
At Theranos, Many Strategies and Snags - srunni
http://www.wsj.com/articles/at-theranos-many-strategies-and-snags-1451259629
======
tristanj
> _In April 2014, she got a long email from another employee. The employee
> alleged that Theranos had cherry-picked data when comparing Edison machines
> to traditional lab machines to make the Edison look more accurate, according
> to a copy of the email._

> _For one test, the device’s accuracy rate increased sharply after some
> information was deleted and manipulated, the employee wrote. Edison machines
> also allegedly failed daily quality-control checks often._

> _Ms. Holmes forwarded the email to Mr. Balwani. He replied to the employee,
> who no longer works at Theranos, denied all the claims and questioned the
> employee’s understanding of statistics and lab science._

Oh man. If you read through Theranos' reviews on Glassdoor [1] this anecdote
seems totally legitimate. Multiple reviews talk about the toxic culture and
how management does anything to cover their behinds. Quite a few of these were
written before the scandal broke so I think they're quite honest about what's
going on.

[1] [https://www.glassdoor.com/Reviews/Theranos-
Reviews-E248889_P...](https://www.glassdoor.com/Reviews/Theranos-
Reviews-E248889_P6.htm?sort.sortType=OR&sort.ascending=false)

~~~
randycupertino
Glassdoor actually removed a few of the more scathing negative reviews about
working there. I think Theranos advertised on Glassdoor so they removed some
of the even worse reviews... there used to be some even more negative ones.

~~~
jere
So I was on Glassdoor just yesterday and saw a little note "Your trust is our
top concern, so companies can't alter or remove reviews."

Is that just a flat out lie?

~~~
in_cahoots
It's not a lie but it's not necessarily the whole truth. Companies can't alter
reviews, but Glassdoor definitely can and does. We just don't know what
criteria they use.

~~~
randycupertino
Glassdoor seems like it has the same business model as yelp- "Buy our
advertising and we will make your good rankings rank higher and your worse
reviews be filtered or lower."

Maybe not outright extortion but certainly not what they claim of being a
truly independent forum.

~~~
eli
That allegation against yelp has never been proven. I'd be surprised if either
yelp or glass door is outright deleting reviews for money.

~~~
rasz_pl
What would you consider a proof? does a a sales rep asking her friends to post
fake negative reviews count?

[https://www.youtube.com/watch?v=C67Lh4LE5LY](https://www.youtube.com/watch?v=C67Lh4LE5LY)

~~~
eli
The fact that they need to have friends post fake reviews suggests to me that
this is not sanctioned activity or a systematic fraud.

An environment where salespeople feel they can do stuff like that is a
problem, but no, it is not proof that "yelp deleted bad reviews for money"

------
blakeross
I wrote a parody of Theranos as a TV pilot that is increasingly becoming true:
[http://www.pricks.com/](http://www.pricks.com/)

(I'm sharing this here because the Hacker News community seemed to enjoy my
Season 3 premiere of Silicon Valley
[[https://news.ycombinator.com/item?id=10179894](https://news.ycombinator.com/item?id=10179894)],
but apologies if others feel it detracts from the discussion.)

~~~
randycupertino
I was just thinking that someone needs to write a novelization of this
Theranos nonsense & turn it into a screenplay and voilà:- Silicon Valley's
"Wolf of Wall Street" or the next "The Social Network" ... I'm sure someone is
already writing it up.

~~~
interesting_att
I thought Arrested Development has been parodying the tech scene well.

Seasons 1-3, which aired during the Bush era, showed the lives of incompetent
and corrupt property developers + military contractors.

Now the main running gag is a BS non-existent app.

~~~
akhilcacharya
Don't forget what Parks and Rec did in it's last season. We've seen a lot of
great comedy about tech recently.

------
ThomPete
No matter how this story ends (whether they eventually ends up with having a
fully functioning product or not) this should be a cautionary tale to anyone
wanting to actually change the world in healthcare.

Science speaks for itself and does not care how much you raised at what
valuation. It requires a rigorous approach to testings and facts and data or
it will be merciless if you aren't living up to your own claims.

