What The Theranos Debacle Reveals About Government Regulation

I think I began fearing blood clots when I read Love Is a Mix Tape as a junior or senior in high school. It is music critic and skinny ubernerd Rob Sheffield’s beautiful 90s pre-grunge Pavement-infused elegy for his loud, brash, unapologetic, fun, Southern riot-grrrl wife who dropped dead in her early 30s because her blood gathered together into a knot and then attacked her lung.

A blood clot can kill you instantly and with no warning. But it’s also very easy to prevent.

Theranos

Theranos

A faulty test might not kill you the way a faulty drug will, but indirectly killed through the wrong treatment is still dead.Part of prevention is accurate testing. A faulty test might not kill you the way a faulty drug will, but indirectly killed through the wrong treatment is still dead.

Steve Hammons is a retired marketer in Peoria, Ariz. After heart surgery last year, his doctor put him on Warfarin, a blood thinner, during recovery. Blood thinners require constant monitoring. If the blood is too thin, you can get major bleeds that are difficult to stop. Too thick, and you get clotting that can kill you. Hammons used Theranos to measure his blood’s viscosity. That was a mistake. The test results were all over the place. One test said his blood was taking more than six times longer than normal to clot. So he switched from Warfarin to a weaker drug. Then a year and a month later, he gets the truth. The Warfarin was working fine. It was the test that was broken. He didn’t find out until the Wall Street Journal asked Theranos for the results, and found out someone at the company corrected the results but informed neither Hammons nor his doctor.

One of the most interesting twists in the long, bizarre saga which includes lies, mass firings, and even a suicide , involves the role the Food and Drug Administration played in keeping patients safe.

Elizabeth Holmes, one-time world’s richest woman and Steve Jobs-esque Stanford dropout genius, who sold put people’s lives in danger selling faulty tests and covering it up, was calling for mandatory FDA approval for all lab tests.

Like John Wayne Gacy Calling for More Cops

“Given the pivotal role of labs in medicine, consumers need to trust the quality and accuracy of the tests they get,” Holmes wrote in a WSJ op-ed . “The FDA sets the gold standard for quality assurance. Its review is data-driven, objective and uniquely rigorous. I know this firsthand because Theranos, the company I founded, voluntarily committed to submit all of its lab tests for review starting in 2013. On July 2, the FDA cleared the first of those tests, for herpes simplex virus 1, and the associated finger-stick blood-test technology and underlying system on which our tests are run.”

How odd that the “uniquely rigorous” FDA reviewed Theranos”s finger-stick blood-test technology and underlying testing system, yet didn’t catch that they don’t work. The company told federal health regulators in April that all test results from its proprietary Edison devices from 2014 and 2015 were void.

Steve Hammons isn’t the only person Elizabeth Holmes put in harm’s way. And despite the fact that the FDA scrutinized her company’s systems in-depth, from collection devices and software to analytics and methodology, some people are still going to look at this debacle and call for more government oversight.

This is not just the wrong approach, but a dangerous one.

The Danger in Doing Nothing

If you knew a train was coming for you, and you were given the option to jump out of the way, you’d probably take it. But what if you were blindfolded, and on one side was safety, but on the other side was a cliff? Most of us would still probably jump.

For National Review, Veronique de Rugy told the story of an FDA regulator’s wife whose runaway train was ovarian cancer . While his wife fought for her life, her husband worked on his side to speed up the drug approval process at his agency, making it faster than ever before. Sometimes you need to see the train coming for you to understand the precautionary principle .

When you’re on the hook for negative outcomes, you want to lower risks. When your wife is dying, you want to try anything to save her.

The precautionary principle is letting bureaucrats choose the current failure over a coin toss. Uncertainty is scary! But so is dying from curable diseases.

Tens of thousands of Americans needlessly die from curable diseases to keep FDA bureaucrats from getting in trouble.The long, arduous FDA approval results from bureaucratic incentives. They don’t get bonuses for saving lives, but they do get in trouble if they approve a drug that hurts someone. This means that tens of thousands of Americans needlessly die from curable diseases to keep FDA bureaucrats from getting in trouble.

Forcing lab testing into this utterly broken system is not a good idea. The only thing FDA approval for lab testing will do is slow innovation and jack up costs.

Right now it takes the FDA a decade or more to approve new drugs. But most never make it to market at all. The FDA only approves one out of every 5,000 to 10,000 compounds that enter preclinical testing for marketing. When companies spend this much much time and money on drugs that never make them a dime, they have to charge more for the drugs that do to make up the cost.

The other unseen cost to requiring FDA approval is that it limits competition by artificially raising start-up costs. Innovating a new way to test blood isn’t cheap to begin with. But adding eight to 10 years and millions of dollars to the process will exclude many potential new entrants, making the marketplace less competitive and the resulting technology inferior to what a freer market would produce.

Government can play a role in protecting people from companies that misrepresent themselves, thereby putting people in danger. But that role should not be gatekeeper. Governments aren’t good at that. It wasn’t FDA regulators who discovered Theranos’s testing wasn’t working as advertised and blew the whistle. It was a Wall Street Journal reporter who started asking questions while most Silicon Valley press-release machines disguised as news outlets were mindlessly cheerleading for the company . Only after a series of articles appeared did federal regulators step in for further inspection. The role government should play now is to fairly adjudicate the numerous lawsuits piling up.

It is each individual’s job to decide their own risk tolerance. It is the media’s job to give each individual the data they need to make an informed decision. It is the government’s (or private arbiter’s) job to ensure companies fairly compensate the families they hurt.

It’s not clear what Elizabeth Holmes knew about the accuracy of her tests. But we do know that FDA scrutiny didn’t shed much light on the situation. The next time a promising young CEO calls for more regulation, I hope a reporter starts digging around

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