
Regulators Propose Banning Theranos Founder from Blood Testing - trimbo
http://www.wsj.com/articles/regulators-propose-banning-theranos-founder-elizabeth-holmes-for-at-least-two-years-1460570869
======
dcgudeman
The more I read about theranos the more apparent it is that there is something
fundamentally wrong with it's core goals, leadership and technology. One
easily identifiable red flag is the composition of its board. It's nearly all
ex-military and government officials not veteran entrepreneurs and
technologists. Just to name a few: George Shultz (former Secretary of State),
Sam Nunn and Bill Frist (former U.S. Senators), James Mattis (General, USMC,
retired) and Gary Roughead (Admiral, USN, retired) Henry Kissinger (former
Secretary of State), William Perry (former Secretary of Defense)

[https://en.wikipedia.org/wiki/Theranos#Governance](https://en.wikipedia.org/wiki/Theranos#Governance)

~~~
rzt
In discussion on other HN threads, some commenters suggested that the board
was composed that way to grease the wheels of a DoD acquisition of the
company's "tech". As OP put it
[[https://news.ycombinator.com/item?id=11403165](https://news.ycombinator.com/item?id=11403165)]:

John the more I think about Theranos the more I think this “mess” is actually
deliberate. Looking at the history of Theranos and the composition of the
board it appears Theranos was designed from early on as a vehicle to defrauded
the US military.

The plan appeared to be to use their connection and access to some rather
“helpful” high brass to offload the technology for billions and then later
sweep the fact that it didn’t work under the rug (this tactic has worked
fabulously for the last 20 years). Avoid the FDA altogether.

Who would have noticed another $10 billion misspent on some wizz-bang
technology given the $100s billions lost in other frauds? When the wheels fell
of this plan (some underling didn’t play along) the idea seems to be to blame
the scientists and say “we were misled”. They might be evil, but they don’t
appear to be stupid.

~~~
jobu
The first part seems probable (sell to the DoD), but intentional fraud is
unlikely. Remember Hanlon's Razor - _" Never ascribe to malice that which can
be explained by incompetence."_

It seems more likely they were very close on the science, and decided to run
with it while they worked out the last 10%. That works great for most tech
companies, but healthcare technology is very different.

~~~
dv_dt
A simpler theory might be that once the board picked up a couple of members in
certain areas, it expanded along the social network of the board.

~~~
gozur88
That's my read on it - the board members probably all know each other, or are
friends-of-friends. Just like you and I, corporate board members recommend
their friends when positions are open.

It probably doesn't hurt to have people like that on your board when you go
looking for funding.

Being on a corporate board has got to be the easiest job in the world. When
things are going well you collect a six or seven figure paycheck for doing
almost nothing.

------
JoaquimBean
Funny to see tech VCs try to get into the medical space with no knowledge or
expertise in the subject. Expect more of this as clueless GPs try to cash in
on personalized medicine trend and shady founders give them every opportunity
to hop aboard. There are already professional VCs who do this shit all day
everyday, they just hang out in Kendall Square and RT. 128 not SF.

~~~
entee
There are plenty of Biotech VCs in the bay area. The one I know best is Third
Rock Ventures, but there are others. The timelines for success are
extraordinarily long so it's not quite as splashy a space. It's almost
impossible to "fail fast" with a "MVP" in the biotech space, so you have to
put in tons of capital for a long time.

That said personalized medicine should end up being interesting, but I think
it's really, really early days.

~~~
jonwachob91
Bull Shit. Biotech companies produce more MVP's then any other sector. Just
because we don't need to test if the business will work (as much as say a
facebook) we do need to test the science. My startup is working on infection
resistant materials for around hospitals. Infections are a problem, if we
solve it we will have customers, how many and at what cost is the question.
But because science is the question, and it's relatively easy to test compared
to a business model, we run lots of MVP tests. By the time we seek our first
outside investment at the end of summer my team will have built and tested
over 1,000 MVPs testing different nanotexture geometries and bacteria. 1,000
MVPs before our angel round, 1,000 opportunities to fail fast. That's not
something you'll EVER see in an IT startup.

~~~
haberman
Correct me if I'm wrong but I thought one of the key ideas of a MVP is that
it's something you put in the hands of customers to get feedback on. How many
of those 1,000s have you given to customers?

