More than a quarter of Theranos’ blood analyzers were failing quality control after it started offering blood tests, threatening patients’ health, and company founder Elizabeth Holmes was told about problems with the technology, the court heard in Holmes’ criminal fraud trial Wednesday.
Holmes’ lawyers have sought to distance her from the operations of the company laboratory where the analyzers were used. Attorney Lance Wade earlier this week told court the labs were overseen by Holmes’ co-accused, former Theranos president Sunny Balwani, whom she has accused of abusing and coercing her during their romantic relationship.
Erika Cheung, a former lab associate who became a whistleblower, testified Wednesday at Holmes’ trial in U.S. District Court on a dozen felony counts that in quality-control testing, some 30% of prostate-cancer screening results were inaccurate, with a thyroid-health test failing at a rate higher than 50%.
“It was immensely concerning to see this degree of failures,” said Cheung, whose observations came from the six months she spent at Theranos in 2013 and 2014 before she blew the whistle on what she saw. “In a normal lab you’d want to see less than 1%.”
Theranos, meanwhile, was using its machines to conduct patients’ blood tests, and inaccuracy of quality-testing results would translate into inaccuracy of actual patient tests, Cheung said. For example, with the thyroid test, “That means that for every 40 patients that would come through the door, 20 would get results that were unreliable,” she testified.
Patients had no idea what was going on behind closed doors at Theranos, Cheung testified. “They think that they’re getting accurate results and they’re making very important medical decisions about what their treatments are, what their diagnoses are, what kind of medications to take,” she said.
Cheung, who worked for Theranos when she was just out of college at UC Berkeley, was also tasked with helping report to regulators the results of Theranos’ “proficiency testing” of its machines, she said. That testing was turning up dramatically different results from the company’s machines compared to federally approved third-party analyzers Theranos kept upstairs for tests it couldn’t run on its own devices. “That is pretty concerning,” Cheung told court, adding that proficiency testing results were supposed to be reported to federal regulators. “This information was not provided to regulators,” she testified.
Holmes, a Stanford University dropout, founded the Palo Alto blood-testing startup in 2003. Prosecutors allege that before the company went under in 2018, she and Balwani bilked investors out of hundreds of millions of dollars, defrauded patients, and misled doctors and patients with false claims that their technology could conduct a full range of tests on just a few drops of blood. The two have denied the claims. Balwani is to be tried next year.
Cheung testified that the upstairs lab where Theranos ran tests on other companies’ devices was known internally as the “Dinosaur Lab” because the machines were “traditional,” and that Theranos also used commercially available testing kits to check blood for Hepatitis C.
When Balwani called Cheung into his office after she raised concerns about the proficiency testing, he told her that if she wanted to continue working at Theranos, she needed to process patients’ samples “without question,” she claimed.
Cheung said Balwani’s reaction led her to believe the problems with the company’s hardware and software wouldn’t be addressed, and she took her worries to colleague Tyler Shultz, grandson of the late U.S. Secretary of State George Shultz who sat on Theranos’ board. Tyler Shultz had a closer relationship with Holmes than Cheung did, and he sent Holmes a message about the problems with the devices, Cheung testified. In the April 2014 letter, shown to jurors, Tyler Shultz told Holmes that “a significant portion of our data is just noise.”
Cheung also raised her concerns to the elder Shultz, she testified.
Under cross-examination by Holmes lawyer Lance Wade, Cheung testified that when Tyler Shultz wrote to Holmes, he was a recent hire and a junior member of his lab team.
Wade also highlighted the large number of other lab associates at Theranos, and that Cheung was overseen by a medical doctor and managers with PhDs. The attorney elicited from Cheung that as a lab assistant, she was only allowed by federal regulations to do “very low complexity” work.
Wade also had Cheung acknowledge that the quality-control analyses weren’t done on standard blood samples — though she said certain analysis samples contained human blood — and that the quality-control failings she referred to did not involve using patient blood samples.
Cheung resigned from the company, and blew the whistle to a reporter, and then to federal medical-device regulators, she testified. She went to the media as a “final resort” after doing what she could to express her worries internally, she testified. “When I was approached by the journalist I felt hopeful that people could actually see the truth about what was going on,” she testified.
The trial continues Friday, with Cheung scheduled to return to the stand for more cross-examination.
Holmes, who has a newborn baby, faces up to 20 years in prison if convicted.
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