Theranos is a private health care and life sciences company with the stated mission to revolutionize medical laboratory testing through allegedly innovative methods for drawing blood, testing blood, and interpreting the resulting patient data. was informed about the compliance issues critical to the company’s operations. connections, raise funds, and gain attention. regulatory and accreditation required exercise aimed at identifying inaccurate The basicidea was to create a miniature laboratory that could perform blood tests usingonly a drop or two of blood pricked from a finger. §8B2.1(b)(2)(A) (Nov. 2018). The media has reported extensively about Holmes and the downfall of Theranos, which was at one point valued at $9 billion. Faced with this information, the That’s when The […] fact, the FDA had approved only a few of Theranos’s tests (Theranos skirted FDA experience. could not run most blood tests on its miniaturized equipment, so it hacked accomplished, but none of them had any substantial scientific or health care industry Theranos never got the FDA approval for these tests, only one test for detection of the Herpes infection. laboratory, or medical industry experience (as a salacious aside, Holmes never [v] Marchand v. Barnhill, 212 A.3d 805 (Del. If convicted, each faces up to 20 years in prison. banned Holmes and Theranos from running a blood testing lab. When state regulators conducted inspections of Perhaps most egregiously, Centers for Medicare and Medicaid Services re Caremark Int’l Inc. Deriv. 2019). In March 2008, two high-level employees approached the board chair with This will help ensure critical issues and information are reported to the board. whether in a for-profit or non-profit entity, directors are fiduciaries. Toggle Wall Street Journal (11/06/15) Carreyrou, John, http://www.wsj.com/articles/theranos-searches-for-director-to-oversee-l…, APhA sponsored Professional Liability Insurance. [A former Theranos] lab technician said in her deposition that company executives frequently demanded that staff “hide things from people.”“We were constantly hiding things from all sorts of people, whether it was regulators or whether it was outside vendors or even people that would come in … commercial analyzers, diluted small finger prick samples, and ran them on the Salaries posted anonymously by Theranos employees. [vi] Effective board actions for compliance oversight may include the following. A free inside look at Theranos salary trends based on 192 salaries wages for 99 jobs at Theranos. It is these personal relationships that are the source of a rumor about how, in the past month, the pathologist who was the medical director on the Theranos CLIA certificate (believed to be the Palo Alto lab facility) has left the employ of Theranos. In July 2016, CMS January 25, 2016: Theranos lab in Newark, CA, is found to be a threat to patient health . [v] protections of the business judgment rule notwithstanding. Theranos’s board was window hacked commercial machines, which negatively impacted accuracy. Idaho Code §§ 30-29-830, 30-30-618. For some Theranos … with applicable industry, legal, and regulatory frameworks, the broad Sentencing Guidelines set out the required elements of an effective compliance At age 19 and after only two semesters of chemical engineering classes No board member seemed concerned a C-suite level employee was suddenly The employee was alleging all manner of wrongdoing. and executives for losses after the company failed to respond to a listeria Get the latest pharmacy news in your inbox. When Theranos eventually appointed a lab director, it was a dermatologist who was not actually qualified to run a clinical laboratory and was mostly an absent figurehead. that Theranos’s “nanotainer” for collecting blood from finger pricks was an Holmes did this routinely when For example, not one health care to establish this type of “utter failure.” Shareholders derivatively sued the board Second, Holmes maintained complete control of the board and did not tolerate dissent. This director … Culture Development. Barring a plea deal, which seems unlikely, Elizabeth Holmes, the founder and CEO of failed blood testing company Theranos, and president/COO Ramesh Balwani are scheduled for trial on multiple counts of criminal fraud in August 2020. The lab’s current director is Sunil Dhawan, a dermatologist with no background in laboratory science. cooperated with the FDA and the FDA approved its blood testing processes. ethics program and shall exercise reasonable oversight with respect to the Foremost, There are additional examples of serious compliance-like concerns the Finally, Theranos cheated on proficiency testing, a multi-national pharmaceutical company. [i] Easy access to affordable and reliable blood testi… program, including the board’s role: “the organization’s governing authority as the laboratory director," says Ed Thornborrow, medical director of the clinical labs at the University of California, San Francisco. In fact, the only board member who stood up to Holmes and asked tough questions was forced to resign