~~~
nmrm2
_> I thought one of the key ideas of a MVP is that it's something you put in
the hands of customers..._

Internet-type startups, at their core, are about marketing more than they are
about technology. Getting the technology right is absolutely no guarantee of
success, but you can hack together some PHP and -- if you get the marketing
right -- make a shitload of money.

Psychology is kinda hard to do rigorously, so you test marketing the only
place you really can -- in the market.

Conversely, the question "does this material prevent infections?" _can
actually be studied, to a significant extent, in controlled lab experiments_.
You don't need the marketplace to answer that question.

And for many cases -- such as the OP's -- it's obvious that if the answer is
"yes" then you have a valuable product. Period. End of story. Infection-
resistant materials aren't a fucking social network. If they work, they are
obviously and immediately useful. You'll need to get the business side right,
but it's really less difficult than the science itself because hospitals are
begging for products to buy that address this problem.

So the question is more "can we solve this totally obviously extant and well-
defined and obviously significant problem" rather than "have we identified a
problem whose solution will let us win some pocket change of a big number of
consumers?"

Figuring out if the science works out _IS_ the MVP test. If you have a product
that works your customers will be lining up.

~~~
lmeyerov
Not true, plenty of biotech startups fail because they believe this.

Consider the pharma route. Does it solve something that slots in, or will the
process be hard, or maybe they have something close enough that disrupting the
pipeline isn't worth it? Many projects don't get into testing, many testing
projects don't get purchased, and as generally only one pharma will want to
purchase, scale won't be hit (so you're dependent), and many purchased
projects won't get acquired.

There are other routes and they have their own business risks. The MVP /
market analysis process is different for biotech, but still should happen.
It's pretty fascinating!

~~~
nmrm2
_> The MVP / market analysis process is different for biotech, but still
should happen. It's pretty fascinating!_

Right. I think we're all violently agreeing.

Biotech companies _do_ need MVPs and market analysis. My observation is just:

1) The idea of testing product-market fit by building a complete product and
putting it out there in uncontrolled settings doesn't really work for a lot of
biotech companies. Especially anything that's going to need regulators'
approval.

2) Compared with IT startups, Biotech companies are more likely to fail due to
having the wrong answer for "but can we make it work?" rather than "is there a
market?". So the MVPs optimize for testing former question, which usually
means controlled experiments in a lab. There are counter-examples on both
sides, I'm sure, just in general.

------
drcode
Medical research is in great need of a major shakeup, because I feel like
current research models have seriously underperformed in recent years...

...but now that isn't going to happen, primarily because of this debacle.

It's so sad that the "keystone cops" at Theranos have done so much damage to
the reputation of the medical startup community- Possibly, they've set medical
research back by several years with their bad behavior.

Every time from now on when someone dares suggest that medical regulation is
stifling innovation, they will be asked to defend Theranos, which appears
indefensible.

~~~
searine
>I feel like current research models have seriously underperformed in recent
years...

The research models have performed as they always have, if not better.

The only thing that's changed is the introduction of know-it-all Silicon
Valley VCs who think bio is the same as software.

~~~
drcode
> The research models have performed as they always have, if not better.

I'm not an expert on the history of progress in medical research... however, I
do have a medical degree.

Bottom line, I have higher standards and think we could be doing a lot better.
Regardless, without counterfactual data it's really a very subjective
question.

~~~
sndean
If you haven't seen it, this a pretty interesting and controversial paper:

Increasing disparities between resource inputs and outcomes, as measured by
certain health deliverables, in biomedical research
[http://www.pnas.org/content/112/36/11335.full](http://www.pnas.org/content/112/36/11335.full)

Basically, increased funding of biomedical research hasn't resulted in better
output, and that we do, indeed, need to change the model. The current model is
really inefficient.

~~~
Someone
I don't think that paper clearly shows that. It could also be that the low
hanging fruit has been taken, and that, as we reach for ever more hard to
reach fruits, the effort needed per unit of health improvement necessarily
increases.

