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U.S. Bans Theranos CEO Elizabeth Holmes from Operating Labs for Two Years

• dcgudeman 10y ago
  I wonder how long she will be able to hold the CEO position?
  • fnbr 10y ago
    On the one hand, hopefully not long, as she can't provide any effective leadership with this in place. However, my understanding is that Theranos has an unusual corporate structure that gives Holmes control of most of the votes, so if she doesn't want to leave, I don't know if anyone can force her.
    • dcgudeman 10y ago
      Seems like an odd arrangement for investors to agree to, one I am sure they are currently regretting...
      • fnbr 10y ago
        Yup. I'm pretty bearish on tricky corporate structure. I think a lot of the existing norms evolved for a reason, and exist to prevent people pulling these sorts of shenanigans. Board oversight isn't always a bad thing.
      • dekhn 10y ago
        Ms Holmes is a close personal family friend of Venture Capitalist Tim Draper, who continues to support her and say that everybody else in the world is a big meanie who is out to get her. He hasn't repented and I don't expect him to.
  • rgbrenner 10y ago
    well the bar is "owning, operating, or directing" a lab. She can appeal and that would delay it.. but when this takes effect, it sounds like she's out.
    • dcgudeman 10y ago
      But does "operating a lab" mean the same thing as being the CEO of Theranos?
      • iaw 10y ago
        Yes.
      • jacquesm 10y ago
        Ditto 'owning'. Effectively this says 'Theranos as a company will not go anywhere until Holmes steps down, and after that the chances of it remaining in business are still extremely slim'.
        • dragonwriter 10y ago
          Since "owning" and "directing" are there, and Holmes is not only CEO but also majority shareholder (and owning stock that gives her disproportionate control for her stock ownership), wouldn't she have to not only step down but also divest at least enough to no longer be either majority owner or have majority voting power?
• acosmism 10y ago
  hopefully forever!
• arcticbull 10y ago
  Hear that? That's the sound of $9B in valuation disappearing :| There is really a thin line between delusion and brilliance.
  • yyyuuu 10y ago
    It's quite strange, how easy it is to build a valuation
    • LargeCompanies 10y ago
      just grow up with a sliver spoon in your mouth and have daddy/mommy sell all their incredibly wealthy and powerful friends/contacts on the genius of their daughter and boom this is what you get.
    • ekianjo 10y ago
      Most of the time you just need to show up at TED and pretend your stuff is going to change the world, despite all you have for proof is close to nothing.
      • nathancahill 10y ago
        "We've already completed step 1. We're half way there." applause https://www.youtube.com/watch?v=DkGMY63FF3Q https://www.youtube.com/watch?v=DkGMY63FF3Q
  • BinaryIdiot 10y ago
    I'm beginning to wonder if at any point they will pack their bags, return what's left to investors and close up shop...or maybe they'll just keep going until it's completely dead? Hell maybe they pivot to be a traditional lab with traditional equipment?
    • ben_jones 10y ago
      Theirs a few reasons at play that motivate people to NOT return the money. * Sunken cost fallacy (we can still make a come back!) * Failure is unacceptable (returning money is accepting utter failure) * Returning money means you no longer possess it or the power / reputation it yields (you will no longer get a generous salary for example) * Returning hundreds of millions of dollars with a multi-billion dollar loss is a joke to begin with
• gravypod 10y ago
  I cant read this article. Can someone provide some backstory? What is Theranos? Why was it shut down?
  • rgbrenner 10y ago
    click web > go to article from google
    • gravypod 10y ago
      I have read the article (there was no 'web' button but some other comment posted a working link). Still have no idea what Theranos is or what they have done. Apparently they worked fro Walgreen or something?
      • exolymph 10y ago
        Have you considered Googling Theranos?
      • rgbrenner 10y ago
        i think wikipedia has you covered: https://en.wikipedia.org/wiki/Theranos https://en.wikipedia.org/wiki/Theranos
        • gravypod 10y ago
          Thanks, everyone else just downvoted. Thanks for taking the time to link. Has there been any clue as to why this ban has come about? That seems rather harsh for a "simple" (I'm using that very loosely) mistake. Is there evidence of faking data or other nefarious deeds on the side of the company?
          • umanwizard 10y ago
            People downvoted because going to Wikipedia is something you could have very easily done yourself. This is like if I commented "what's China?" on a post about the Chinese economy.