So hopefully next time someone has a great disruptive idea in healthcare, they
will spend a little more time getting the science and tech right before they
start worrying about becoming a unicorn.

~~~
beagle3
It is a common, romantic view of how science works - but it is only compatible
with reality on a 30-50 year timescale, and probably only because of survivor
bias.

The science of Dan Shchetman, J. Robin Warren, Barbara McClintock and many
others spoke for itself, and for a long time "science" essentially didn't
listen. I put "science" in quotes because "science" doesn't speak or listen -
scientists do - and the scientists shunned those luminaries (eventually to
recognize them with one of the highest honours - the Nobel Prize).

Warren had to use himself as a test subject for others to notice. Shechtman
was a cast out for years (and then it turned out that he wasn't the first to
notice 5-fold symmetry - he was just the only one for a long time to insist
it's real; the other "scientists" who noticed it cared too much about their
status, rather than the science). McClintock was shunned by her peers and
essentially lost her job -- though evidence for how badly she was treated by
"science" for her radical ideas (now mainstream and assumed true) is being
whitewashed.

I keep wondering how much progress we have lost because "scientists" (unlike
"science") does care how much you've raised, how much you've published, and
who your friends are.

> anyone wanting to actually change the world in healthcare ... Science speaks
> for itself

The belief that modern healthcare is nothing but the application of science is
also romantic and misguided. In the US, healthcare is a business and not even
a free-market one. It is informed by science, most definitely. But e.g. no
doctor will recommend the single most effective treatment for type 2 diabetes
early in the disease[0] (calorie restriction whether directly, by direct
fasting or intermittent fasting). In fact, it turns out that the American
Diabetic Association recommendations are the everything _but_ science, and
possibly the worst you could do.

[0] -
[http://www.theguardian.com/lifeandstyle/2013/may/12/type-2-d...](http://www.theguardian.com/lifeandstyle/2013/may/12/type-2-diabetes-
diet-cure), see
[http://www.ncl.ac.uk/magres/research/diabetes/reversal.htm](http://www.ncl.ac.uk/magres/research/diabetes/reversal.htm)
for references

~~~
pdonis
I agree that good science often doesn't get recognized because it happens to
rub some established scientists the wrong way.

However, the issue with Theranos is the opposite: it _is_ getting recognized,
even though we don't know whether it's good science or not, because there
isn't any visibility into what they do and how they do it. The scientists you
mention all published their work for the world to see; they didn't hide behind
"trade secrets".

 _> The belief that modern healthcare is nothing but the application of
science is also romantic and misguided._

I agree with this too; but again I don't see how it applies to Theranos,
because they are explicitly claming that what they are doing _is_ science. So
they should be judged by scientific standards, even if the rest of the health
care industry can't live up to those standards.

~~~
beagle3
I was not remarking about Theranos, but rather to ThomPete's statement.

Rigorous science is not sufficient (e.g. the Shechtmans/Warrens that we don't
know about -- it is pure hubris to believe that all those were eventually
vindicated), nor is it required (e.g. Vioxx, Thalidomide, ADA recommendations,
baby peanut allergy recommendation, dietary cholesterol recommendation,
dietary sodium recommendation).

If Theranos is a lesson to entrepreneurial scientists it is probably: "Don't
waste your time failing quietly and cheaply, when you can fail extravagantly
and retire rich"

~~~
ThomPete
Not sure what you mean.

Their product is scientific. It's not just a health app or some nutriment
recommendation which can be claimed successful without any scientific claims
to back it.

Theranos has a very a scientific product with a binary output and so it's
claims will stand up to that (i.e. being approved by passing a number of
tests)