Another explanation could be that the money givers haven't gotten as much
health improvements as they would want because they haven't directly asked for
them, as this paper acknowledges:

 _" A recent focus on productivity has dominated the competitive evaluation of
scientists, creating incentives to maximize publication numbers, citation
counts, and publications in high-impact journals. [...] The efficiency of
society’s investments in biomedical research, in terms of improved health
outcomes, has not been studied."_

Computer programmers do not produce more profitable programs if you pay
programmers by lines of code, either.

~~~
sndean
Ah, maybe "better output" should have been "health improvement."

And yeah, I heard Casadevall speak at a conference and "used up low hanging
fruit" was one of the theories. It's less likely that there'll be another
penicillin moment.

It's all pretty depressing, and very true that it's all driven by
Science/Nature/Cell publications, not by discoveries.

------
jonknee
It's just a matter of time before huge writedowns in the valuation happen. And
Elizabeth Holmes won't be described as a billionaire for much longer (which
unless I have missed something is almost all on paper).

Without a drastic plot twist it appears this company is little more than
vaporware. At least the investors that will lose their money are people who
should have all known better (and can afford the loss!), back in the dot com
boom this thing would have been held by mom and pop.

~~~
chimeracoder
> And Elizabeth Holmes won't be described as a billionaire for much longer
> (which unless I have missed something is almost all on paper)

Almost anytime a startup gets to a valuation that high, the founders have had
an opportunity to take some money off the table. VCs like this, because it
keeps the founders' incentives aligned with the investors' (they are more
likely to take risks and swing for the fences if they don't have to worry as
much about their own personal net worth).

It's dangerous if the founder divests entirely, but you want them to have
enough that they aren't too worried about the risk of the company collapsing
to make bold decisions when necessary.

That said, I don't know Theranos's cap table, but it's probably unlikely that
her current stake in Theranos is worth $1B on paper even today - did she
really manage to achieve a $9B valuation while holding onto 11% of her
company?

~~~
txttran
It says in the article that she has >50% equity.

~~~
no_wave
I'm going to guess that these big name investors have liquidation preferences
of at least 2x, meaning that her stake will probably be worth nothing once
this all blows up even if the company maintains any value (and it probably
won't anyways)

------
chollida1
I can't imagine the stress she must be under right now, unfortunately, it
seems like the vast majority of it was her own doing.

Will be interesting to see what the company does. Normally the CEO would be
"asked" to step down from having any involvement with the company whatso ever.

However, I believe she's the majority shareholder so the usual remedy of
removing her from the company altogether might not work so well.

Man, there goes any hope of a decent exit anytime soon Thernos, as usual its
the employees themselves who will absorb the brunt of this. I hope they have
alot of money saved because if they try to raise again, and its debatable if t
hey'd be able to, its going to be a nasty round.

~~~
simula67
> However, I believe she's the majority shareholder so the usual remedy of
> removing her from the company altogether might not work so well.

She could step down voluntarily if she believes that someone else could turn
the company around. That would be better than going bankrupt and losing her
entire fortune in Theranos stock.

~~~
jonknee
> She could step down voluntarily if she believes that someone else could turn
> the company around.

The problem is the company is 100% based around her invention that she won't
share the inner workings of and apparently that doesn't actually perform up to
standards. It's not mismanagement, it's a material issue.

------
wavesounds
"One of those tests, a blood-coagulation test known as prothrombin time,
measures how long it takes blood to clot and is often used by doctors to
determine which dosage of the blood thinner warfarin to give patients.

Wrong prothrombin time results could cause doctors to prescribe too little or
too much warfarin. Too much of the drug, also known by its brand name
Coumadin, can cause fatal bleeding, while too little can leave patients
vulnerable to clots and strokes, according to medical experts."

Huge free market failure here. Thank god we still have some working government
regulation in this country.

------
dwolfson
How did a company like Theranos get so "far" with all signs early and present
pointing to deep, fundamental problems? I refuse to believe investors simply
failed to perform due diligence.

~~~
kneel
It's not obvious that the diagnostic assays they were running couldn't scale
down.

These assays are performed regularly on large samples no problem, but the
sensitivity and accuracy of the assay becomes erratic when you only have a
couple micro liters of blood.

Either they couldn't develop proper assays (an engineering problem) or
microliters of blood don't contain enough substrates for their assays (a major
lapse in knowledge)

~~~
hga
It's more like the method of drawing the blood was thought to be the problem.
A venous draw is going to be pretty clean, in that whatever tissue got stuck
in the aperture of the needle is going to be dwarfed by the quantity of blood
taken; I've read that the actual assaying machines use very little of the
blood, which makes sense because the reagents used are expensive, plus to the
extent you're using optical scanning to read the results (what else might you
use?), thinner will tend to be better (note most of the preceding is WAGs on
my part from basic principles).

