Startups

‘Do no harm’ applies to startups, too. Healthcare marketers on harsh prison sentence for Elizabeth Holmes

The Theranos saga culminated Friday when convicted ex-CEO Elizabeth Holmes was handed a prison term of more than 11 years by a federal judge.

Her sentence fell between the 15 years prosecutors had sought and the nine-year recommendation made by a probation officer. Holmes’ attorneys argued for no more than 18 months.

Healthcare marketers said that the term sends a signal that health-tech startups are not exempt from the evidentiary and safety rigors to which more established players are bound.

“That verification process is inherent in what we do. It was just reinforced in a court of law,” said Amy West, head of U.S. digital transformation and innovation at Novo Nordisk. “You can’t just go out there willy-nilly. There are processes, regulations and laws in place. We all have to adhere to them. These smaller startups need to be held to the same standards.”

Holmes’ sentence, West added, is “a good [wakeup call] to everybody, whether you’re a big pharma or a healthcare startup.”

U.S. District Judge Edward Davila, who also oversaw the 15-month trial in which Holmes was found guilty by a jury of four charges of defrauding investors by orchestrating a scheme involving her now-defunct startup, said he intended to set an example with the sentence. Future deterrence was an underlying reason, he noted, calling the Theranos fraud “a cautionary tale” for Silicon Valley.

The case against Theranos, which had purported to be able to revolutionize blood testing, came in the wake of a series of articles in The Wall Street Journal between 2015 and 2016 debunking the company’s claims. Subsequently, Theranos folded in 2018.

Holmes is set to surrender to authorities in April 2023. The sentence of 135 months, or 11.25 years, is roughly at the mid-point of the terms of 12 similar white-collar offenses cited by the government in its sentencing memorandum.

Judge Davila ordered Holmes to serve a three-year supervised release, as well, and added that he would schedule a hearing to discuss restitution. Government attorneys had asked Holmes to pay a total of $804 million, the amount which they said Theranos swindled from investors, certain business partners and a board director.

The sentence was extraordinary, some have said, considering Holmes tread a path familiar to many tech entrepreneurs. She dropped out of Stanford at age 19 to found the blood-testing company, running it for 15 years. She employed a big PR effort to attract attention and funding, eventually driving the company to a $9 billion valuation.

But Silicon Valley’s reputation for innovation is built on a foundation of trust, and prosecutors argued that Holmes betrayed that trust. She – and her next-in-command, ex-COO Ramesh “Sunny” Balwani, convicted in a separate trial – manipulated their scientists, business partners and investors, not to mention the media and their ad agency.

The pair pushed the company to market by performing blood tests that were not sufficiently accurate or reliable. By providing lab results that weren’t suitable for clinical use, they put patients in harm’s way.

“People were given inaccurate information and that’s where the real moral crime is in all of this,” said West.

At first, Holmes claimed that Theranos blood-testing technology could run some 200 tests based on a few drops of blood from a finger-prick sample, making needles and vein-based blood draws a thing of the past. At trial, though, it became clear the company was using its technology for a far narrower group of tests.

These included hCG, to assess the presence and stage of pregnancy; PSA, to check for prostate cancer; and TSH, to measure thyroid health. But the device, dubbed “Edison,” suffered from accuracy problems and the startup surreptitiously ran most of its tests on machines from other manufacturers.

After her fraud was revealed, government lawyers argued that Holmes didn’t fess up. She “lied, obfuscated and concealed” the truth, they wrote. Holmes continued to promote and offer the tests to patients with the knowledge that they and their physicians would rely on them to make medical decisions.

“Credibility and trust of healthcare companies is built not only by the success of their science and how they positively impact lives, but also in how they respond when the efficacy or safety of their products falls short,” observed Stephanie DeViteri, managing director of the health practice at MSL.

Misdiagnosis can have serious consequences. An inaccurate test result can cause a patient to undergo an unnecessary treatment that could harm them or to forgo a necessary treatment that could save them.

The Theranos case, DeViteri noted, “reinforces the importance of transparency and accountability as well as putting every control possible into place to ensure patient safety and health is never compromised.”

The sentence also underscores the need for innovating ethically, for the benefit of the entire startup ecosystem. Nirav Sheth, a product manager at Waters Corp., which makes equipment for the diagnostics industry, said he spent four years at a bioprocessing startup, “where some of our end-market customers were damaged by Theranos ‘discoveries,’ thus harming our ability to get traction.”

Some, like Sheth, never “bought into” the Theranos myth because its technology was poorly understood. The methodology had never appeared in peer-reviewed biomedical literature, for example. But many non-scientists were taken in, including — perhaps most famously — former Secretary of State George Shultz, who invested in Theranos on behalf of his family members.

Experts don’t expect this case to have a chilling effect on investors’ obsession with discovering the next health-tech unicorn. Nor will it cause pharma to shy away from collaborating with startups, said West.

Over the last several years, biopharma manufacturers have executed a string of partnerships with health-tech companies, joining complementary strengths in a trend known as open innovation. Such initiatives have included launching accelerators, challenges, grants and co-development to find solutions to health problems.

Nevertheless, cultural differences remain a sticking point.

“When you look at a lot of these startups versus the big pharma, there’s this cultural dynamic in that the startups – given their funding window – don’t have time to wait,” West said. “Whereas in big pharma, we’re slow to move because of regulatory requirements.”

Yet the tough sentence for Holmes might make the startup world that much more tolerant of incumbents’ longer timelines and legal considerations. It’s another reminder that “move fast and break things,” the familiar refrain among the disruptive set, doesn’t translate well in healthcare. This is a sector where medical claims need to be properly vetted, regardless of how shiny the tech or charming the founder.

“We’ve all gotten wiser again to look under the hood,” West said. “Trust, but verify.”

Or that the Hippocratic Oath — “first, do no harm” — applies equally to those sporting black turtlenecks and/or gray pant suits.

People in science “detest cults of personality,” added Sheth. “Healthcare is just too hard to substitute buzzwords and style for causality and actionable results.”

“That verification process is inherent in what we do. It was just reinforced in a court of law,” said Amy West, head of U.S. digital transformation and innovation at Novo Nordisk. “You can’t just go out there willy-nilly. There are processes, regulations and laws in place. We all have to adhere to them. These smaller startups need to be held to the same standards.”

Source: https://www.mmm-online.com/home/channel/do-no-harm-applies-to-startups-too-healthcare-marketers-on-harsh-prison-sentence-for-elizabeth-holmes/

Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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