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The Great Medical Fraud

Axeesys News

21 Aug 2022

The college dropout who tricked investors out of hundreds of millions, and the medical world in a fake medical machine.

Photo Credit: New York Post

Theranos a medical device manufacturer was an American corporation that was hailed as a revolution in healthcare technology providing cheap and fast services, the company was founded in 2003 by a 19-year-old Elizabeth Holmes, a college dropout.

Holmes dropped out of Stanford in 2003 and used money that her parents’ set-aside for Elizabeth’s education to establish the company that later became Theranos, derived from a combination of the word’s "therapy" and "diagnosis". The company's original name was "Real-Time Cures"

Theranos claimed that it had discovered new innovative blood testing techniques that required very little quantities of blood and could be processed rapidly in a small device the company had developed, over time these devices would be exposed for delivering false results.

Theranos raised millions of dollars in its first years. In 2004, Theranos was based in a rented basement near the Stanford campus. By December 2004, the company had raised more than $6 million from investors at a valuation of $30 million. The company had about $45 million total fundraising after Series B and Series C funding in 2006. Theranos raised an additional $45 million in 2010 at a valuation of $1 billion. The company moved to the former headquarters of Facebook in June 2012. The company had significant news coverage starting in September 2013 after profiles in the San Francisco Business Times and The Wall Street Journal. By 2014, Theranos had raised more than $400 million with an estimated value of $9 billion. In 2016, Forbes revised the estimated net worth of the company to $800 million taking into account the $724 million of capital raised.

In February 2015, Stanford professor John Ioannidis wrote in the Journal of the American Medical Association that no peer-reviewed research from Theranos had been published in medical research literature. In May 2015, University of Toronto Professor Eleftherios Diamandis analysed Theranos technology and concluded that "most of the company's claims are exaggerated. "Attempting to boost the company's credibility, Holmes invited then-U.S. Vice President Joe Biden to tour their facility. Biden praised what he saw, but to conceal the lab's true operating conditions, Holmes and Balwani had created a fake lab for the Vice President's tour.

Theranos claimed that the allegations were "factually and scientifically erroneous." Walgreens suspended plans to expand blood-testing centres in their stores following a Wall Street Journal report.

In January 2016, the Centres for Medicare and Medicaid Services (CMS) sent a letter to Theranos based on an inspection of its Newark, California lab in 2015, reporting that the facility caused "immediate jeopardy to patient health and safety" due to a test to determine the correct dose of the blood-thinning drug warfarin. Walgreens subsequently announced a suspension of Theranos blood tests from the Newark lab and immediately paused wellness services in Palo Alto. Theranos also agreed to stop tests at Capital BlueCross's Enola, Pennsylvania retail store.

In September 2018, Theranos announced in an email communication to all its investors that it would terminate operations and dispensation of all assets and remaining cash to creditors. The company's remaining employees had been laid off on the previous Friday, August 31. Theranos general counsel and new CEO David Taylor and a few support staffers remained on payroll for a few more days. Any equity investments in the company were made worthless by the shutdown. As of July 2022 Elizabeth Holmes has stood trail and is awaiting sentencing for her alleged crimes.

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