• joeyrideout 10y ago
  Ouch. Sanctions mean "shutting down and subsequently rebuilding the Newark lab from the ground up, rebuilding quality systems, adding highly experienced leadership, personnel and experts, and implementing enhanced quality and training procedures". There is a chance to appeal, but "such appeals have rarely succeeded in the past". Couple that with an "unspecified monetary penalty" and this looks like a very big nail in the Theranos coffin. Side note: Anyone else have trouble viewing the WSJ article? I had to read the full text through a private news outlet, even though I tried signing in to WSJ with Facebook :/ Edit: Added a sentence of detail to the last paragraph, for those who still can't see the article.
  • aerovistae 10y ago
    Whenever you can't view a WSJ article due to paywall, copy/paste the article headline into google search then click the article out of the google results. Paywall will vanish. If you're talking about a different problem, sorry, no idea.
    • kilroy123 10y ago
      I just use this chrome extension which does it automatically: https://chrome.google.com/webstore/detail/bypass/ekfnpmbmfmlnbphalelfmiodjmbbjlmp?hl=en https://chrome.google.com/webstore/detail/bypass/ekfnpmbmfml...
    • arprocter 10y ago
      You can also click the 'web' button under the headline here
• fnbr 10y ago
  I have no sympathy for her. It's incredibly irresponsible to do what she did- play marketing games with medical technology. Theranos' unethical behaviour has made it much more difficult for future innovation in the medical field, and has potentially cost lives. This sanction is appropriate. My fiancee works as a laboratory scientist in a hospital conducting patient sample testing, and her and her co-workers take their work incredibly seriously- checking, and re-checking their work, with complex protocols to guarantee the accuracy of their testing. It's disappointing to see that same attitude lacking in Theranos.
  • rtpg 10y ago
    I agree with the sentiment, this stuff's important. But when does "playing marketing games" become OK? Maybe for mobile games, but even then you have kids taking their parent's credit cards out of wallets and spending 100s... everything's important to somebody. Clearly medical tech is extra important, and the consequences even more grave, but I hope this is a lesson to everyone that trying to dupe all of society sometimes has consequences. And hopefully convince more people to do ... nicer things? Better things? Well, at least taking things seriously.
    • BinaryIdiot 10y ago
      > But when does "playing marketing games" become OK? When it comes to anything that can affect your health in medical related capacities it's tough to say it's ever okay. But duping a 9 year old into buying $200 worth of bullshit in-app purchases? Also very unethical, in my opinion, but at least it doesn't directly result in inaccurate medical care which could easily lead to serious injury or death. So ultimately I'm not sure it's ever ethically okay but that's probably going to depend on each person's definition of "playing marketing games".
      • MawNicker 10y ago
        It's only ever OK. That's just a societal agreement. It's never good. It seems like an extremely conservative application of innocent until proven guilty. Advertising has been deemed necessary despite the ways it can be abused. We should likely be more critical in "serious" markets. It's insane that we let Coke/Pepsi regularly subject us all to babes in bikinis sensually consuming fizzy sugar water. That or whatever other psychologically invasive scene they've contrived. But even then, we still require that you not tell outright lies about your product. This ruling was definitely fair. If not lenient. It would be nice to see fewer marketing games it's just hard to find a good place to draw the line. Not lying is a very low bar.
• mkagenius 10y ago
  little more text than wsj (unsubscribed): http://medcitynews.com/2016/07/cms-fines-theranos/ http://medcitynews.com/2016/07/cms-fines-theranos/
• iteabagkevin 10y ago
  Hi kevin
• Animats 10y ago
  The WSJ article and the Theranos press release [1] don't agree. There's no mention of the 2-year ban in the press release. The press release indicates it's business as usual for Theranos at their Arizona lab. Supposedly only their Newark (CA) lab is being shut down. [1] http://www.businesswire.com/news/home/20160707006570/en/Theranos-Receives-Notice-Sanctions-Centers-Medicare-Medicaid http://www.businesswire.com/news/home/20160707006570/en/Ther...
  • rgbrenner 10y ago
    It's the first point in the sidebar: Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation But yes.. they really didn't care to expand on that at all... or explain how it would impact their business.
    • Animats 10y ago
      Yes, I missed that. But does this mean Holmes has to be fired to keep the Arizona lab open?
      • jacquesm 10y ago
        Who will fire her though, she has an absolute majority. This does open the door to immediate shareholder lawsuits if she does not step down voluntarily.
