The concept was irresistible: Theranos said it could take a few drops of blood from a simple finger prick to detect everything from H.I.V. to a diabetic’s A1C level. Relying on a proprietary technology to analyze the small quantities of blood, the private company offered a wide array of tests much more cheaply than existing blood tests.
Would that it had worked. Instead, the tests never were able to prove to work as advertised. It appears that the founder, Elizabeth Holmes, was able to fool the likes of George P. Schultz, Henry Kissinger, and Jim Mattis.
In addition to misleading investors about the promise of the company, federal officials charged the two with encouraging patients and doctors to use the company’s blood tests in spite of knowing they “were likely to contain inaccurate and unreliable results.”
HT: CY
It's so interesting to think about legal filings in the context of what we are learning about in Chapter 19. Claimants alleging fraud generally assert that they need to move to the discovery phase of litigation because the defendant(s) have kept vital information secret (which is really "informational asymmetry"). I took a look at a few of the filings against Theranos/Holmes (including the March 2018 SEC filing, available here: https://www.sec.gov/litigation/complaints/2018/comp-pr2018-41-theranos-holmes.pdf) to get a sense of the allegations. Translating from legalese to economic terms, the filings allege Theranos and Holmes, as the more informed parties, purposefully and deliberately "signaled" incorrect information to gain investors and payers. Investors and payers, who had far less information, attempted to "screen," but were not successful, in large part because Theranos and Holmes were calculated in how they revealed (and concealed) information. Investors and payers were thus even less informed than they otherwise would have been!
ReplyDeleteTheranos will act as a signal to other players in silicon valley that the old adage of "fake until you make it" will not apply in life sciences. If your app or new social media platform becomes a bust then all you create is economic damage. If you attempt an ill fated technology designed to address healthcare need then you run the risk of physical harm and economic damage. Maybe the Theranos story line will shift the hubris among the tech titans.
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