"Theranos did apparently manage to develop one actual novel test, for the Herpes Simplex Virus (HSV-1), which has full FDA approval. "
The FDA doesn’t approve tests:
AACC is the one who approves test. https://www.aacc.org/
Because it would be super convenient. Every so often I need an antifungal treatment, which requires a liver function test. So I have to find the nearest Quest or Labcorp (which is much further away than the drugstore), fill out a zillion forms, sit around for an hour, then finally get an annoying test. Eats about two hours of my day, and I get a sore arm. Then I wait a few days, head back to the doctor to get the prescription, then back to the drugstore for the drugs.
Imagine instead that I head to the drugstore immediately after the appointment. I get a little pinprick test that gives me a yea/nay within minutes. And then I pick up the drugs right then because the labwork system is integrated and they know that is the only dependency.
The current system utterly sucks. It’s really too bad that Theranos was completely fraudulent.
Just to be clear: Elizabeth Holmes was a fraud. That being said, I disagree with pretty much everything you posted.
I work in the medical lab industry (albeit in Logistics, so my knowledge of a lot of the nuts and bolts of the lab stuff is at best indirect). STAT testing is actually a significant element of our business. It’s true, for most routine tests, overnight results are perfectly adequate. But we directly compete with other labs in how quickly (and accurately) we can provide STAT testing. An in-office automated machine that could produce results in under an hour really would be a game-changer.
Even for routine results, it’d be revolutionary. I mean, yeah, you can get an appointment and schedule your day around that appointment, go to your doctor’s office or one of our Patient Service Centers, wait around, get stuck with a heavy gauge needle, and have several vials of blood drawn, and then wait until the next day for your results. Or you can pop into your local Walgreens while running errands, get your finger pricked, and get results in an hour. Which would you rather do?
And on your insurance, it was only a $15 co-pay. It’s great that you’re that well insured. But not everyone is. We get a lot of clients with much higher out of pocket costs. And a significant number of self-pay clients, who are paying the entire cost out of pocket. And those tests can run into the hundreds or even thousands of dollars. And, of course, your insurance company would definitely want you to use the vastly cheaper option, if it actually worked.
If the magic box could really process those tests at a fraction of the cost of traditional labs, and without all of the overhead of phlebotomists and courier services and lab techs and the physical infrastructure the lab industry relies on, that really would disrupt the entire industry.
The FDA did, in point of fact, approve Theranos’ HSV1 test:
ETA: Oops, double ninjad
She was already being hailed as a genius prior to anyone actually seeing the tech.
You’re seriously going to suggest that had the technology actually been delivered people would have stopped calling her a genius?
At the time of the iPhone many were skeptical of the need for such a device. Comedy skits made jokes about it being a swiss army knife of features that could all be done by other devices. It was far from obvious that it was something we needed.
In the alternate universe where Theranos’ tech actually worked, sure I think it would have been hella useful. Better diagnostic tools remains one of the primary goals of medical technology right now, especially in the current climate of restricted access to doctors.
And of course, had it worked, the money would have kept piling in, and competitors would have sprung up too. Who knows where the tech would have gone next.
It may sound like I am defending her, believe me I’m not. She deserves to go to jail and I have no sympathy for her.
It’s more a rant about how our culture values the wrong things, and elevates these people and not the actual hard work of solving technical challenges. Plus we want there to be a charismatic individual to praise, we’re uncomfortable with great work being the collaborative effort of many experts.
That’s not what enablement means:
In order for an application to be complete the invention must be enabled. What this means is that the disclosure must explain enough about the invention so that someone skilled in the art can both make and use the invention. The purpose of the enablement requirement is to require applicants to truly put the invention into the public domain and through that disclosure thereby advance the technical arts.
There is no requirement to demonstrate that an invention works as described - an “actual reduction to practice”. In the older “first to invent” US patent laws an actual reduction to practice could be useful for determining precedence in the event of disputed priority, but with the modern “first to file” system that in now moot.
I have several patents for inventions that were never built because the business climate changed and product development stopped. In cases where the invention was actually built (and was covered by the primary claim), the actual patent usually includes secondary claims to cover variations on the central invention to make it more difficult for someone to work around the patent. I certainly do not have to prove that all these variations work, but they are still included in the patent.
What does “use” mean then, if not what is described in the patent application? A patent on a perpetual motion machine can’t possibly contain enough information to “make and use” the invention, if “use” means a device that produces power with no other energy input.
“Because it would be super convenient.”