  • joeyrideout 10y ago
    First bullet point in the list of sanctions in the Theranos press release you linked: "Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation" (emphasis mine)
    • foota 10y ago
• sndean 10y ago
  If they're going to ban her from operating labs for two years, does that mean they think she'll be, in some way, rehabilitated and capable of soundly running labs after that? Maybe there is little precedent, but that length of time seems a bit arbitrary (and too short?).
  • tamana 10y ago
    It's a time out in the corner , with two years of lost revenue, to think about what she did wrong and make a plan to build a proper lab
  • ben_jones 10y ago
    Revocation of the laboratory’s CLIA certificate which, as dictated by the regulations, includes a prohibition on owners and operators of the lab from owning, operating or directing a lab for at least two years from the date of revocation I think it's a case where the company had a certificate revoked as part of that process is a direct ban on the person in charge of said lab, which bubbled up to Holmes. I would've supported a direct levy on her but this just seems to be aimed at the company.
  • atarian 10y ago
    Doubt she'll have much impact if she decides to return after two years. Her reputation is beyond repair at this point.
  • mikeash 10y ago
    That was my first reaction to the headline. Banning her from running a lab for two years feels like banning a murderer from owning a gun for two years, or banning a corrupt politician from holding office for two years. Seems like it ought to be a lot longer!
• Fede_V 10y ago
  I'm usually a huge fan of pg, but in his essay about founders, there was one section which I wasn't very comfortable with: http://www.paulgraham.com/founders.html http://www.paulgraham.com/founders.html Specifically, when he talks about naughtiness, he says: Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. I have absolutely no interest in trying to play language games - and maybe I'm misunderstanding what pg is saying, but it has always seemed to me that the judgement of whether the rule that was broken was consequential or not is post-hoc. For example: had airbnb gotten in serious trouble and floundered in the aftermath of when they started scraping craigslist for listings, they wouldn't be clever and naughty, but reckless and foolish. Had zenefits managed to grow even more or hire some key lobbyists and get the law changed in time, their CEO would be hailed as a visionary genius that cut through pointless red tape. Anyway: the reason I brought that up is that a lot of the ethically dubious things that Elizabeth Homes did are very similar to things which a lot of tech companies did at one time or another. Trying to push ambitious young men and women to look at rules and regulations as something they should take pride in hacking and bypassing is a dangerous game - even more so in fields that are highly regulated. Addendum: part of the original hacker ethic was to ignore stupid rules. For example, we take delight in Feynmann cracking safes at Los Alamos, or finding some clever hack to bypass a pointless procedure. However: I think it's one thing to hack a system to make a point about how stupid it is, but it's completely different if you add a monetary incentive, and suddenly the rules that get broken are those that stand in the way of you making money. The two sets have a fairly small overlap. Addendum two: in a complex society like the one we live in, we have a lot of dumb rules. I'm not trying to defend them - we should obviously get rid of them, even in healthcare. A lot of economists have written intelligently about how to make the approval process of the FDA more agile.
  • _Codemonkeyism 10y ago
    Evidence A: How Paul defended shady AirBnB tactics here on hackernews.
    • yborg 10y ago
• abpavel 10y ago
  I've personally heard Tim Draper blaming regulation for her downfall. So in the eyes of SV giants, it's us and the government who are delusional, and we should let her do her thing.
• dannylandau 10y ago
  Schadenfreude is probably merited in this case, but I for one think one needs to consider that this could quickly spiral down and end up in Holmes taking drastic action that we will all regret. Hope my meaning comes through here.
  • drjesusphd 10y ago
    Not really...
    • thingexplainer 10y ago
      They're concerned Holmes will commit suicide.
• rgbrenner 10y ago
  The article says it isn't clear what the monetary penalty would be.. but the letter CMS sent to theranos in March (re the newark lab) proposes a 10000$/day penalty for noncompliance that would continue until the lab is brought into compliance. http://online.wsj.com/public/resources/documents/cms20160412.pdf http://online.wsj.com/public/resources/documents/cms20160412...
  • schappim 10y ago
    That's only 3.65M (or 2.4M if they only count business days) per year. Having no idea of the US system here, could they just continue in noncompliance mode? It wouldn't be the first time a valley business powers on and pays for noncompliance. I understand that Uber pays the fines it's drivers receive where it's service is illegal...
