WSJ: Former Theranos employees reveal problems with proprietary testing device

Theranos' Palo Alto, CA, headquarters--Courtesy of Theranos

Industry watchers go back and forth on blood testing startup Theranos, with some citing the company's innovative finger-prick technology as a potential win for patients and others claiming that its tests are shrouded in uncertainty. Either way you cut it, there may be problems brewing behind the scenes, especially regarding Theranos' proprietary testing device, The Wall Street Journal reports.

By the end of 2014, a lab device meant to process the company's tests had only handled a small fraction, or 10%, of its products, former employees anonymously told the WSJ. One former senior employee said that the device, named Edison after the inventor, was used for only 15 tests in December, potentially calling its efficacy into question.

Theranos also failed to report test results that challenged Edison's precision, the employee added, which could stand as a violation of federal lab rules. In early 2014, the Palo Alto, CA-based company split some of its proficiency testing samples--or those meant for approval by the Centers for Medicare and Medicaid Services (CMS)--into two pieces, testing one with Edison machines and another with instruments from other companies. At the time, Theranos routinely used Edison to screen for vitamin D, two thyroid hormones and prostate cancer.

Theranos CEO Elizabeth Holmes

The two pieces of equipment gave different results, the WSJ reports, tipping off some employees that Edison's results might be inaccurate. Senior lab employees showed both sets of results to Theranos COO and president Sunny Balwani, noting the differences and asking which information should be reported back to the government.

Balwani ordered lab personnel to stop using Edison machines on any of the proficiency testing samples and report only the results from other companies' instruments, former employees told the WSJ. The "samples should have never run on Edisons to begin with," Balwani said in an email to CEO Elizabeth Holmes seen by the newspaper.

The former employees said that they did what they were told, but at least one stepped forward later to describe the incident to New York state's public health lab. In April 2014, the New York State Department of Health got a formal complaint over Theranos' testing practices and sent it on to the CMS, according to the WSJ story.

Still, the company is standing by its practices, saying that the comparison between devices was based on "left-over proficiency samples" used "to conduct additional experiments and verify best practices," Theranos' general counsel, Heather King, told the newspaper. And the company has never failed proficiency testing, she added.

Unsurprisingly, Theranos is less than pleased with the WSJ's take, calling its story "factually and scientifically erroneous and grounded in baseless assertions by inexperienced and disgruntled former employees and industry incumbents," the company said in a rebuttal statement. The company provided more than 1,000 pages of statements and documents to the reporter to refute the "false allegations" by its former employees, but the newspaper "chose to publish this article without even mentioning the facts Theranos shared that disproved the many falsehoods in the article," it added.

The story casts a dark cloud over Theranos, which recently gained momentum with its finger-prick testing technology. In July, the company, which is valued at about $9 billion, snagged FDA approval for its $9 finger-stick test for herpes, helping it expand the reach for its product and challenge business models laid out by rivals such as Quest Diagnostics ($DGX) and LabCorp ($LH). A few days later, Theranos inked a deal with Capital BlueCross of Pennsylvania to provide its test to the insurer's 1 million members.

But the company is not planning to let the bad news overshadow its progress, taking an aggressive stance in its rebuttal.

"Stories like this come along when you threaten to change things, seeded by entrenched interests that will do anything to prevent change, but in the end nothing will deter us from making our tests the best and of the highest integrity for the people we serve, and continuing to fight for transformative change in health care," the company said in a statement.

- here's the WSJ story (sub. req.)
- read Theranos' statement