Besides there being a zillow Labcorp and Quest Diagnostic centers, if there was really a financial need to do this, Walgreens would have partnered with either of those two major testing companies to offer blood collection to be done in their drug stores just like they offer flu shots. You are buying into the hype of her lies, there was no market for this product. There are no zillow forms to fill out, you fill it out online and sign in-person and that wouldn’t change either, corporate legal wouldn’t allow that to be skipped. She lied that 40-60% of blood work prescriptions aren’t being performed because people are afraid of needles. If 40-60% of blood work prescriptions weren’t being filled your doctor’s office would be following up to monitor it and remind patients, or insist they be done in their office during the initial visit. You don’t head to the doctor for the prescription for blood work, they can postal mail or fax the request to the blood work center. You are buying into her exaggeration of the problem with blood tests and there are none.
Lab tests are not a diagnosis. That’s what a doctor does. So even if you knew the lab results while inside a Walgreens, you’d still need a visit to the doctor to treat you and prescribe what drugs you might need.
Edison was a genius because his invention was sold and changed the world because there was a need for it. Her invention wouldn’t have been sold because there was no market for it. Blood testing was already being performed correctly, but people believed her con and dumped money into it along with the false claims. Edison was a genius because his invention had an actual need for it, and it did change the world. There are plenty of inventions that don’t come to market because there are no markets for them. Patent attorneys will tell you a patent by itself has no value unless there is a market for it. People don’t buy a patent just because it was clever, they do it to make money because they can sell the product or service it provides. The proof of the pudding is in the eating, and Edison was a genius because there was a need for his invention.
I know you aren’t defending her. I think too many people are overlooking the fact that a huge part of this big con was that there was a need for this service and there wasn’t. The only credit she gets is being able to extract money from others over 12 years while skirting every possible check and balance to stop her.
Elizabeth Holmes & The Theranos Deception | 60 Minutes Archive:
[I’m assuming “zillow” is a typo or autocorrect for “zillion”.] There really aren’t. in the last 20 years, the tri-county area I live and work in went from no Patient Service Centers for one of those labs (which I work for), to one in each county, down to one total for all three counties. We constantly get complaints from patients about the travel times and inconvenience. The other major lab company has only ever had the one PSC for the tri-county area. And a lot of more rural regions of the state have even less coverage.
My company is constantly talking about doing exactly that, with Walgreens, CVS, and Walmart, and constantly launching pilot programs, but it just never quite seems to manifest. I’m a low level peon in the company, but from what I know, it’s mainly the financial part that’s the sticking point. It costs money to set up the physical infrastructure they’d need for traditional on-site collection, including a full-time phlebotomist. Theranos promised a self-contained, fully automated machine, which could run a huge battery of tests based on a finger-prick of blood. If that were actually feasible, Walgreens would have one in every location, and our PSCs would be shut down.
Sure, but instead of having to schedule an appointment at a PSC, driving there (which, again, there really, truly aren’t all that many - a tiny fraction of the number of Walgreens locations), waiting to get drawn, getting multiple vials of blood drawn, and then waiting to the next day to get results, you could just get a finger prick while running errands and have the results in an hour. You could go the Walgreens on your way to your doctor’s appointment. You could get the finger prick in your doctor’s office. You could potentially get an exam, get your finger prick, wait for an hour, and then go back in and discuss the results with your doctor, all in the same visit.
Again, I work in the industry, and in my opinion, a magic machine that fits on a desktop and that could automate the whole blood collection and testing process and give results in an hour at a fraction of the cost of traditional blood work would be…it’s really difficult to convey just how disruptive and revolutionary it would be.
And that’s a big part of what made Theranos such a successful grift. If it were actually real, it would simply take over a multi-billion dollar industry virtually overnight. It would be the equivalent of introducing a 2022 laptop computer with a full suite of 2022 software in 1972.
Already done. This is actually new since I last looked for blood labs, but there is literally a “Labcorp at Walgreens” (their title) near me. That only improves a minor aspect of the problem, though.
It’s still inconvenient because I can’t get the lab work and drugs the same day, let alone the same visit. Of course I still need to visit the doctor to decide I need the drugs in the first place. Theranos aimed to solve everything after that point, which as it stands now dominates both the time and inconvenience.
The lies were almost entirely about the physical (im)possibility of what they were attempting, as well as their ability to execute even on those few things which were not impossible.
If you really can’t think of any uses for a magic box that gives you hundreds of lab results with a drop of blood, it’s your failure of imagination that’s the problem. Holmes wasn’t wrong about that being a very lucrative device if it could be made.
