Blood-Testing Startup Theranos, Inc. Is Trading Blows With the Wall Street Journal

A startup company offering a new technology solution to an old problem is in the news, though not in a good way. Theranos, Inc., the blood testing company started by Elizabeth Holmes, made news with its claim that its new technology would make possible the completion of a whole range of blood tests from a few drops of blood. But earlier in October, the Wall Street Journal published a report alleging that Theranos’s claims about its transformative diagnostic technology, including needle-free blood tests that yield faster results than industry standard tests, do not hold up. Theranos fired back with a denial, offering a rebuttal to statements in the article and suggesting that the reporter, John Carreyrou, had been trying to “take down” Theranos.

One possibility is that Theranos will sue the Wall Street Journal for libel. Another is that Theranos might find itself in trouble. The company’s tests are currently sold in California, Arizona, and Pennsylvania. If people from those states came forward and claimed testing was inaccurate or had failed, it could attract the attention of state prosecutors and receive regulatory action. Los Angeles attorney Tracy Green, and expert in health care regulatory issues, discusses the possible outcomes of the dispute between Theranos and the Journal in this report.

Tracy Green

Tracy Green

As to the possibility of a libel action against the Wall Street Journal, Green points out that “libel cases are hard to win.” Green is involved in a case involving reporting by John Carreyrou, and she says that he is meticulous in detailing what he does. Green says that an FDA report released this week will affect any decision to sue. The FDA report is a public record, so it would be important in any issue as to the truth of what the Journal printed.

Green also notes that Carreyrou apparently did a good job of cultivating sources—employees and former employees of Theranos. Whether Carreyrou acted in good faith and checked his facts would also be important. Green says that Theranos has been known to be “incredibly secretive.” The company worked in hidden buildings with no indication of what was going on there. Getting information from insiders will be an important consideration, especially if this information tracks with what the FDA reported.

Theranos CEO Elizabeth Holmes has said that she would release data to substantiate claims made by Theranos, but the data has not yet appeared. Green says that this is not of great importance since Theranos has not really gone into a full business operation. The threat from Theranos was that it would put a lot of traditional labs out of business by being able to do all of the tests out of a few drops of blood. Patients would be able to get the blood testing done at a neighborhood drug store or even in their own homes. So releasing data would be a good idea for Theranos so as to achieve some transparency in what they were trying to do.

Green says that Theranos might argue in a court case that the company was testing its Edison device and, at the same time, running full lab tests at its labs to compare the results. Theranos would need FDA approval for the Edison. The company needs to release data to counter, if possible, the statement by a former employee that the company was running less than 10% of its testing on its Edison device.

Tracy Green is the founding partner of Green & Associates, Los Angeles, California. She combines more than 25 years of experience with a strategic, results-oriented approach and is considered to be one of California's preeminent attorneys in fraud investigations and audits, complex white collar investigations and cases, health care regulatory issues, administrative law and licensing law, litigation (complex civil and criminal), and health care regulatory matters. The Legal Broadcast Network is a featured network of Sequence Media Group.