My lesson was for those who wanted to change the world via healthcare, not
those who wanted to get rich.

~~~
beagle3
> Their product is scientific. It's not just a health app or some nutriment
> recommendation which can be claimed successful without any scientific claims
> to back it.

So was VioXX[0]. Read the Withdrawal section, especially the last paragraph.
As someone who was following the case closely while it was happening, I can
tell you that everyone involved looked guilty as hell, even though the court
found only the marketing people "overzealous".

You see, "science" doesn't lie. But scientists do. Some liars are better than
others, though.

Also, the standard US medical advice about things like nuts that might cause
allergy are "delay introduction as much as possible" (e.g., do not introduce
peanuts before age 3 or so, for fear of allergic reaction). You will hear this
from doctors and find this in official manuals, although there is no science
to support this (never was), and in fact, there's data indicating that early
exposure to nuts reduces allergy.

> Theranos has a very a scientific product with a binary output and so it's
> claims will stand up to that (i.e. being approved by passing a number of
> tests)

Output is not binary. Most (often all) data used to evaluate medical products
is provided exclusively by manufacturer, who is able to massage data to yield
specific desired results, see e.g. VioXX.

> My lesson was for those who wanted to change the world via healthcare, not
> those who wanted to get rich.

Well then, they shouldn't look to Theranos - those guys obviously care more
about getting rich than about changing the world (well, changing the world for
the global good, anyway).

[0]
[https://en.wikipedia.org/wiki/Rofecoxib](https://en.wikipedia.org/wiki/Rofecoxib)

------
GabrielF00
Does the composition of Theranos' board strike anyone else as very weird? It
seems much more like the board of a foreign policy think thank than a biotech
start up. There are three former cabinet secretaries (state and defense), two
former very senior military officers, two former senators (one regarded as a
foreign policy expert), a bigshot DC lawyer, and the former CEOs of Bechtel
and Wells Fargo. The only physicians are former Senator Frist and a very
credentialed epidemiologist, but it's not clear to me that either would have
much knowledge about laboratory testing.

I'm really curious what the rationale for this board composition is. [Edit:
I'm curious if this is connected to Holmes' father's experience in the foreign
policy establishment]

~~~
randycupertino
I think they wanted a bunch of Washington power players because their real
money grab was pushing regulation changes so that patients could go and do
their blood tests themselves, without a doctor's order. Surprisingly, they
were actually successful in getting this passed in 1 state already- Arizona.
If they were able to push that through it would be a HUGE gamechanging cash
cow, because people could either self pay or even try to get Medicare to pay
for it if they wanted to run their own bloodwork without seeing a PCP and
getting an order.

Physicians groups, insurance companies and biomedical ethics groups aren't
really hip to this idea because patient self-testing bloodwork may open
pandoras box to a lot of unnecessary expenses, especially if the patient is
trying to bill this through their insurance. False positives can and do
happen, and they lead to unwarranted appointments, specialist visits,
exploratory surgeries, etc. Other reasons physician groups are opposed to it
is because they view it as profiting off people who are hypochondriacs, and a
huge amount of the customers would probably be drug abusers and steroid users.
Most likely, people who would go and do their own blood work are the system's
"super ultilizers" and they are the ones who are already costing the insurance
companies and the states $3-4 million per patient per year in healthcare
expenses. It's not uncommon to have a fibro/rheumatoid arthritis/hypochondriac
patient who bills $10 million per year. If these people go to the ER and cost
3k per visit every time they can't fall asleep and have anxiety (~12x per
month), imagine how often they might want to go and run their own bloodwork.

Not being able to order our own labs as patients is the reason there are moral
objections to for-profit hospitals selling "full body scans" and
dermatologists doing unwarranted full body mole checks. Generally the proper
guidelines is to only administer testing when you suspect that something is
wrong.

~~~
1123581321
Will you please link to a source for the $3-4 million per patient per year
figure or the $10 million per year figure for certain diseases?

~~~
randycupertino
It's just from what I see at work, we're consultants who do strategic case
management for high acuity cases- patients who spend more than $3million per
quarter (or whatever levels that specific client establishes with us) get
kicked over to us.

I'm working with a guy right now who has a blood clotting disease and his meds
alone are $800k yr before all the inpatient stays and procedures.

Generally once the patient starts spending and hits certain level of cost they
get assigned a case manager through their insurance to 1. see if they're
getting proper treatment 2. try to streamline them to the correct care first
(rule out needless and repeat visits) 3. make sure all procedures and drugs
are medically necessary. The people that go beyond these case managers
sometimes go to a different organization for medical management.

Some states are getting even more strict, in Alaska right now if you have
Medicaid and go to the doctor too much for what they view as needless visits
you actually get cut off from ALL providers and then can only see certain
approved providers for certain approved types of visits, can only get
prescribed specific drugs and you have to "graduate" from that program after a
year in order to get out of it by keeping ER visits to less than 1 every 6
months. I'll try and find you a link with more info about that program but
they're trying to keep it on the dl because obviously all the patients who get
put on that program are pretty outraged & they don't want the bad press about
it, the perception of denying care etc.

