getting this information corrected with the regulatory agencies," Holmes wrote in an email to Mattis, saying that since the "misinformation came from within DOD, it would be "invaluable" to have the information "formally corrected by the right people in the DOD."

Really? I don't know these reporters, but I know ones of similar caliber, and they are very, very hard to use. They are of the "if your mother says she loves you, check it out" school of reporting. So in that spirit, could you provide your evidence that the reporters were used? And also explain by whom, and why these military VIPs didn't just have the DOJ go after Theranos directly?

I imagine a chain of events something like this: 1) Some shady anonymous source (someone incentivized to see Theranos fail) provides them with some hints. 2) Being good journalists, they follow up and find that something sketchy is going on at Theranos, enough for a whole series of good stories. 3) At this point, even if the original anonymous source was using them, they've put together their own story. What are they going to do, kill it to avoid helping some third party by printing the truth?

I'm not getting how this might be different than any other exposé. I'd guess the majority of people contacting reporters have some sort of agenda.

Evidence? That is a very serious charge, and I feel sure you would not just shoot your mouth off with an accusation that would destroy the careers of people and cause damage to our military and country unless you had strong, incontrovertible evidence.

John Carreyrou is a bona fide, two-time Pulitzer winner.

They saw a story, chased it, and it looks like their hunches were right

Here's a television parody I wrote about Theranos that ends right where this story begins... http://pricks.com

that's a more noble use of that domain than anyone could have predicted.

I just read a 32 page script and now I want you to write major television shows. Is that your actual job? This is really good.

Thank you! Currently it's a hobby; my background is in tech. This is the second script I've written. The first was a fake premiere for S3 of Silicon Valley (http://bit.ly/1LOZZpT).

Well, I know what I'm doing tonight. Cheers! This is great.

Just wanted to say that I found this so funny when I read it a few months ago (if I remember correctly). You perfectly captured the characters and I could see them saying those exact words.

I'm curious what it takes to break into the world of writing for existing TV shows. Can you sell scripts written on spec for shows like this?

I appreciate it.

You can't sell a script for a show to the show itself. In fact, the staff isn't even allowed to read it for legal reasons (if they happen to conceive a similar idea, they're worried you'll sue them later).

However, an agent could shop your script to other shows to demonstrate that you're able to integrate well into a world you didn't create. It's rather strange: If you want to write for Breaking Bad, you should write a script for The Wire.

"Maritime breakfast" -- incredible!

I read this when you first wrote it, you have serious talent and hope you get one of your scripts into production one day.

The Blood Fairy and final speech are the funniest things I've read today. Possibly also for a few days before that too.

I genuinely laughed out loud when Allison announced the general council, who has a religious objection to email, would be working from home in Iceland.

I immediately sent that scene to my lawyer friend, with a link the script and a bad pun.

This dude co-created Firefox and was director of product at FB for a while...definitely not a screenwriting background but smart man nonetheless.

https://en.wikipedia.org/wiki/Blake_Ross

Wow, and he did it all before the age of 30. I feel like a loser.

Nah, don't worry about it. If you read his bio it says that he started when he was 10yrs old creating websites and then interned at Netscape at age 14. He started quite young and it's obvious that his value systems at that age were quite different from most people.

I however, would not have given up my childhood for any amount of success or achievement. That stuff could have waited. I'm not even the least bit jealous of him because it's clear that him and I had different value systems. I had so much fun trading pokemon cards with my friends and running around in the neighborhood park. Screw going to Stanford at 15.

I do want to make it very very clear that this is not a criticism of Blake. I have tremendous respect for his accomplishments and his hilarious screenwriting. I just wanted to point out that it's not all roses and that people can frame these achievements in the context of different value systems.

Not bad, but why did you make the Holmes character an English PhD when part of her story is the whole founder-dropout thing?

Possible answer from the script's "notes" page: "the degree hanging in her office is aspirational. she would've gotten it. It's a reminder of everything she gave up"

FWIW (a fleeting warm fuzzy at best, sadly) I'd give you an interview for a comedy writing room if I were in charge of that kind of thing.

You ever listen to the Sam and Jim go to Hollywood podcast? Awesome stuff, not least because now they're showrunners for a major Steven-King backed television program and when they started they were just former Minnesotan restaurant owners who moved to Hollywood to try to become writers.

This is great, I hadn't heard of it before.

I loved your Silicon Valley script, and seriously hope they invite you on for a least a guest writer spot. I haven't gotten to read the full "Pricks" script yet, but I just cracked up in my office (with a bunch of strange looks) when I read (and had a beautiful mental picture of) Dr. Oz, Dr. Phil, and Dr. Dre at the board meeting.

It's not super sexy anymore, but if you ever want to write/learn anything about the silicon (semiconductor) part of "Silicon" Valley, let me know!

Uh, this is shockingly good.

When I first read this headline I was thinking "Uh oh, Theranos must have very badly handled its interactions with FDA". But this is apparently the SEC investigating the company.

Does anyone know how often the SEC investigates a private company with a product that's still essentially in beta testing?

> Does anyone know how often the SEC investigates a private company with a product that's still essentially in beta testing?

Apparently at some point before a company takes $400m in investment on a fraudulent basis.

They will see if there is something like a material misrepresentation.

The cynical point of view is that some wealthy investors feel like they were mislead and that is the only reason the SEC gives a hoot.

