Theranos, the Silicon Valley health care startup, seemed to have everything it would need to live up to its hype and become the next breakout tech phenom.
The company was selling a revolutionary blood-analysis machine that boasted a sophisticated touch screen and a sleek designer case. Founder Elizabeth Holmes, a college dropout, exuded Steve Jobs-like confidence as she spun a founding narrative so powerful that it could induce a kind of blindness in business executives who should have known better.
Theranos’ blood-testing device was “the most important thing humanity has ever built,” Holmes once told a crowd of employees. The device would eliminate thousands of deaths from adverse drug reactions, identifying diseases early, and run any blood test for less than half the normal cost, potential customers were told.
The problem was, Theranos had no such device.
Remarkably, that omission didn’t stand in the way of Theranos’ financial success until late 2015, when Pulitzer Prize-winning reporter John Carreyrou began to expose the company’s lies in a series of investigative stories in the Wall Street Journal. Now Carreyrou is out with a book-length exposé, “Bad Blood,” which uses interviews with more than 150 people to show how Holmes briefly became the world’s youngest self-made billionaire.
Holmes is depicted as a kind of social hacker loose in Silicon Valley, hoodwinking potential partners while intimidating her critics. She would use grandiose statements, inflated accounting and fawning press coverage to get what she wanted, while constantly firing skeptics and sending her lawyers after critics. She disregarded scores of observers who said she needed better science to back up her claims.
Holmes may be leaving Theranos, but the fallout continues. Holmes and Theranos are settling fraud charges from securities regulators, and news about legal settlements fills Theranos’ website. It’s not hard to imagine further enforcement actions flowing from “Bad Blood,” especially since the book has already been optioned for a film starring Jennifer Lawrence — a convenient platform to raise the topic of health care fraud.
The book exposes a host of Theranos lies. Pfizer was once told that the Theranos machines were providing inconsistent results partly because of “dense foliage” that interfered with wireless transmissions. Walgreens was told that Theranos machines could be used to perform 192 different blood tests, though it could not. Theranos told Medicare that it would not deploy the machines without regulators’ permission, contradicting what Holmes had told military personnel.
Steve Burd, the CEO of Safeway, had his grocery-store chain invest $30 million in Theranos and spend hundreds of millions more to create walk-in wellness centers that would use Theranos machines. Yet Burd had never seen scientific data showing that the machines worked as promised because those data did not exist, and he was never allowed inside the lab where Theranos falsely claimed it was using its proprietary machines to test Safeway employees’ blood.
Usually a stickler for deadlines, Burd accepted a string of dubious excuses from Holmes for Theranos’ repeated delays, including one occasion when she blamed an earthquake in Japan, leaving other Safeway executives doubtful.
“He was starry-eyed about the young Stanford dropout and her revolutionary technology, which fit so perfectly with his passion for preventive health care,” Carreyrou writes.
Burd missed a deadline with investors in the fourth quarter of 2012 to unveil his expensive new plan for in-store wellness centers, and shortly thereafter Safeway announced he would step down from the company. Burd went on to form his own health care consulting firm, and even tried getting back in touch with Holmes. But, says Carreyrou, she no longer returned his calls.
By: John Carreyrou.
Publisher: Alfred A. Knopf, 352 pages, $27.95.