Whereas a fingerstick produces a few drops of blood that flow to the surface
moving past the tissue and cells that were cut getting to the blood vessels,
and they'll contribute unrelated proteins, lipids from cell membranes, etc.
etc. On its face, many many people have said this is so problematic real
evidence that it worked was needed; heck, even a theory would have been nice,
but neither were forthcoming.

~~~
vonmoltke
> A venous draw is going to be pretty clean, in that whatever tissue got stuck
> in the aperture of the needle is going to be dwarfed by the quantity of
> blood taken

From the many blood draws I have done, standard practice is to fill a tosser
vial before collecting the real samples in order to remove these contaminants.

~~~
hga
From the ones done on me for bog standard tests in the last dozen years or
more, that wasn't done, _but_ the extra gunk in the vial just might be
intended to grab the contaminants as well as stabilize the blood. Or maybe
these more standard tests allow for whatever amount of contamination is in the
drawn blood, suppose it's 2-3 orders of magnitude less.

~~~
madgar
They don't throw out the first vial right there in front of you.

~~~
hga
When they only take one vial, they'd better not be throwing it out and sending
my doctor and myself "results"!

Now, it's possible I'm mis-remembering this, although the protocol includes
showing me the vial after the draw so I can confirm it's labeled correctly and
I tend to remember additional vials, since that manipulation often hurts more
than anything else. I'll pay attention, heck, ask the phlebotomist in a few
months during my next annual checkup.

------
makomk
Of note is that this letter is dated _before_ the big dog-and-pony show they
did of appointing a bunch of experts to their scientific and medical advisory
board. Guess that was their attempt to get ahead of this news.

------
mplewis
Rehosted for 24 hours without the paywall:
[http://pastebin.com/RwipXxds](http://pastebin.com/RwipXxds)

~~~
samuraig
Thanks. I find it interesting that they refer to "redactions" in the CMS
report that Theranos wanted to "protect trade secrets". I suspect it is more
dirt that would show just how much they are hiding behind their facade. I
wonder if CMS will end up releasing the full report to the public.

------
aznpwnzor
I've been short Theranos from the beginning. It's very obvious to people who
have interacted with the type of person Holmes is.

> Stanfraud graduate (not even graduated)

> Father has a IV in his name

> Both parents work in DC (east coast)

These are HUGE red flags in a field where results are much more tightly
correlated with technical expertise. They wouldn't be in another field that is
less tightly correlated such as banking or politics.

Furthermore, anybody that has done any amount of research in any capacity
knows that an undergraduate claiming their research project (in biology
especially. CS is possible) could launch an entire company is either
purposefully delusional or incompetent.

------
programminggeek
It seems like Theranos was a scheme to trick investors. It feels like the
emperor has no clothes, but it was one of those ideas where "they are
successful because they are successful" without anyone looking behind the
curtain.

Maybe it's that legitimate medical tests take long enough that you could get a
lot of sales and investment off of early trials and social proof.

I don't know anything about it to say that it really was a Bernie Madoff type
situation, but it has a bizareness to it that feels similar.

------
kqr2
Direct link to letter from CMS to Theranos with proposed sanctions and
justification for sanctions:

[http://online.wsj.com/public/resources/documents/cms20160412...](http://online.wsj.com/public/resources/documents/cms20160412.pdf)

~~~
phonon
Hmmm...skips from page 3 to page 42?

------
return0
Why haven't we heard anything from the VCs or , for that matter from anyone
except WSJ ? If this letter is true, this is completely gross, how can a
startup which is being punished for fraud still enjoy high valuations and,
apparently the tolerance (if not support) of the silicon valley ?

~~~
fatjokes
A lot of powerful folks on that board.

------
electic
I wonder how much Quest and LabCorp have lobbied to get Theranos under the
microscope. Almost all labs have findings including FDA labs that need be to
corrected. I just find it odd that WSJ seems to get access to government
documents, internal information, and competitor benchmarks over and over
again. Theranos faults aside, something does not smell right here.