Respectfully, that's a nonsense point of view. The investors want to get as much of their investment back as possible, or, if they've given up on that, they at least don't want to be seen as having invested in criminals.

If they have concluded that their was some kind of fraud involved then having the government investigate and expose the facts is a lot easier and cheaper for them. They will then be free to use those facts to recover money.

They're the owners of the company; they're already entitled to their share of whatever's left.

Institutional investors are a lot more worried about the (additional) reputational damage, from having invested with criminals, than they are about recovering fractions of fractions of fractions of pennies on the dollar by raiding Elizabeth Holmes' personal bank account.

Nah, no way. If anything the SEC spends too much time chasing down small time crooks scamming grandpa.

That's the point they only go after people scamming grandma unless some influential person pushes them to do otherwise.

Well, if it can be shown that they lied or omitted material information in the course of soliciting equity investments, that's a Rule 10b-5 violation, the SEC's big club. The fact that Theranos is a private company is immaterial, as is the possibility that none of its investors may have complained.

Theranos has at least two mainstream venture funds among its investors. These funds have limited partners, most of which are fairly famous institutions (including big-name universities). These LPs hate to see their money squandered -- and they may feel a legal obligation to raise a ruckus.

The criminal probe is separate from the SEC actions -- The SEC can only refer criminal cases to the DOJ, they have no criminal enforcement arm themselves.[1]

So in addition to the criminal probe instigated by the DOJ, the SEC is investigating for securities issues.

[1] - https://www.sec.gov/about/offices/oia/oia_enforce/overviewen...

The SEC is getting more aggressive about regulating large pseudo-public companies that haven't had a formal IPO, but which have many "qualified" investors.[1] Mutual funds now invest in these companies, which means ordinary investors are at risk.

The SEC chair on "unicorns": "It is axiomatic that all private and public securities transactions, no matter the sophistication of the parties, must be free from fraud. Exchange Act Section 10(b) and Rule 10b-5 apply to all companies and we must be vigorous in ferreting out and punishing wrongdoers wherever they operate. In the unicorn context, there is a worry that the tail may wag the horn, so to speak, on valuation disclosures. The concern is whether the prestige associated with reaching a sky high valuation fast drives companies to try to appear more valuable than they actually are."

That last sentence sounds a lot like Theranos.

[1] https://www.sec.gov/news/speech/chair-white-silicon-valley-i...

"tough on Unicorns" :) The plight of Theranos has just become much worse as they will probably be made an example of.

My money is still on the CEO and board of investors bailing out on golden parachutes to whatever their next horrendous executive appointment will be.

Maybe for the board, but not the CEO -- she's not a hired gun, she was the founder.

Good that the feds are doing their due diligence.

The news release issued when the Walgreens deal was announced said consumers “will be able to access less invasive and more affordable clinician-directed lab testing, from a blood sample as small as a few drops, or 1/1,000 the size of a typical blood draw.”

As part of the deal, Walgreens has invested at least $50 million into Theranos, according to people familiar with the matter.

It really blows my mind that Theranos was able to get this far with what sounds like technology that simply didn't work. Did any investors simply try the test(s) before investing vast sums of money?

The Walgreen's angle is much bigger. From what I've read online, they invested $50 million and built out all those in-store clinics based on Theranos. Add in the retail space and construction costs, and you're looking at real money.

non-paywall link:

http://on.wsj.com/1VyFPIt

Much appreciated

WSJ also allows for visitors from organic search to read the articles without the paywall. Simply Google search the exact WSJ article title with "quotations" around the title and click on the WSJ link from Google.

For all the EPA fights that plague larger older companies (and many new ones, too), industrial safety and adherence to regulations is very deeply ingrained in their cultures. Heads roll pretty quickly for violations at lower levels. Even higher level executives are often quite responsible about staying within the bounds of laws and regulations (though they are less so in doing layoffs and such). This obviously leads to slower innovation and more red-tape, but I have come to believe that slower innovation is an acceptable price to pay for the rest of the stuff being legit.

If you are challenging the old order in old industries, and have to move fast and break (the right) things, do it like Tesla and Space X, not Theranos.

Always fun to go back in time and look at what people were saying about Elizabeth Holmes and Theranos, like 2 years ago:

https://news.ycombinator.com/item?id=7951019

https://news.ycombinator.com/item?id=8181339

I find it insightful to see who was "right" and who was "wrong". There were a surprising number of people from the medical field expressing doubts about the technology.

Perhaps should have been titled "30 year old vaporware sector billionaire"

i remember that one https://news.ycombinator.com/item?id=8182026

That day I just basically learned about Theranos existence from the posted article, and that comments post explained to me what it is about :)

> There were a surprising number of people from the medical field expressing doubts about the technology.

And were dismissed because their industry was being "disrupted".

The Theranos story is unfortunate due to the likelihood of fraud because the healthcare industry is in desperate need of disruption. Even if just from the periphery, which is how I would characterize Theranos' role, I think that could enable a change in how health care is done and delivered in the US.

Investigators are also examining whether Theranos misled government officials, which can be a crime under federal law, some of the people said.
Such subpoenas don’t necessarily mean prosecutors are actively seeking an indictment. People familiar with the matter said the investigation is at an early stage.