Also everyone in the AK medicaid who is on opiates has to abide by a "pain
contract" including random drug testing and med count checks and if they screw
up too many times they will get banned from certain doctors/facilities, put on
a stricter program (like the above) and can get kicked off Medicaid.
Unfortunately this just leads to more homeless heroin addicts, so I can't
really say that program has been a success.

Edit: link [http://www.adn.com/article/20140703/state-aims-curb-
overuse-...](http://www.adn.com/article/20140703/state-aims-curb-overuse-
emergency-rooms-some-medicaid-patients-0)

~~~
1123581321
Thanks for the expanded answer! I found it hard to believe because I was
remembering when most insurance had a lifetime payout between 1 and 5 million,
but of course that was pre-ACA and never relevant to Medicaid.

------
geomark
I like how Holmes' recollection of meetings is always different than the other
attendees. Only one machine had an error message, not all three. She didn't
abruptly walk out of the meeting. She didn't refuse to answer a question due
to "trade secrets". And so on.

~~~
CamperBob2
Every article I read about this company sounds like a recap of Rashomon. No
two participants ever describe the same events.

------
ekianjo
Interesting, Theranos' funder's behavior is what you would expect from someone
who knows nothing about Science:

\- make bold claims

\- avoid going into details ("trade secrets", sheesh)

\- make investors believe in your "vision"

\- give talks about successful entrepreneurship to polish one's image

And still nothing reliably demonstrated.

What amazes me the most is how clueless investors are. If they don't care
about Science, what do they care about when it comes to providing new
Healthcare solutions? What's next, a new take on homeopathy ?

~~~
epistasis
> What's next, a new take on homeopathy ?

Not too far off, actually:

[http://blogs.sciencemag.org/pipeline/archives/2015/12/04/and...](http://blogs.sciencemag.org/pipeline/archives/2015/12/04/andreessen-
horowitzs-first-move-in-biopharma)

~~~
ekianjo
Hehe, I really like Derek's sense of humor:

> A few billion years of blind evolutionary tinkering gives you a mass of
> insane, irrational, tangled interwoven systems with no documentation in
> sight. Crazy new things keep getting uncovered all the time (siRNA! Who
> knew!), and the number and scope of the crucial things we have no clue about
> is just another one of the things that we have no clue about. If your
> worldview has been formed by using human tools to make human-designed
> applications for humans, you are in for quite a shock.

------
MathsOX
Many in SV find it hard to grapple with traditional startups not penetrating
health care to a greater degree; in Rise of the Robots (one of the Financial
Times and The Economist books of the year) it's lamented for an entire
chapter.

Traditionally the level of fundamental research and development displayed by
Theranos - in areas of health or national defence - are done for years behind
closed doors and then slowly rolled out to the public to mitigate any
questioning of the underlying tech since the standards are understandably
higher (i.e - it has to work from the start). This stands in contrast to the
"move fast, break things" attitude pervasive in start-up culture.

I don't think there's anything necessarily fraudulent about Theranos, from
what I've read, which seems to be the not-so-subtle undercurrent in much of
the commentary. Rather they flipped the model startups should use in health,
which is establish a business model that works and then work on preparatory
tech in the background until it's ready to be rolled out. This seems to be
largely what Theranos has done, but not what it's purposely chosen to
articulate to the public and investors as it surely would have garnered less
attention/funding. At this point Theranos seems to be playing the waiting
game; waiting for their technology to reach a point where they can make a more
transparent case for their business model and change the narrative once
they've reached a point that's more aligned with the aspirations that have
been articulated by Holmes for the past decade.

Once again, Peter Thiel's approach with Palantir looks to be extremely well
executed and one that perhaps Theranos should have emulated.

~~~
apalmer
Thing is, the approach your describing is fundamental dishonest... Leading
investors to believe that you have technology that will be ready in 2011 when
in reality you expect it to be ready in 2016 is not flipping a start up
business model... It's just lying to get investor money

~~~
MathsOX
The latter half of that paragraph is articulating what I think Theranos is
currently doing, not what I think they should have done.

What I said they should have done is described to their investors the business
model that would act as a stop gap measure (gain market share and revenues by
using existing technology) while allowing them to develop their proprietary
technology to a point where it can get regulatory approval and can replace the
already existing tech they're currently using.