~~~
aab0
WSJ has been going after Theranos for a long time now and I believe they broke
the first stories. If you're an internal leaker, ex-employee, or hostile
official, who are you going to leak to or give tips about where to dig up
bodies? The WSJ, of course.

------
Ankaios
Anybody know which retirement funds and other institutional investors are most
exposed to Theranos through VC and other investment?

------
cylinder
Uber skirts city/state regs; you can't mess with the FDA, among other federal
agencies (such as FAA).

~~~
pfarnsworth
I guess you prefer the old way where taxi cabs had a virtual monopoly, and it
was expensive as hell. Uber did the right thing by disrupting this market.

Theranos potentially could have been amazing for medicine, but more and more
this looks like an epic disaster.

~~~
blakeyrat
Unless you want a taxi cab with wheelchair access; Uber utterly fails that
market.

The traditional cab companies (who have to cover that market _by law_ ) are
quite right in crying foul, IMO.

~~~
pfarnsworth
Uber isn't a taxi company, and wheelchair access is a very small percentage of
customers. Also, Uber's 5-6 years old, give them a chance to fix that problem
in the coming months/years before crying foul along with a bunch of
monopolists like the taxi companies. They have done nothing for us, except sit
on their monopolies. The number of times I was passed by open taxis on the
street, or stuck waiting hours for a scheduled taxi makes me glad they are all
going out of business.

~~~
jonathankoren
> Uber isn't a taxi company

That's funny. You must work for Uber PR.

> and wheelchair access is a very small percentage of customers.

Well in that case, fuck 'em. And fuck the ADA too.

~~~
dang
Please don't post uncivil, unsubstantive comments. If you'd like to make a
thoughtful criticism, that's fine, but dismissive snark is destructive here.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

[https://news.ycombinator.com/newswelcome.html](https://news.ycombinator.com/newswelcome.html)

------
desireco42
I can't imagine being in her shoes. Kind of sorry for her, she was supposed to
be an inspiration for women everywhere.

On the other hand, she is an excellent example of how not to be disconnected
from reality for founders.

~~~
WalterSear
That statement borders on the obscene.

Just because someone gets anointed by family connections to money and PR, that
doesn't make them an 'inspiration', regardless of gender.

~~~
desireco42
It is not that I studied her, it seemed like young, well educated, successful
women, that is all.

~~~
mk1202
There are a good number of successful young females working in tech. They just
aren't billionaires or hyped as much, that's all.

Here's an example:

[http://www.ted.com/talks/tan_le_a_headset_that_reads_your_br...](http://www.ted.com/talks/tan_le_a_headset_that_reads_your_brainwaves)

~~~
desireco42
Sure, and I was just expressing that. Like I said, I didn't study her, I might
have seen article here and there.

------
forrestthewoods
At what point does the fraud become criminal?

~~~
orky56
Based on intent, people being effected, and those people or others complaining
about it/going to litigation.

------
AzzieElbab
Wow this is personal. The 4 trillions dollars empire strikes back

------
ageofwant
wsj's paywall prevents me from getting to their version of "the facts" and
their presentation of it. So I'll just make up my own.

Suffice to say that this debacle won't do any further biotech investment any
good, and that's a great shame.

US$ 10B is a lot to piss away, I hope some good came of it.

------
mrfusion
That sounds oddly specific ...

------
TheRealPomax
To Read the Full Story, Subscribe or Sign In.

~~~
CaptainZapp
When you click on the discussion you see a "web" link at the top.

This takes you to Google News search from where you can click through to the
article.

It usually works.

------
transfire
My personal opinion is that their technology was too disruptive and would have
ultimately undermined too much money making in the industry so it _had_ to be
stopped. The whole things smacks too much like a witch hunt. Including the
fact that whenever I mention my opinion is gets down voted to oblivion.

~~~
toomuchtodo
> Including the fact that whenever I mention my opinion is gets down voted to
> oblivion.

Because its just conjecture has no proof behind it? HN isn't the place for
conspiracy theories.