In addition to the criminal probe, the Securities and Exchange Commission is examining whether Theranos made deceptive statements to investors when it solicited funding, according to people familiar with the matter. Theranos was valued at $9 billion in a funding round in 2014 and the majority stake of Elizabeth Holmes, the startup’s founder and chief executive, at more than half that.

Has there been any other examples of such high profile entrepreneurs ending up at the wrong end of a criminal investigation?

Sure. Adelphia Cable was a large company - the fifth largest cable company in the US - founded by John Rigas, and he was indicted when it imploded:

"Federal prosecutors proved that the Rigases used complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing $100 million for themselves."

https://en.wikipedia.org/wiki/Adelphia_Communications_Corpor...

A few other examples from that time are not as clean when it comes to the direct "entrepreneur" part. Kenneth Lay is sometimes considered the founder of Enron, but he didn't build or found most of the pieces of it. Bernie Ebbers of Worldcom was a bit closer to being a traditional entrepreneur story:

"Ebbers began his business career operating a chain of motels in Mississippi. He joined with several other people in 1983 as investors in the newly formed Long Distance Discount Services, Inc. (LDDS). Two years later he was named chief executive of the corporation. The company acquired over 60 other independent telecommunications firms, changing its name to WorldCom in 1995."

https://en.wikipedia.org/wiki/Bernard_Ebbers

Crazy Eddie is a famous story, but quite a lot smaller than Theranos (well, in regards to b.s. market valuation):

"At its maximum, Crazy Eddie had 43 stores in the chain, and earned more than $300 million in sales" [that $300m in sales would adjust quite a lot higher in today's dollar]

https://en.wikipedia.org/wiki/Crazy_Eddie

Bernie Madoff is maybe the most famous example (he ran his own firm for 48 years!):

"Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest on December 11, 2008"

https://en.wikipedia.org/wiki/Bernard_Madoff

Allen Stanford was sort of out of the same mold:

https://en.wikipedia.org/wiki/Allen_Stanford

As part of the deal, Walgreens has invested at least $50 million into Theranos, according to people familiar with the matter.

It really blows my mind that Theranos was able to get this far with what sounds like technology that simply didn't work. Did any investors simply try the test(s) before investing vast sums of money?

Have you ever seen how directors and executives make deals? Meanwhile, I'm sure dozens of engineers were shouting that this doesn't work, but couldn't get the message through the thick layer of middle management. It is not the least bit surprising to me.

Funny, just saw this in the paper yesterday. I wonder how it differs from Theranos. http://szdaily.sznews.com/html/2016-04/18/content_3505489.ht...

If verified, the LinkedIn history [0] at least shows some expertise and progressive advancement in medical device design and manufacturer, which I don't think Theranos' CEO has.

[0] https://www.linkedin.com/in/wendian-shi-21757833

"The Journal‘s reporting suggests that Theranos had been falsifying lab records to make it look like its own proprietary gear was as reliable as the industry standard.

Documents from health care inspectors also seem to show that this kind of stuff was happening.

If the DOJ concludes that Theranos was charging money for a test it knew was not accurate, that would violate health care laws, and could earn people prison time." http://www.wired.com/2016/04/theranos-investigated-fraud-wei...

Never trust anyone whose schtick is that they're too busy to have a private life.

Agreed. Did Holmes say that?

It was a minor takeaway in some gushing article about 18 months ago though I don't recall where right now and don't feel like diving through my ancient HN comments. I just remember it jumping out as a 'too good to be true' aspect of the story.

There is a number of things from her past interviews (https://www.youtube.com/watch?v=iwKs-eoPM-Y) that leave a lot of questions. For example she says that she sleeps for 4 hours , and that she 's a big fan of the 10000 hours rule, and a bunch of stuff for how she really is committed to what she does, but very little on why she believes she can pull it through. For comparison, another female health entrepreneur, Woljisky of 23andme usually gives much more down-to-earth and concrete motives for her company.

And there is the turtleneck thing that, in retrospect, looks ridiculous.

Hey now I like turtlenecks, even if she was going for a 'Steve Jobs, only pretty' image.

I think the working assumption of the investors was that she would be sacrificed, but Theranos would continue. But because of this, it may not happen.

Theranos' tragic flaw was not even so much that they were hyped to the moon and back, but that they believed their own hype.

The punchline will be kissinger dying weeks before the law finally catches up with the p'tach.

Why is the SEC involved in a failure-to-quality-control issue? Were investors materially misled?

Yes, word on the street is that they are being investigated by the SEC for misleading their investors.

This very sparse report leads with the same text and twitter is full of news sources "reporting" the same thing.

I have a feeling that it's going to be a bad time for Theranos employee's and investors over the next few months. It's going to be much worse for a few of their executives.

With lots of mutual funds investing in these pseudo-public technology companies, actual investors are at risk.

Thankfully, the SEC has our backs.

This eerily reminds me of Enron.

Enron was much more of a real company. It collapsed due to poor investments and cooking the books, but Enron really did own a lot of assets. It would be more akin to Enron if Theranos' tech actually worked, but they were reporting much more profit than they were really getting.

Well, her father did work there.

(Though, in his defense, not in a business unit related to their fraud)

Other than (potential) fraud, they have very little in common.

What happens if the investors were not mislead? Is this probe a move by the big investors to cover their ass in the case that Theranos is found to have defrauded customers?