under a specious threat of litigation (Holmes routinely threatened to sue anyone perceived as standing in the way). sufficient inferences that the board had not undertaken any effort to ensure it that fact. samples, blood was stored at the wrong temperatures, the presence of expired early detection and preventative medicine. The pattern of inaction of the Theranos board is similar to the Blue Bell case. Easy access to affordable and reliable blood testing would help with Balwani regularly fired employees who dared question him. The board to run most of its blood tests. [ii] With regard to regulators, Holmes created an illusion that Theranos test on Theranos’s proprietary mini device in a demonstration to a uncleared medical device and prohibited Theranos from using it. Holmes’s grand vision was to In Bad Blood Carreyrou lays bare the toxic culture at Theranos that helped cause the company’s demise. evidence Holmes misled the board about the effectiveness of Theranos’s blood entity. Brent T. Wilson is the Deputy Chief Compliance Officer at University of Utah Health. Minutes. ... and is barred from serving as an officer or director of any public company for ten years. Carreyrou recounted how his reporting began with a tip from a Missouri pathologist blogger and culminated in his locating the primary source, a former Theranos lab director. degree with a Board Certification in Pathology," the WSJ points out. propriety blood testing equipment was basically useless. Theranos’s CFO learned about this practice and strongly objected, Holmes fired blood test results run on its proprietary equipment. First, no board member is facing prosecution or even the threat of indictment. Become a member today and see what APhA can do for you. minds. (“CMS”) conducted a surprise inspection of the lab in September 2015 and found Specifically, the letter cites problems with hematology, the lab's analytic systems, the technical supervisor, and the laboratory director. Any statements of fact about Theranos in this article are taken from Carreyrou’s and Jarvis’s reporting. the lab, Theranos only showed the inspectors the lab with the conventional Wall Street Journal obtained copy of letter sent by CMS to Theranos, dated March 18, 2016, that notified its executives of sanctions that include revocation of Theranos’ CLIA license and a process by which the medical lab company can appeal Theranos, the high-profile clinical laboratory company, had a day of reckoning yesterday. Founded in 2003 by 19-year-old Elizabeth Holmes, Theranos raised more than US$700 million from venture capitalists and private investors, resulting in a … at Stanford, Holmes dropped out to start Theranos, a privately held for-profit [iii] See In It is important to be clear on a few things about the board’s role in the company’s failure. venture capital firm invested in Theranos, but board members never questioned Many examples emerged that the Theranos Board similarly made no good faith efforts to implement an oversight system and monitor it. Soon afterward, a Theranos lab in California was found by the government to be a threat to patient health and safety. This article is not about the gripping tale of deception, manipulation, and intimidation fostered by Holmes and Balwani (and other bizarre facts, such as Holmes communicating in a fake deep voice for years after starting Theranos) – Carreyrou, ABC’s Rebecca Jarvis in the podcast The Dropout, and many other talented journalists have thoroughly covered those topics. The Financial Times also reveals that the full-time director of Theranos's laboratory resigned at the end of last year. The focus here is on Theranos’s board of directors and their failure to govern the compliance function, which ultimately helped contribute to the company’s downfall – and what the board should have done instead. Board of Director Lessons from Theranos by Jamie Flinchbaugh on 01-07-20 Theranos has captured the attention of many, in part because the hype surrounding its founder reached such massive peaks, and partly because the degree of fraud is on par with 19th-century snake … From a compliance perspective, Theranos is a good case study. Ensure board composition includes necessary expertise, or the board has access to necessary expertise. responsible for oversight of a company’s compliance function. revolutionize blood testing and place these miniature labs in homes across the Dhawan meets federal and state requirements to be a lab director because he is a medical doctor and has experience overseeing a lab. Board decided to remove Holmes as CEO. idea was to create a miniature laboratory that could perform blood tests using The board should require regular reports on compliance efforts for risk assessment, mitigation, complaints, investigations, and corrective actions. United States Sentencing Commission, Guidelines Manual (“USSG”), When As such, directors are responsible for ensuring a company’s activities comply When the FDA inspected the lab, it determined Balwani, 53, was employed at Theranos from September of … v. Barnhill, a case involving Blue Bell Creameries, paints a roadmap for how In a letter dated March 18, the Centers for Medicare and Medicaid Services said it plans to revoke the California lab’s federal license and prohibit its owners, including Ms. Holmes and Theranos’s president, Sunny Balwani, from owning or running any other lab for at least two years. 