> Leading investors to believe that you have technology that will be ready in
> 2011 when in reality you expect it to be ready in 2016 is not flipping a
> start up business model... It's just lying to get investor money

I've not seen any indication that rounds were predicated on certain delivery
dates of the tech (what tech? what is the "success" percent? can the tech be
augmented with more traditional tools?). If terms did get that specific, then
there would be grounds for potential fraud.

------
ekianjo
> Sunny Balwani is an entrepreneur and a computer scientist. Sunny joined
> Theranos after dropping out of the Computer Science program at Stanford
> University. He received his MBA at UC Berkeley and undergraduate degree from
> UT Austin.

Honest question, can you claim to be a Computer Scientist if you drop out from
a computer Science program ? To me it sounds like calling yourself a Doctor
after dropping out following the first year of Medicine Studies.

Needless to say, this smells of arrogance more than anything else.

~~~
chetanahuja
Sounds like he dropped out of a graduate degree from Stanford. If his
undergrad degree from UT Austin he might have a plausible fig leaf to go
around calling himself "a computer scientist". Though I certainly wouldn't
call somebody who with just an undergraduate degree a "scientist" in any field
unless they've proven themselves by practicing such science in a credible
manner for a reasonable period of time.

~~~
isolate
I prefer an operational definition: a scientist is somebody who does research
using the scientific method. But then again, this eliminates a bunch of CS
people, since they're mostly doing math and engineering.

~~~
chetanahuja
Me too. Hence the "practicing such science" part in my comment. University
degrees such as Master of Science/Doctor of Philosophy etc. are meant to
provide validation from universities that the holder of such degrees has had
some training in the discipline but it's by no means a requirement to be a
scientist (Leonardo da Vinci certainly didn't have a PhD).

~~~
ekianjo
In theory, yes. But when it comes to highly specialized topics, there are a
number of things that are very hard to learn on your own (at least for now)
without going through an academic path. Chemistry, Biology, pretty much
require hands-on experience as part of your education - and you can't do that
kind of things from home or simply by reading books.

~~~
isolate
You can teach an 8-year kid the scientific method so they can "do science"
with household chemicals. Probably they won't discover anything novel, but
assuming they don't look at the internet it will be new to them and that's the
important bit: reasoning about truth on the basis of experimental observation.

------
ekianjo
> He replied to the employee, who no longer works at Theranos, denied all the
> claims and questioned the employee’s understanding of statistics and lab
> science.

> Quality-control failures were due to the “newness of some of our processes,
> which we are improving every day,” Mr. Balwani wrote.

> He added: “This is product development, this is how startups are built.” The
> reply ended with an edict that the “only email on this topic I want to see
> from you going forward is an apology that I’ll pass on to other people.”

I would rather question Balwani's understanding of Lab Science and Statistics
as someone who has never had a remote experience of lab science in the first
place. And about his understanding of Statistics, I have no idea where he
thinks he has any authority either. MBAs are not particularly known to be very
good at grasping probabilities.

------
Mithaldu
I'm honestly getting kind of annoyed with seeing stuff about Theranos, since
everyone writing about them is beating about the bush, and only ends up
describing how Theranos communicates with a startling lack of earnestness.

Example from the video, paraphrased:

Mod: "What prick tests are you _able_ to do, using no commercially available
lab equipment?"

Holmes: "[lots of waffling] We're currently only doing the Herpes test.
[proceeds to not answer the question]"

Mod: [accepts the non-answer and moves on]

This kind of reporting is entirely useless, unless it's some kind of attempt
to subtly out Theranos for being dishonest.

~~~
oska
A media interview is not a police room interrogation, nor a courtroom cross-
examination. The interviewer (most probably) realises the question has not
been properly answered but understands that they have to keep the interview
moving. Also, if they go in too hard, it can have a backfiring effect of
causing the audience to start sympathising with the person being interviewed
(even though that person is clearly waffling and dissembling).

The interview is still effective in that hard-headed people watching the
interview who need concrete answers and actual information will still draw
their own (likely negative) conclusions.

~~~
Mithaldu
Yeah, i understand that interviewing follows specific rules, since it's a
realtime setting. However, what i failed to make clear in my original post:
The mentioned exchange is not addressed seriously in the article either.

------
aceperry
For awhile, I kept seeing job posts at Theranos, which is how I know the name.
I didn't know whether they were expanding or just had high employee turnover.
The WSJ articles and the strange Glassdoor reviews (either totally love the
company and CEO or extremely negative about the company and its ethics) leads
me to believe that the WSJ is correct. The latest article with the video
interview of the CEO, makes me think that she is incredibly smooth at spouting
the BS, to the point of being a pathological liar. This company will be VERY
interesting to watch during the coming year.