How long until hacker news champions the next Theranos?

note that this article requires a subscription to wsj.

One thing I'd love to know, and that might come out in court eventually, is which early investors exited in the huge dumb-money round in 2014. What did they know and when did they know it, and all that.

IANAL, but I'm pretty sure that in this kind of situation, unless said investors have a seat on the board of directors -- and none at Theranos did -- they're almost certainly not in trouble with the SEC.

Theranos is a private company so the SEC rules around MNPI are not relevant here. However, if (IF) any of the earlier investors told later investors things about Theranos that they had reason to doubt in an effort to up the valuation of the next round, then I suppose that might be lawsuit fodder.

How you would prove that? Dunno.

Out of interest, does any one know what liabilities such investors might have? If the outside investors had knowledge of the problems we are now seeing and sold off without disclosing the issues, are they somewhat accountable?

That almost entirely binds to what responsibility they had in regards to the company. If they weren't legally insiders, then even if they had more knowledge than the broader public does (which in this case may be irrelevant depending on a few things), they won't be carrying liability.

To be clear, selling doesn't make them liable for fraud committed by Theranos, if they had no role in managing the company. Even if a lawsuit were brought, you're going to have one helluva hurdle in getting any liability to stick to said investor/s without proving direct involvement.

Doing anything about insider trading in a private corporation, has historically been a challenging area for the SEC. They have often previously been more hands off, but they've gotten more aggressive about it lately:

"On December 12, 2011, the SEC announced an enforcement proceeding that serves as a useful reminder that the federal laws against insider trading and misrepresentation apply as forcefully to private companies purchasing stock from employees and other shareholders as they do in the public company setting."

http://www.lexology.com/library/detail.aspx?g=e24dc4ab-2a77-...

Is there any evidence of Elizabeth Holmes' scientific research abilities? Besides the 100 or so patents that she's on (none of which she's on alone)?

E.g., is there anything in her high-school yearbook about her winning science contests, etc.?

Like I've mentioned before, Theranos needs to shut down. The technology doesn't work (and likely it never will since blood constituents are not evenly distributed at small volumes) and its investors and executives are complicit in fraud. While half-completed/non-working solutions are fine in software world and with consumer electronics, a misreading or missed reading of blood parts can easily cost the health or life of a person. I'll be glad to see the SEC/FDA put an end to this.

healthcare is a very hard problem.

While we in the tech community may find it morbidly entertaining to watch Theranos burn to the ground. Someone out there needs to attack healthcare. The not dying motivation is fairly important.

It's better to make photo-sharing apps and sell iphones. While healthcare is very hard, also needs alot of money. My idea would be: create photo-sharing app/telegram/iphones etc to make alot of cash and THEN try real-science-shit (like Elon Musk / ~Paypal Mafia).

The attacking part is great. It's the "fail fast" part that they messed up on. If the machines worked, would we be having this conversation about a company accused of lying to regulators and defrauding investors?

Maybe it's a problem of Theranos setting investor expectations poorly, maybe the regulators are looking to make an example of someone for playing fast and loose in the traditionally tightly regulated healthcare industry, maybe both. Hopefully it's growing pains for a burgeoning biotech market and not actually fraud from the top.

> Someone out there needs to attack healthcare.

All the attacking that needs to be done is political/social, not technical. Want to attack healthcare? Strip middlemen out so that the money flows to providers and researchers (Single payer + pouring additional money into the NIH/NSF, with the results being public domain).

All of these YC startups I see "hacking" healthcare (Dr Chrono, HealthSherpa, etc) are just bandaids on a patient bleeding out from the jugular.

EDIT: Before you chime in to state that single payer can't be done, 58 countries [1] enable it just fine. Governments can be even more accountable than the current breed of private health insurance providers (I cannot replace the board at my insurance carrier, nor can I FOIA them).

If you want to "hack" healthcare and fix the problem, get involved in government and get single payer done.

[1] https://en.wikipedia.org/wiki/Universal_health_coverage_by_c...

Here is a good factual overview of why Single Payer won't make health care cheap in the US:

http://www.bloombergview.com/articles/2014-04-30/single-paye...

My post never said it would be cheap. It would ensure 1) everyone was covered and 2) less funds were skimmed out by health insurance companies, leaving more funding to be used for health providers.

It would also help if a republican Congress didn't require Medicare to _not_ negotiate on drug pricing with for-profit drug companies. Way to leach off the public teat "small government party".