I believe that the space set aside for Labcorp at your local Walgreens (and the similar space set aside for Quest at my local Safeway) was originally intended for Theranos.
If the invention being patented is sufficiently different from what was done before, then it’s allowable for the patent to simply cover the physical configuration of the device, or the steps in the process, without necessarily claiming any particular level of performance, accuracy, cost-effectiveness, etc.
In that case, the requirement that the patent enable you to “make and use” the invention simply means providing enough information for you to build the same device, or follow the same process. The fact that the device/process as described costs a zillion dollars and only achieves 30% accuracy isn’t relevant at that point. The patent wasn’t issued on the basis of achieving low cost or high accuracy, it was issued to cover the new device configuration and/or process in general. The more novel the overall concept you’re patenting is relative to prior art, the easier it is to justify the scope of this sort of general claim.
From the patent office’s perspective, if you want to file a patent on a worthless device or ineffective process, that’s your problem. Their only concern is whether what you’re patenting is truly a new invention and whether you’ve provided enough information for someone to replicate it: i.e. you haven’t assumed the existence of a material with properties that don’t exist, or of a subassembly that can’t be fabricated with existing technology, etc.
You might ask - what’s to stop someone with a brilliant new device from intentionally filing vague patents on versions that perform poorly, which don’t actually cover the part that makes it commercially viable? The main obstacle there is that, if you don’t disclose the critical details in your own patent, there is nothing that stops a competitor from filing their own patent covering the version that you’re actually using, which they could then enforce against you.
(There is also technically a “best mode” requirement in patent law, which requires you to disclose the best version of the invention you know of, but this has been substantially weakened over time, and somewhat irrelevant in Theranos’ case since their devices weren’t any good even in secret).
A number of companies just depend on trade secrets. SpaceX, for instance, says they file very few patents, because their competitors (China, Russia, India, etc.) would just ignore the law and use the information to improve their own rockets.
I still don’t quite get it, though. Say a company patents a process but leaves out the final “secret sauce.” Some other company discovers the secret sauce and patents that. But they’d still need to license the other parts of the patent. And while I believe the first company couldn’t use their usage as prior art to invalidate the second patent, at least in some cases they can use it to gain rights to continued usage–i.e., they wouldn’t have to license that aspect from the second company.
It seems like it would be very useful to patent all the boring, almost-obvious stuff, while keeping a few crucial steps as trade secrets.
The SEC actually pursues only civil cases. The Department of Justice can and does pursue criminal securities fraud cases but DOJ must prove them to a higher standard (beyond a reasonable doubt) than the burden of proof in civil cases.
It’s true that in theory the SEC could pursue fraud with no harm or damages but the hypothetical would look something like this.
- President of the company spouts utter bullshit about the company.
- Investors rely on bullshit to buy stock in the company.
- Company, bullshit notwithstanding, makes investors tons of money.
- SEC catches wind of bullshit and decides to bring a fraud suit even though investors made lots of money.
The SEC wouldn’t be able to prove damages, so there would be no money to recover for investors, but the SEC could still seek other sanctions (such as a bar against serving as an officer or director of a corporation) against the President for spouting bullshit.
The SEC would need to show that the misstatements or omissions were “material.” “Material” means that there is a substantial likelihood that a reasonable investor would view the fact as significantly altering the total mix of information available about the company in question. TSC v. Northway, 426 US 438 (1976). Much ink has been spilled interpreting this standard but, in the end, there are not a lot of bright lines for things that are clearly material (misstatements that turn a real loss into a reported profit seem to be one). Materiality is determined by the finder of fact (usually the jury, unless it’s a bench trial with only a judge and no jury). One common method to try to show materiality is to look at how much the price of the stock dropped when the information was revealed (this also shows investors’ damages). But in our hypothetical, there is no drop in stock price.
So the SEC has a decision to make in deciding whether to bring a case - is this the fight they want to make? High risk that they cannot prove the information was material. No damages to recover for investors if they win. Fighting against a great defense that will be mounted by a successful CEO backed by the resources of that successful company. If the SEC wins, the best they can accomplish if forcing the company to fire the President that ultimately led the company to great success. (Theoretically, if the investors wanted the President gone, they should be able to accomplish that through the board.) If you were in charge of deciding where the SEC was going to invest its limited Enforcement resources, is this the case you would choose?
The DOJ would face the same hurdles but they would have to overcome a higher burden of proof and the alternative cases they could pursue are basically every criminal case.
Real world - the later success of the company will insulate the President from accountability for the misstatement.