    • jacquesm 10y ago
      That fine could be increased if they continue to not be compliant, it could also be supplemented with different charges.
• kumarski 10y ago
  I've talked to over 100 hematologists. This business, didn't pass a basic litmus test of objective criticism from people who work in the space. There seems to be this bravado among founders who believe they're sticking it to all the people who say something's amiss. I think if there's an elephant in the room though, it probably should be assassinated with a huge body of transparent evidence.
  • logicallee 10y ago
    I think Tharanos is a scam and misreported its results and capabilities. That said, your "litmus test" is dangerous and should not be used. If you had talked to 100 cab drivers about Uber, how many would have said it's a viable idea? Uber is actually WAY less viable than Theranos, because there are legal frameworks that made it literally illegal. Meanwhile Theranos is in a high-profit part of the medical industry, that is also (as you can see) regulated. The issue is that Theranos is a scam. That's the only issue, not any of the stuff you mention. Founder bravado exists because lots of parts of the world are stupid and wrong and done out of habit. Theranos isn't a scam due to bravado. It's a scam because it's not real. If it "happened to be" real and not a scam, your comment could read exactly the same, except it would happen to be wrong instead of right. Your generalization about startups is entirely unjustified, and makes it that much harder for people who are not running scams to actually change the world. Could I also venture a guess that you're not living in Silicon Valley? Your comment and others like it are the reason people don't change the world from the city you're living in, by creating a startup from scratch, but go and move to Silicon Valley to do it. If you have any examples of an Uber, an Airbnb, or a Tesla made in the city you're living in, go ahead and say it. These three companies have upended their respective markets (taxis, hotels, cars). You would have knifed them in their infancy, citing "founder bravado". This literally impedes progress. People shouldn't have to move to Silicon Valley to be able to change the world. None of this has ANYTHING to do with the fact that Theranos (and, to cite another example, that ultrasound charging company) are scams. They are scams ONLY because they're not real: not due to the opinions of the industries they're disrupting, and not because of bravado. Don't conflate the two.
    • jacalata 10y ago
• yeukhon 10y ago
  And she went to Stanford? What a joke. Seriously, I am tired and sick of government and regulators not sending people to trials at all. I was watching Elizabeth Warren's hearing in the Senate on finance issues, and she brings up a good point. Wall Street banks have not been punished hard enough. In case of evident and deliberated fraud and cover up, no one was sent to trial. This is stupid. FYI, I am not the kind of guy goes around and preach about reform. But this shit is stupid as hell. I think major offense like these should be sent to trial or even requires congressional hearing and congressional punishment.
• deftnerd 10y ago
  Sometimes company leaders have severe problems with ethics. As mentioned in other comments, even YC has had companies that have bundled adware/malware with software, practiced dark patterns, hidden news of security breaches, etc. I tend to see YC as being more "evolved" than other VC's, but I also think that these problems are more ingrained into the human condition. YC could consider making funding contingent on all high level company officers attend or participate in some kind of ethics course. It could even be remote. There could also be penalties built into VC agreements. If a company violates contracted ethical rules, then penalties could include replacement of staff, more shares being given to the VC, low share buyback prices for the VC, etc. It could also be a two-way street. If YC violates some kind of ethical rule, then they could be punished by having to do something for the companies they represent. Ethics are important but so far they have just been "best practices" in our industry and not something contracted and enforced.
  • elmar 10y ago
    Hacking sometimes puts you in a grey area :) Airbnb: The Growth Story You Didn't Know https://growthhackers.com/growth-studies/airbnb https://growthhackers.com/growth-studies/airbnb Airbnb Cofounder Was One Of The Worst Spammers In The World, Says His Freshman Roommate http://www.businessinsider.com/airbnb-co-founders-freshman-roommate-says-hes-a-spammy-scumbag-2011-10 http://www.businessinsider.com/airbnb-co-founders-freshman-r...
    • untilHellbanned 10y ago
      What's interesting about the spammer link is that the YC narrative and everyone thinks about Obama O's and Brian Chesky's hustle making this business. Whereas its clear that mass emailing in the spirit of all publicity is good publicity is what created huge awareness amongst potential customers.
      • 55555 10y ago
        Yeah I don't really mind the spam so much, but I really hate when people pollute others' senses of reality with misinformation. If the AirBnB story is all about cereal and photographers walking around NYC, then you teach others to have a less accurate view of reality and you destroy their ability to make good decisions. They will start companies with an unearned sense of optimism, etc. Go ahead and spam if you're a spammer, but be honest about it.
