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Theranos' Voided Tests Could Make It a Magnet for Lawsuits

• http://www.wired.com

Theranos, embattled Silicon Valley blood testing startup, is really testing the old adage that all press is good press. To wit, the Wall Street Journal reported Wednesday that the company has voided two years' worth of blood tests results. Those voided tests are just the latest indictment of Theranos' proprietary technology, which the company had once advertised as being capable of analyzing dozens of different diagnostic tests on a single drop of blood.

This same technology helped Theranos raise hundreds of millions of dollars from investors. And, combined with the company's marketing and its cut-rate prices, brought in business from millions of customers. Both groups might have bones to pick. Bones meaning lawsuits, in case that analogy didn't quite work for you.

Theranos is up against the ropes. Earlier this year, the Centers for Medicare and Medicaid Services released documents expounding on extensive lapses in the company's Newark, CA laboratory, home of its experimental Edison technology. The regulators threatened harsh penalties—from fines, to barring CEO Elizabeth Holmes from the blood testing industry for two years—if Theranos didn't straighten up. Voiding two years of tests was a voluntary move, part of the company's larger atonement. Which includes developing stronger internal guidelines and hiring a new medical director for its California lab.

To investors, Theranos is probably starting to look less like a glimmering unicorn and more like a nightmare. Get it? Night-mare? Ugh, sorry. Not only has the Journal's relentless, year-plus investigation exposed the company's technological stumbling and lab protocol bumbling, it brought down investigations from several federal and state agencies, including the Securities and Exchange Commission and the Department of Justice.

The SEC is looking for evidence of investor fraud, by subpoenaing documents from Theranos and the venture capitalists who gave the company money. "It comes down to what Theranos knew about its machines when it raised capital, and what its investors didn't know," says Steven Davidoff-Soloman, professor of law at UC Berkeley. If Theranos misled them, knowingly or otherwise, those investors could have grounds to recoup some of their funds.

Not that they'd necessarily want to. "If those VCs are very substantial investors in the company, their cases could help drive Theranos into bankruptcy, which is not very strategic from a financial point of view," says Adam Pritchard, professor of law at the University of Michigan. The investors' smartest move would be to wait and see what happens. If the company manages to pull through, all is good.*

The bigger threat comes from consumers. Many people probably made medical decisions based on those two years of voided tests. Or perhaps they wrongfully decided to forgo medical treatment for a misdiagnosed condition. "If Theranos negligently did blood tests, then someone has a right to sue," says Davidoff-Soloman. "And it looks like it might be a good case." But so far, he says he has not seen any examples where a person has popped up and said they were adversely affected by the results from a Theranos test. So again, wait and see.


www.universityofreason.com/a/29887/KWADzukm