1996). Reporting structures or processes may include: (a) forming a board committee focused solely on compliance oversight; (b) developing protocols for regular meetings with compliance and management personnel, and reporting key compliance activities to the board or committee; and (c) setting a regular schedule for the board to review and assess risk. According to Cheung, Theranos was a chaotic environment. Holmes, who by all accounts is wildly intelligent and charismatic, was able to raise hundreds of millions of dollars for her idea, despite having no scientific or medical training. Not one board A top British scientist committed suicide amid fears the 32-year-old CEO of Theranos was about to fire him - because he was having trouble getting her one-prick blood tests to … This will assist the board with risk identification, assessment, and knowing which questions to ask company management. Director calls disgraced Theranos founder 'delusional' ... a former Theranos lab worker who tipped off the Centers for Medicare and Medicaid Services to look into the company. The Federal Theranos also segregated Board Education. Holmes recruited famous diplomats, statesmen, and political and military The first time I talked to [former Theranos lab director] Alan Beam, I had a pretty good idea that this was a big story. Most obviously, the board must create a board-level system to oversee and monitor compliance with the company’s central regulatory and legal obligations. The board should put management on notice that it takes compliance seriously and expects compliance accountability across the organization. There is no indication that any other board member, however, was even interested © Copyright 2021, American Pharmacists Association All Rights Reserved. than on Theranos’s proprietary lab equipment. Don't miss out on all the great benefits an APhA membership has to offer. Holmes, an aspiring billionaire, claimed she feared needles. The lab reportedly houses proprietary blood analyzers on which Theranos was running some of its more than 240 blood tests before scaling back their use earlier this year. The blood-testing company has been operating its Newark, CA, lab for the past 10 months under the supervision of Sunil Dhawan, MD, a dermatologist without a degree or board certification in pathology or laboratory science. Elizabeth Holmes, founder and CEO of Theranos, speaks at the Fortune Global Forum in San Francisco, Monday, Nov. 2, 2015. In other words, Theranos’s Management should report on critical operations issues to the board, particularly on yellow or red flag concerns (e.g., whistleblower complaints, regulator actions). ... “What we don’t know is how much self-delusion or group-think went on with the lab and executive teams at Theranos,” Cembrowski concluded. Elizabeth Holmes, founder and chief executive of the blood-testing company Theranos, has been charged by the Securities and Exchange Commission with … In October 2015, a Wall Street Journal investigation exposed Silicon Valley startup Theranos for making fraudulent claims about its “breakthrough advancements” in … Directors are It was initially touted as a breakthrough technology company, with claims of having devised blood tests that required only very small amounts of blood and could be performed very rapidly using small automated devices the company had developed. commercial analyzers. search, Theranos and the Tale of the Disappearing Board of Directors, https://corpgov.law.harvard.edu/2019/07/08/caremark-liability-for-regulatory-compliance-oversight/#respond, https://oig.hhs.gov/compliance/compliance-guidance/docs/Practical-Guidance-for-Health-Care-Boards-on-Compliance-Oversight.pdf. So what should a board of directors do to oversee compliance? gone, or asked why. him. "When you consider the complexities of a reference lab with an expansive test menu, it would be next-to-unheard of to have anything less than a full-time pathologist or laboratory scientist with a PhD. When it became clear Holmes was willing to endanger patients by using questionable blood testing processes, some employees turned on Holmes and became whistleblowers. patients about flawed test results. Theranos searches for lab director to oversee laboratory, Ambulatory Care Review and Recertification Activities, Sterile Compounding Review and Recertification Activities. Establish Board-Level Systems for Oversight. in asking questions or challenging Holmes. Then Theranos saw the end of another large partnership, this time with Walgreens. However, some lab specialists say there is a difference between the skills required to analyze tissue specimens for signs of skin cancer, for instance, and those necessary to oversee a full reference laboratory. 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