~~~
draker
I'd be interested to be the results from a bot monitoring/archiving the
Glassdoor page. I'm sure Glassdoor has some ability to audit or approve the
review statements before they posted publicly which would provide some degree
of damage control, but given the negative reviews it seems some would get
through.

------
timrpeterson
Theranos = Pets.com of this decade's bubble, which will once again be defined
by founders, often young ones, having no clue what they are doing.

Investors can you please get better at realizing that sometimes experience and
know-how can help?

~~~
wpietri
Should they get better at that? I mean, I'd like them to. But they're after
return, not virtue or value.

I can certainly say I don't like what they're doing, but I'm not sure I can
say that they won't make money on this.

------
asdfologist
As the article says, "blood tests sometimes provide life-or-death answers." If
these allegations of fraudulent testing are true, then the executives belong
in jail.

------
rdlecler1
The key questions that needs to be addressed, is how homogenous or
heterogenous are blood markers at the level they want to measure at? The
machines may be reporting results accurately, but a pin-prick-sized droplet
may simply not be a large enough sample size for the tests they want to run.

~~~
onewaystreet
>prick-sized droplet may simply not be a large enough sample size for the
tests they want to run

This was always the main criticism of Theranos. Finger-stick blood tests have
never been considered reliable for clinical diagnostic tests because you don't
get enough blood and the blood you do get can be contaminated.

~~~
brandon272
How does the blood become contaminated?

~~~
CamperBob2
For one thing, it's almost impossible to get your skin perfectly clean. Any
test that uses a single drop of blood will be very sensitive to even the
slightest amount of soil or contamination on the fingertip where the drop is
extracted.

~~~
brandon272
Couldn't this be alleviated with a finger prick method that prevents the
droplet from sitting on the surface of the skin before it is collected? (i.e.
a tiny needle that reaches below the epidermis to extract a drop of blood)

~~~
learc83
The needle breaks the skin and moves through any contaminants that were on the
skin's surface--potentially mixing the contaminants with the sample regardless
of whether the blood sits on the surface of the skin or not.

~~~
enraged_camel
Isn't it common practice to wipe the skin with a disenfectant to prevent this
very thing? A 60-70% alcohol-based solution will kill the vast majority of
germs on the skin.

~~~
learc83
Contaminants don't have to be alive to confuse results. Also many contaminants
we're talking about were never alive in the first place.

------
FussyZeus
Holmes' backstory is getting so redundantly covered. It's like how every
Superman movie has to walk us through how he was sent to Earth when Krypton
was destroyed.

I suppose if the author didn't talk about Holmes' history, though, they
wouldn't have half the damn article. Certainly nothing interesting to talk
about with that company by itself, were it not for the headline grabbing
founder.

That said if I read about how this "inspiring" person dropped out of Stanford
when she were only 19 one more time I might lose my mind.

------
Animats
How can I short Theranos?

~~~
nradov
I suppose you could go long LH and DGX. They might outperform if a potential
major competitor fails to make an impact.

------
6d0debc071
It's a long shot gamble funded by some people who maybe should and maybe
shouldn't know better - I don't pretend to be in a position to judge the
science in this case. So, who cares? I don't mean that in a derogatory sense,
I mean it in the sense that you might set yourself a limit of a few hundred
pounds for a game of poker one night. If it pays off, great. If it doesn't, no
biggy. If they're committing fraud, then there are regulatory mechanisms in
place around that - how far you trust those is an issue, but it's a much
larger issue than one company.

The big sin that you mustn't commit, and that many do anyway, is to trust a
private company's data where a potential conflict of interest like this
exists. Run your own trials.

------
devanti
though not yet proven, I believe we may have found the Enron of our decade

------
melted
The company's name sounds vaguely like "tear anus". What did they expect?

------
desireco42
Is it just me or WSJ increasingly is behaving like apologist for big business?

They probably always were, just now I am noticing.