I prefer to make the distinction between Corporatism vs. Capitalism in these type of discussions. Corparatism, the big companies and governments as a symbiotic unit, not Capitalism is the problem. I have lived in Montreal with its public health care system for a year, and I now live in a rice farming village in East Java, Indonesia with their public healthcare system, and I grew up in Brooklyn, NY, so I speak from my experience and what knowledge I have acquired. Sure, you can go to the doctors here in East Java, and pay $1 to $2, and walk away with 3 or 4 prescriptions, but I am not sure that is good for several reasons. People go without even a thought to thinking about their ailment or complaint. The doctor doesn't do more than listen, and possibly listen with a stethiscope, and then prescribe generic medications to treat the oral complaint. I have seen my father-in-law come back with 7 medications due to high blood pressure. I checked it with my portable monitor, and he does have high blood pressure. They prescribed a blood thinner, an antacid, and bunch of other meds you would see as possible prescriptions. My twelve year old niece had a blood test at school, and her cholesterol was a bit high. Result: 3 prescriptions, and not a lot about diet change or exercise. Lines are longer the closer to the city you get. Here people are there with sore elbows, headaches, etc... These are people who shake off a lot of hard daily work and bruises. They go at a whim when they are not working, and bored, and the simplest of ailments are perceived. I am anxious about the amount of prescriptions handed out, and the quality. In Montreal, in Spring or in stretches of good weather, there would be lines outside the emergency room. I went and inquired if it was for flu shots, or some other special day since they had setup folding tables and chairs to handle the patient load. The jaded healthcare worker explained this was typical, and made some comment about if somebody sneezes, is bored on unemployment, they head to the emergency room. My daughter needed surgery back in NJ, USA, while I was in SE Asia, and I thought it was going to cost me $16k to $20K, since my coverage had just expired. I asked how much to pay up front in cash to make sure she could get the surgery, and it turned out that if I paid the hospital, the anaesthesiologist and the surgeron each separately the cost would be and was $5k. I asked why, and I was told by all 3 offices, that this was their real price, and that when it goes through the insurance companies they spend up to a year or more trying to collect, and at a 40% rate or less. The gratitude of me pre-paying in cash, was shocking. They never have that, and it makes for less work for them. They were so thrilled. The hospitals and doctors charge a lot more to make sure they cover the administrative costs of tracking and chasing payments, and to cover the costs of the procedures themselves. I guess that's what you get when you let big companies and government intervention do their thing. I am sad at this Theranos thing. I do not know about the truth; I guess we shall soon know. I see the idea of disrupting the labs and innovation as a good thing. So I hope guilty completely, partially or not, it has at least challenged the status quo. I know their are smaller quantities of blood testing kits available, not as small as Theranos, but I sure never heard of them before this fiasco. The benefit of reading HN! The conspiracy side of me, urges me to look at big Lab and Pharma as not wanting this to happen, or at least outside of their walls. They will make a slightly more volume blood test work, and now reap the publicity and sell it to the public and government. My Uncle Victor, who upon seeing my drawing of a car running on water buy using a solar cell to perform electolysis on water and exhaust of water back in 1974 (I had just built a solar oven and purchased a small solar cell, too small) spurned the idea, said to me: The big oil companies, or (pardon the racist, parochial remark here relayed) the 'arabs will come after you'. We used to call him Archie Bunker from All in the Family. A very funny show that would cause many to protest if it were on the TV nowadays. Sweden is always held up as a model of public healthcare, but we forget their financial crisis in the 1990s that started with slow growth once the US ended the gold standard in August 1971. They didn't get out of the 1990s crisis until they started embracing more capitalistic practices, so their healthcare system should not be used as an argument for it to be applied in the US. Not to mention, costs of covering 9.5 million people in a smaller geography, vs. 310 million people in a much larger geography. It is not simply a scaling problem or application.

This piece reminds me of the UNA-bomber pamphlets. The formatting is the best part of it :)

@pinaceae I accidentally upvoted you looking for 'reply' button. I admit I wrote this with little sleep after a game jam, and it is lengthy, and not my best writing, but I was responding to the healthcare aspect of @toomuchtodo's thread. Was your remark intended to be snide? I find it offensive in any case that you would compare what I have written to a murderer. I guess with all of your karma here on HN, you find it easy to hide behind your keyboard without much consequence. I am always eager to hear opposing view points, not for argument's sake, but to learn. Hopefully this can turn into a less ad hominem discussion, and we can both walk away a bit better off for it.

[EDIT] - moved reply to @pinaceae, and deleted from under my comment.

Summary of the article: A single payer system works well everywhere else, but is politically impossible in the US.

That is a sad indictment of US politics.

Well, its politically impossible now, but people opposed to it are dying every day.

Same sex marriage, marijuana decriminalization/legalization, etc all took time. This'll take time as well. I just wish people didn't have to suffer and die because of their fellow citizens' shortsightedness.

"Progress occurs one funeral at a time."

There's hundreds of factors affecting the efficiency of a singe payer system in the US compared to other countries, including population size, illegal immigration, crime rates, etc.

Solutions for one country may not work for another

The problem with the U.S system is everyone has their hand out for money. In America, Money is considered the universal yardstick for success and universally effective solution to all problems. The health care industry grew 20% last year? Fantastic!

It's a perfect example of the civilizational collapse process that Joseph Tainter, a professor of archeology, wrote about in his book "Collapse of Complex Societies"[1]. A society will get some sort of civilizational process that works to create wealth in their society. The civilization will continue to increase complexity to exploit this process and when the process starts returning negative marginal returns the collapse process begins because the whole civilization can't switch into reverse. This happened to the Romans with their conquer and receive tribute process for example. It eventually started yielding negative returns and they couldn't reverse course. The inertia was just too great.

[1] http://www.amazon.com/Collapse-Complex-Societies-Studies-Arc...

You need a politically strong somewhat lefty government to ram it through against the vested interests who are rich from the present system. Single payer was opposed similarly in the UK but we had a landslide left wing government after WW2 who got it done. A shift in the US towards say Sanders could do it but it doesn't look like that's happening this time around.

That factual piece only makes one real argument, which is that reducing income flows to the healthcare sector would be politically untenable.

That argument applies equally to based solutions to the problem which are not proceeding because of regulatory capture.