Yup, you’ve got it. But in my imagination this becomes the shocking reveal that underpins an otherwise fawning biography about the CEO. Or, the CEO never learns her lesson, continues to mislead investors until it actually bites her in the ass, and then during a long slow process of uncovering her misdeeds, this is portrayed as the time when diligent investigation would have revealed the truth so early as to prevent lots of later pain.
There is certainly a market for better, cheaper, more convenient, less painful tests. Just because your insurance covers most of the cost, doesn’t mean that no one is paying the rest of it. And there are billions of people that don’t have medical insurance at all.
Yes, good point.
People in the tech billionaires club make lots of extraordinary promises about what their tech will do next. However, it’s an essential skill to know when to stop promising something and/or move on to some other bold claim.
In the hypothetical, Ms Holmes would have learned all the wrong lessons the first time.
So probably her version of the Hyperloop would have fake test data, pretend contracts and wouldn’t deliver anything the real customers paid for.
Her demise was probably inevitable.
I think you are referring to what would be considered “forward looking statements,” which includes statements about new product developments. Generally, forward looking statements aren’t fraudulent if they are made in good faith (that is the person saying it believed it) and that the person had a reasonable basis to believe it was true. Perhaps if you are putting a billion dollars into researching a problem and you don’t have a good foundation to know that it’s impossible, you can convince a jury that what you promised sounded reasonable. And as long as you don’t admit you don’t believe it, there is little risk of a bad faith finding. At some point though when your research goes nowhere, your good faith and reasonable basis to believe are harder to assert.
The latter aspect is fairly new - prior to patent law changes in 2012 there were no “prior user rights”. If you decided to keep the secret sauce as a trade secret and someone else later files a patent on it - sucks to be you. And, in that scenario, the owner of this second patent doesn’t need to actually be practicing their invention (e.g. selling a product) to enforce their rights against you - which means they don’t need a license for your original patent.
The prior user rights introduced in the AIA in 2012 are still fairly limited - they are not transferable and the burden is on you to prove in court that you were actually using the invention prior to the second patent being filed. You may also be severely restricted in your ability to make improvements or adjustments to your “secret sauce” without invalidating the prior user protection.
So, filing a patent but keeping the important parts a trade secret is still a risky strategy to base a critical part of your business on.
This is the main point. If it were possible to do these tests with a finger-prick, first the medical testing companies would do it. They’d lay off 3/4 of their staff, close the labs, and set up field units at every Walgrens. They’d charge 1/10 what they do now for the same test, but take home twice the profit with no administrative overhead, no lab staff, no HR and benefits to pay for those 3/4 staff now gone, etc. etc. Sell the lab properties, get rid of high-maintenance expensive lab equipment with constant calibration and verification procedures, etc.
Sooner or later your doctor would figure out they could put one in a side room and have the nurse run the full range of tests when you come in, and bill your insurance, and skip the test lab middleman.
Rich hypochondriacs would buy their own device and check what the results mean on internet websites…
Third world countries would buy these to provide cheaper health care to the poorer masses without the expense of big labs.
All that’s missing is functional tech that lives up to its hype. So much for that…
Medicine has already been though exactly this scenario before, but with a generation before of technology and medical science. Pathology tests used to require legions of technicians with test tubes in a lab doing individual tests. The advent of the first automated test machines did utterly revolutionise both medicine and the economics of pathology. There was a honeymoon period where path labs were raking in huge incomes and general practitioners were getting in on the game buying simple automated test machines. It didn’t take long for the people actually paying for the services (governments and insurance companies) to work out that the game had changed and the fees paid for the services dropped to reflect the actual cost. But I remember in the 80’s that pathology services was where the really big money was to be made. Here in Australia they were the first private practices to corporatise and then sell out investors. Of course back then the tests performed were, by modern standards, primitive. Most of the tests were are interested in now were not even science fiction then, we are testing for things that were not even known about back then.
The curious thing about the entire Theranos disaster is the idea that they would and should cut the medical profession out of the loop. That was probably the big thing about their corporate pitch. They were offering Walgreens and others of their ilk a slice of the action in way they could only have dreamt about in the past. Indeed, by having Walgreens enter as partners, Walgreens might have imagined that they could control the technology, and keep it away from competing entities - such as general practitioners who would simply install one in their office.
Since it appears that the Walgreens investment was based on more, ehem, basic interests, we probably won’t know what the full pitch was. But there does seem to be an element of greed on all fronts. Greed is always one of the best ingredients in any pitch designed to separate a mark from his money.