• aabajian 10y ago
  The trajectory of this company is just terrible. They surmounted the most difficult obstacle in healthcare - breaking into existing strongholds (e.g. Walgreens). At that point if there was any doubt that their technology worked they should've used existing tools to run their lab tests. Yes they would've lost money, but they could have used the time to build out their rapid technology or pivoted to a different business model. Getting a contract with Walgreens or any major vendor in the healthcare space is an incredible accomplishment, but such unethical behaviour will make it even harder for future startups to secure such partnerships.
  • dekhn 10y ago
    They did switch to using existing tools to run their lab tests. That's exactly what they did. That's why they started doing venous draws instead of just nanoliter draws from pinpricks. This was documented repeatedly in the media. They also invalidated all their Edison (their specific nano device) results for two years, and it turns out they weren't even running other people's devices correctly and had to invalidate results for that too!
• bane 10y ago
  I hope that Holmes' bizarre behavior as the issues went public keep her from ever running anything even remotely close to things that matter for people's lives and well being. Even as the questions were building and the noose was tightening, she would announce a public talk to reveal and openly share information on the company's tech, then mysteriously cancel a short while later -- she did this over and over. I'm still not convinced that Theranos was meant to be a scam, or at least not a scam in the way most people are thinking about it. But it has definitely produced a similar output, and that makes it functionally equivalent. I hope, really hope, that someday the true story about all the WTF-ness around Holmes and Theranos comes out. I've been on the inside of a company like this once and I ran away as soon as I realized the place was up to no good. What still bothers me about my personal experience is that I, even as a person on the inside, still don't know the truth about that company due to all the same weird kind of cult of secrecy things we've seen at Theranos. The truth in these kinds of things, I suspect, lives only inside the heads of the people who run these kinds of organizations and it may not ever be possible to get at what the truth actually is depending on how far down the delusion hole they've fallen. Real kudos to the press who broke and made very public the stories. This was the media at its finest. Those journalists may have helped save many lives.
  • nashashmi 10y ago
    I'm curious. I have not heard a single thing about Theranos's downfall outside of the comments here on HN. Since you mention "press who broke ... stories", are there any articles out there that would also make me join the "Theranos is a fraud" crowd?
    • qf303rjr3 10y ago
      Much of the initial reporting was by John Careyrou, writing for the Wall Street Journal. This article is representative: http://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901 http://www.wsj.com/articles/theranos-has-struggled-with-bloo...
      • RockyMcNuts 10y ago
• jasonlaramburu 10y ago
  The article mentions that the company's current governance structure may prevent the board from terminating Holmes. Does that mean she is the majority shareholder?
  • w1ntermute 10y ago
    She is a majority shareholder, but also her shares are of a class that gives her 100 votes/share.
    • zackbloom 10y ago
      She really did a great job with that negotiation, if only her company had actually had any value.
• impostervt 10y ago
  Folie à plusieurs https://en.wikipedia.org/wiki/Folie_%C3%A0_deux https://en.wikipedia.org/wiki/Folie_%C3%A0_deux
• deleted 10y ago
  [deleted]
• redmaverick 10y ago
  The difference between a startup like Theranos/uBeam and a product based "soft"ware company is that in one case you can make outrageous claims and then use sheer determination, will power and lots of money to make it happen retroactively but you cannot change the fundamental laws of nature.
• josh_carterPDX 10y ago
  This is a great example of needing to do more due diligence. Walgreens and all of the investors were swept up by the whole "disruption" rhetoric. They should have spent more time understanding how Holmes and her team were going to handle compliance. It's clear none of that was done. This is what happens when disruption pushes back.
• tardo99 10y ago
  Still waiting for the perp walk...
• Piloti 10y ago
  All this underlines a basic problem with R&D startup: it's possible for your company's entire premise, its entire reason for being, to just not work. That's not your fault: it's the nature of research that sometimes it doesn't work (although, let's be clear, there were massive warning signs that Theranos' technology wouldn't work out.) When that happens, you have three options. You can do some kind of pivot, you can admit all to your investors and wind the company up, or you can do an Enron. There's a warning to us all here: if what you're doing is completely on the wrong track, you should admit it and come clean before you find yourself like this and/or in jail. You can't fool everyone forever.