Something has to give.

two things struck me as a little odd.

One, the private costs are off the chart with regard to our peers, but the government spending is just "more than average". but more than average is presented as being just as bad as the outlier we are in the first case.

Two, medicare is responsible for the most expensive health years of a person's life. The time when our bodies just start to fall apart and require a lot of specialized care. Medicare's cost controls seem really good when their youngest clients are 65. Comparing their costs to a private company, who insures working adults, seems like a shallow analysis.

I think the argument is that US government financed health care that only pays for maybe half the population is already more expensive then paying for 100% of the population in other countries.

So it's a stretch to imagine that having the US government take on many more patients would lower costs.

> So it's a stretch to imagine that having the US government take on many more patients would lower costs.

Sure, given your current system, it won't. So change your current system.

While converting from our current patchwork system of government healthcare (a system that's been fragmented in large part due to insurance industry lobbying) will have a high initial cost, it will ultimately be more efficient. As it stands, the insurance companies add enormous overhead (office buildings, sales, advertising, etc), without actually providing any care.

That is in their opinion section, and is written by a columnist with an ideological bent so I would hesitate to call it a factual overview.

For those wondering why the US health care system is so much more expensive than any other country, I recommend this nice series of posts from Dr. Aaron Carroll: http://theincidentaleconomist.com/wordpress/what-makes-the-u...

Fair enough. It's a reasoned argument based on facts, but the conclusions are certainly opinions reasonable people can disagree with.

I suppose I got carried away by my agreement with it.

The Carroll posts look both very interesting and devastating for my productivity...

In the US, I think the current grass roots movement towards Direct Primary Care plus catastrophic coverage or a health savings account is more politically and logistically viable.

Single Payer would be great if you can trust the uh, payer. But our government is delightfully corrupt, so I'm sure a lot of people with more rare medical conditions would end up with worse treatment than they can get now.

Is it better that the majority who have common ailment get easy and very cheap treatment, at the cost of having a more expensive treatment for rare ailments?

"Single Payer would be great if you can trust the uh, payer. But our government is delightfully corrupt"

Lucky for us the health insurance industry we have is a paragon of virtue whose integrity is beyond reproach!

Is it actually corrupt? I hear a lot of hot air about the USG being corrupt, but I almost never hear about quid pro quo scandals... just politicians asking for money because their constituents demand expensive campaigns. We don't like what the government does sometimes, e.g. NSA etc, but I think we have an honest disagreement with them on the best way to protect the country (though they use shady tactics to get their way).

Essentially, it looks to me like government is incentivized to do their job, and most of the problems are due to the way people vote (though gerrymandering and voter disenfranchisement schemes like voter ID are a big problem). The soon as voters change their tune, politicians flip on a dime. I've seen it time and again.

So that said, I'm tired of this corruption meme. Can we talk about implementing good systems instead of assuming other people are out to get us?

Maybe we should outsource much of our government operations to people from western Europe. I propose a new law that only people from Iceland are allowed to run for Congress!

Single payer manages to function in plenty of countries with worse corruption than the US. The US is one of, if not the only rich country without a universal healthcare system.

In my country, we have a single payer - the NHS - and we also have private insurance which people can buy, or more commonly be given as a perk by their company, on top of that.

Result? Everyone gets generally great healthcare, nobody has to worry about bills if they get in an accident or fall seriously ill, and people who fetishize "great customer service" (mostly shorter wait times for certain things, though they don't have facilities to handle nearly as much as the NHS does) can get what they want too.

Have you considered that maybe the reason we don't have single payer when so many other countries do is precisely because our government is corrupt?

Well said.

> If you want to "hack" healthcare and fix the problem, get involved in government and get single payer done.

So we can turn what health technology gets developed into even more of a political game? Building a board of government insiders as opposed to scientists and clinical experts is exactly the kind of move that would work especially well in a single payer system. You want to know what healthcare would look like when governments were the only payors worldwide? Look at defense contracting. Or aerospace. He who had the best lobbyist would win.

If I could change one thing about the commenting on the state of our health care system it would be to require everyone who says "oh we just need single payer" to spend a year working for an insurer, a hospital, and a health technology manufacturer. Then come tell me that changing who pays will fix all problems. Here is a following not-comprehensive list of things that would not be fixed just be going to single payer:

- the US subsidizing all health tech (drug/device) development

- fee-for-service payment structure leading to perverse incentives

- malpractice fears leading to risk-averse, defensive medicine

- poor reimbursement rates yielding waiting lists to be seen by a doctor

- bureaucrats in CMS (the payors) exerting influence on the FDA to not approve new technology because they feel it is too similar to existing technology

- regulators creating vague rules that get applied differently from case to case, making them impossible to plan for

I could go on. I do agree with you that a lot of startups in the space are putting a bandaid on a bleeding jugular. But saying "let's get government more involved" neglects the fact that we're in this problem in part because government is very involved and has been since WWII.

There are three ways you can make healthcare better and cheaper for everyone:

- Make health technology cheaper

- Change the way health care is paid for (I credit Oscar for trying to make it in this space but for various reasons think they're unlikely to succeed)

- Change the way that health care is delivered

There are a number of startups tackling the latter (telemedicine, doctors on demand, drugs delivered to you, etc). Unfortunately the Affordable Care Act has many provisions that make it difficult to innovate in this space, because of the view that it's much easier to control costs when the point-of-care is controlled by a few big hospital systems.