------
the_economist
In light of all the negativity about this company, I would like to note that I
have a friend who regularly uses their services in Arizona and is delighted by
them.

~~~
Bootvis
But _should_ he be delighted. As far as we know, the results of tests are
totally unreliable.

Astrologers also have happy customers, that doesn't mean their money is well
spend.

~~~
musesum
Many fortunes built on Regression to the Mean:
[http://rationalwiki.org/wiki/Regression_to_the_mean](http://rationalwiki.org/wiki/Regression_to_the_mean)

------
stevebmark
Federal regulators "banning" a specific person from an industry is rare. 23
and Me didn't receive anything close to this type of regulation, scrutiny, and
public accusations. Theranos may not be a perfect company, but it's likely
some powerful people are pulling strings to snub them out for an agenda that
supersedes regulation.

~~~
jonathankoren
I think that's because 23 And Me's tests actually did what they said they did.
The problem with 23 And Me was that all about the reporting of the results,
not that the results were fundamentally flawed. The FDA's problem with 23 And
Me was that they were coming very close to, and perhaps were, crossing the
line into giving medical advice. It's legitimately very hard to interpret the
results of say a BRCA1[0] test, and so doing at home isn't recommended.

In the case of Theranos, there are high school biology labs that are run safer
and better.

[0] [http://www.cancer.gov/about-cancer/causes-
prevention/genetic...](http://www.cancer.gov/about-cancer/causes-
prevention/genetics/brca-fact-sheet)

~~~
khomenko
that. there are no real parallels here.

------
plainOldText
It's sad to hear Theranos still has issues, but I think people should give
them credit for showing the world the lab experience can be quick, simple and
painless; not to mention the fact that they actually publish their prices
online, which other labs do not do. You can also order and view all your
results on the phone app, which is also nice.

~~~
entee
Lots of things are quick, simple and painless, but also utterly useless. If
the labs don't work, how did they prove it could be all of those things?

I like public prices and a nice phone app, but that's completely peripheral to
the actual objective of real, reliable, verifiable medical data.

~~~
plainOldText
My understanding is that they've had issues with just some of their tests, not
all of them. For instance, I wouldn't call Google useless if it couldn't
answer reliably a small percentage of my queries. Yep, I know it's not a
perfect analogy, but still.

Theranos could ditch the faulty tests and provide only those which are
reliable, and the experience they would provide would still be superior to
that of other labs, by a long shot.

Now if you want to question their honesty as a company, as a way of doing
things, well, that's a different story.

~~~
entee
I think there's plenty of evidence to question their honesty as a company :-P

You're right there are a few labs they do on commercial hardware that does
work, and I think they're allowed to provide a test (for Herpes I think? could
be wrong on specific test) that is inherently based on very small sample
sizes. As I recall though, none of those tests use any new tech at all, and if
it's an old blood test then it's not going to require less sample, therefore
not that much less painful re. needles anyway.

Take that all away and you have a nice app and pricing experience. Pluses to
be sure, and I'd love those things to happen more in medicine, but not very
innovative or well positioned to take down $10B megacorps.

Lab tests aren't 100% reliable either, it's true. But the nature of that
unreliability is understood and the value of the resulting tests are well
established to be related to a clinical outcome. The main criticism of
Theranos is that they never put themselves to that kind of test or scrutiny.

~~~
plainOldText
From my experience, their prices are much lower than those offered by the
competition.

All things being equal, even if the only advantage Theranos has over its
competition is lower pricing, I'd take it, because having access to affordable
medicine has numerous positive implications for the entire society. What's the
point of all the medical innovation if people cannot afford it? Ideally we
should strive for both innovative and affordable healthcare, but unfortunately
things in the healthcare sector are moving extremely slow.

~~~
tobz
Having an advantage implies they can do equivalent tests with their
proprietary methods, which has not been rigorously proven.

If the tests aren't _actually_ equivalent, they haven't improved anything.
Charging less for vaporware doesn't mean it's better, it's still fuckin'
vaporware. :P

------
daveguy
Note the letter, dated March 18th gave Theranos 10 days to respond (April
1st). According to the company they responded within the timeframe and have
not received any sanctions yet.

Rumor is the response was short and read: "Bring it, Feds! We have Kissinger!
... KISSINGER!!!"

