May 3, 2016
By Alex Keown, BioSpace.com Breaking News Staff
PALO ALTO, Calif. – To protect its secrets and reputation, embattled blood-testing company Theranos allegedly used a team of attorneys and threats of a lawsuit to squash a story in the Wall Street Journal before it even ran, Vanity Fair reported. And Theranos had reason, so it seems. Since the Journal’s bombshell report last October, the company has come under intense scrutiny over the efficacy of its proprietary blood-testing technology.
The Theranos attorneys, led by David Boies, now a member of Theranos’ board of directors, sought to discredit the sources in the Journal’s story long before it ever ran. The legal team argued that the Wall Street Journal was in possession of the company’s trade secrets. However, once the Journal published its first article on Theranos, the company has been playing defense ever since as its technology has been questioned and serious deficiencies at its Newark, Calif. Lab has raised even more questions.
It should come as no surprise that Theranos, or any other company, would use legal avenues to block negative reports that can damage the bottom line. And in the case of Theranos, it’s not the first time the company has sought to use means to squelch negative stories. In December, it came to light that Holmes and Theranos reached out to a Marine Corps general to intervene in an inquiry by the U.S. Food and Drug Administration (FDA). In 2012, the Department of Defense raised concerns about Theranos’ blood testing technology and notified the FDA. Holmes sought aid from Marine Gen. James Mattis to “squelch those ‘inaccurate’ concerns” raised by the DOD official. Theranos told the Post the Department of Defense was interested in adapting the company’s blood tests for battlefield use in a pilot program that would not have required FDA approval. Mattis later went on to serve on Theranos’ board of directors.
The Wall Street Journal’s article started a snowball effect for Theranos, as the once highly-hailed company, began to reel from the negative attention. For more than six months, Theranos has faced criticism over its blood-testing device, with questions as to its efficacy. The company has also faced scathing criticism over one of its labs in Newark, Calif. –so much criticism that federal regulators have suggested they may shut down the facility. Holmes could face a possible federally-mandated two-year suspension from the blood testing industry over failures to address deficiencies at lab facilities in California. Not only could Holmes face suspension, but the company could also face crippling sanctions, including the shuttering of its heavily criticized Newark, Calif.-based lab, as well as suspension of its eligibility to receive payments under Medicare. The possible suspension, which could also include company president Sunny Balwani, stems from an investigation into the company’s Newark, Calif. laboratory by the Centers for Medicare and Medicaid Services (CMS).
In April, Theranos revealed the U.S. Department of Justice has launched a criminal investigation into the company. The investigations center on whether or not Theranos and its executives misled investors as to the efficacy of its blood-testing products. Walgreens, Theranos’ biggest client, has been subpoenaed by the government to provide information as to how Theranos described its technology. While investigation are ongoing, it is important to note that there are no formal charges that have been made and charges may never come from the authorities.
Earlier this year, Theranos took another hit to its reputation after a scathing government report shows Theranos’ Edison blood testing devices has failed to meet the company’s own standards. The U.S. Centers for Medicare and Medicaid Services released a 121-page report of its findings following a series of inspections at Theranos’ Newark, Calif. lab and the news for the company valued at $9 billion based on its proprietary blood-testing is not good. The CMS report showed 29 percent of quality control checks performed on Theranos’ Edison devices in October 2014 “produced results outside the range considered acceptable by Theranos,” the Journal reported. A February 2015 test using the Edison device to measure testosterone levels failed quality control checks 87 percent of the time. The CMS report shows several months-long stretches of quality control issues when it comes to the Edison device.
These questions about Theranos’ technology, have sparked concerns that Walgreens could sever its relationship with the company. More than 40 Walgreens stores in Arizona offer Theranos blood tests. The tests conducted through those stores are the biggest source of the company’s reenue.