I run a startup that's trying to tackle my first solution: making health tech cheaper by making it easier for startups to get their products through regulators and disrupt incumbents.

But even if we're wildly successful and can start lowering health tech costs across the board, the problem won't be fixed until we fix the payment structure, which will require innovation in payment models, not a one-size-fits-all government plan.

...to spend a year working for an insurer, a hospital, and a health technology manufacturer

Living decades in a "single payer" country gives you another outlook: that's a solved problem. You're just doing it wrong. Everybody that has seen it working knows it's wrong and will shrug off whatever ellaborate argumentation you choose.

fee-for-service payment structure leading to perverse incentives

Wouldn't a single payer system make this easier to change? I guess there is a high chance that a single payer law might codify the payment structure and do it in a bad way, but at least then there is a clear path to improving the structure. Legislation modifying the single payer system to work better would probably be less controversial than legislation modifying our current system.

I'd like to see the tax advantages around employer health benefits disappear so that people have to take a nice clear look at just how much they are spending on health care, rather than just handing money to providers.

I'd also like to see providers that benefit from regulation be required to provide up front information about the prices of low risk services.

Healthcare like almost every major enterprise vertical is a wicked problem[1] and these problems are pretty much rife with far more than just technical problems. Most of the VC founded ventures are honestly quite terrible at attacking the Fortune 100 that dominates these verticals including reasons like collusion as well as regulatory capture. A $10M+ series A seems like big money to a lot of the people in tech, in the enterprise space of the Fortune 100, that's a rounding error resolved by just firing one or two middle managers. I can hardly afford good sales guys covering all the regions for long enough of a sales cycle that I could confidently ever make a single deal on that alone - the enterprise approach to relationship-focused sales and procurement cycles forces the necessity of well-networked, very expensive sales people, unfortunately. That's the kind of slow-moving, massive capital flows that are at play, and there won't be any company that can attack that problem head on because it's not a technical problem whatsoever. Even worse, because these industries are capitalized heavily as public companies, their board of directors appoint super risk averse leaders culturally and will not move forward without finding a business model that will not cannibalize existing sales. Even still, if such a technology and business model existed, it is simply very, very easy to torpedo these efforts politically within these companies because these companies are already so profitable (think Hollywood-style accounting for a second, not tech company or even i-bank style simplistic accounting) they'd rather get rid of emerging competitors than to actually innovate. After all, in the health insurance space, as long as people (and, more importantly, companies) are paying premiums and subsidizing a sufficient number of costly patients that need care, there's little reason to really try to innovate in terms of technology there. That becomes something up to healthcare providers to try to work at, but they're typically courted by a very, very well capitalized and networked cartel of healthcare companies typically founded by doctors first, not technology people. Doctors may be smart oftentimes, but they're just not technology people fundamentally after decades of practicing medicine.

I agree that the problem must be attacked, but I have my doubts that it would come from a VC funded company in the same vein as most SV companies that have done so well. And as Theranos shows, I have my doubts that the highly kleptocratic cronyism driven private government contracting space will do it either. It may very well require a completely new model that incorporates the best ideas of both funding vehicles to avoid the common pitfalls of enterprise b2b companies.

[1] https://en.wikipedia.org/wiki/Wicked_problem

Well said.

Medical care and health care aren't actually the same thing. And the problem is that actually improving health for humans tends to be relatively cheap and culturally based. It is pretty much not a big money space. It involves things like inventing soap and getting people to wash their hands. And this is a thing most people do not want to hear.

Better drugs and better surgeries are all ooh, shiny! but they really are not optimal. The optimal approach is boring and hard to even see. People who fail to get sick are incredibly hard to measure. Heroic interventions after the fact are far easier to measure and make for more interesting press. They also can be charged big bucks.

The whole thing kind of sucks, frankly.

Good summary. Especially the healthy people being hard to measure. Never heard anyone put it that way before. Now that I think of it, it's usually easier to tie data points to specific illnesses than to a lack of them. I have a feeling I'll be wondering about this in the future.

Quick guess is that healthy relies on emergent behavior of locally interacting cells. Lots and lots and lots of complex behavior with few observable inputs and outputs into the body. The inputs might not have a direct correlation to healthiness. We'd have to have a model of all those processes before we'd see evidence of healthiness in the data points.

It is and so it's kind of absurd that someone would create so much hype around their company before they even had something working.

I would in fact call it irresponsible.

Given that patients relied on the faulty tests to drive healthcare decisions, one might even call it criminally negligent.

> blood constituents are not evenly distributed at small volumes

You're saying they're running into statistical stochasticity? Are you claiming they were sampling femtoliter volumes? That's the how small you'd have to get for your claim to be true.

Actually, yeah. The variance in the amount of quantities present in the blood draws by Theranos is too high to get useful measurements (without very many replicates, defeating its purpose) according to published research: http://ajcp.oxfordjournals.org/content/144/6/885.abstract

I was also utterly astonished when I read this. Even if the experimental error of the instrument was zero, you cannot reduce the biological variance short of drawing more blood or doing multiple measurements. However, this is such a no brainer that the idea that Theranos skipped this step seemed too crazy to contemplate - apparently not though.

Well you also seem to have skipped what that paper is taking about. For cell counts, yes, the stochasticity claim would be true for microliter scale volumes. For molecular constituents of blood, the claim cannot be true until you drop to the femtoliter range. I don't think the company was ever approved for cell counts, but I could be wrong.

Are you trying to model metabolites as perfectly diffusing molecules with D^2 proportional to an idealized Stokes radius?

No. I multiplied 1 nM by Avogadro's number. Do you have any reason to believe that free IgG is not uniformly distributed at steady-state in circulation? ... Because that's what they're testing for.

Many (most) of the things we're interested in measuring in blood are bound to some sort large macro-molecular assembly... be it cells, lipid vesicles, large protein agglomerates, etc.

In the clinic the most common testing is metabolic paneling (levels of various salts, urea, glucose, creatine, etc.), serology (for circulating antibodies), or cell counts (which they weren't doing, as far as I know).

The point, though, is that things like proteins ARE bound up in individual cells, so there are a whole host of tests that will vary based on number of constituent cells. Hemoglobin is one of the examples in the paper.

When you say "I don't think the company was ever approved for cell counts" - well, the company wasn't ever really approved for anything besides a herpes test, that's the issue.

Actually, that paper states that the standard deviation from finger pinpricks is about 5% of the mean value of, for example, platelets. The normal range has a standard deviation of about 25-50% of the mean https://www.nlm.nih.gov/medlineplus/ency/article/003647.htm. So, if anything, this study supports the conclusion that fingerprick tests have clinical utility.

You're wrong; a single red blood cell is several femtoliters. To get a good statistical count of much more rare (yet important) features one can sample much, much more than this and still get anomalies from having too small a sample.

Here's [1] a cool graphic showing the tip of the iceberg.

[1] https://en.wikipedia.org/wiki/File:Reference_ranges_for_bloo...

No, I'm not wrong. You're talking about testing for cell counts, which is not -- as I understand it -- what this company was approved to do. For molecular and protein components of blood on the nanomolar range, you would not encounter this problem until you were sampling in the femtoliter regime. Just use Avogadro's number, and you'll get it.

A lot of those molecules are bound up in cells, they are not freely diffusing in blood. Even those diffusing in blood are not uniformly distributed, blood is highly dishomogeneous.

Routine metabolic paneling and serology does test for molecules that are uniformly distributed in blood. I can't say it any plainer than that. Of course many possible testing targets are inside cells, but these tests were not claiming to look at any intracellular targets, at least as far as I know.

They weren't really clear about what tests they could perform with their technology, but they did say they planned on offering the "full range" of blood tests.

So if it doesn't work at one drop, if the Theranos sensing/sampling hardware is still good, then the fix would be to mix a large enough sample to present to the sensing system...

The one drop tech is the only reason Theranos was ever talked about. We already have equipment that works very well with larger samples.

You're right, I guess there is the small matter of how much more than a drop is needed. If it's 3 drops, that's much better then 3 vials they they sometimes have to draw for covering a range of tests - but it sounds like it might be much larger then a few drops.

Even three drops is much more than one drop, if you're pricking my fingers a bunch of times, I'd rather you just did a traditional draw, it won't hurt when I type later.

I, for one, would mourn the death of Theranos. I live in Phoenix and used their lab service before all the negative press came out. They did the micro-vial testing on me so the blood draw was totally painless, quick, and just a few bucks per test.

The big issue of course, is maybe the results I got can't be trusted, and sadly I think for my next blood draw I'll use a traditional lab so I don't worry about accuracy (even though traditional labs apparently make mistakes all the time[1]).

Theranos does get an F for public relations. I'd love to read an interview with Elizabeth Holmes on her take on all the negative press. Did they really screw up this badly? Are there fundamental limitations in their technology, or did they just bungle execution? Do they feel they are misrepresented in any way by these articles?

The real point is that they were at least trying to do something revolutionary and we only hear the WSJ side of the story and can't know what legal restrictions (or internal bungling) prevent them from sharing another perspective. If somehow they can navigate their way out of the swamp, it'd be a great win to have cheaper/faster/less painful labs available for the masses.

[1] http://www.jsonline.com/watchdog/watchdogreports/weak-oversi...

Agree completely. Not only do they need to be shut down, but people should go to jail.

It's strange to see the SEC go after them. It's kind of like putting gangsters away for Tax Evasion. If that's the only thing you can pin on them, I guess you have to go with it, but much better to nail them for the real crimes.

Half-completed and non-working solutions do not work in software. If the foundational technology of Facebook was floppy disks and gopher://, Facebook would not have seen the light of day. The problem with Theranos is not that its technology was a failure, it's that it was lying about said technology.

> blood constituents are not evenly distributed at small volumes

Clearly they should have diluted the samples further.

https://www.youtube.com/watch?v=HMGIbOGu8q0

I wonder why WSJ went so aggressively against Theranos. (Not that I'm complaining.) Does anyone know the backstory there?

Basically, it looks like one reporter starting pulling at the thread, and the whole sweater fell apart. I wouldn't really say they went after Theranos aggressively until they realized there was a much bigger story.

*whole turtle neck.

See: https://www.bing.com/images/search?q=elizabeth+holmes&FORM=H...

Because it's good journalism?

Pump and dump couldn't dump!

This is great, it couldn't have happened to nicer people. However, I'm willing to bet no charges will come out of it.

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