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Theranos Facing Consumer Fraud Lawsuits

theranos-consumer-fraudThe news is filled with stories about Theranos and allegations of a major scandal. It’s under federal criminal investigation by the Security and Exchange Commission and the US Attorney’s Office. Consumers have responded by filing fraud lawsuits against Theranos. Let’s talk about the real story on what’s happening and why customers might be filing these lawsuits.

Background on Theranos

Theranos was founded back in 2003 when 19 year old Elizabeth Holmes dropped out of Stanford to pursue a way to make blood tests easier through a handheld device. It quickly began attracting venture capital and by the end of 2004, almost $7 million was raised for its development. By 2010, Theranos was valued at $1 billion. Theranos quickly became the model for how Silicon Valley would solve medical problems as it collected more and more venture capital money.

Theranos’ plan was to give the world a painless blood test from just a simple finger prick. The results could be instantly sent to doctors. They also envisioned people being able to perform their own blood tests and get the results themselves from any pharmacy.

By 2015, Theranos was flying high. They were using their patented Edison blood testing machine to provide quick results from their labs utilizing just a microliter of blood. The company was valued at $8 billion and Elizabeth Holmes had a net worth estimated to be $4.5 billion. She made Forbes’ list of the wealthiest self-made women. She was the darling of Silicon Valley.

Problems Start Appearing

The problems began appearing in October 2015 when the Wall Street Journal reported accuracy problems associated with Theranos blood tests. Research showed that Theranos tests were inaccurate with Cholestrol readings off by close to 10%, enough to bring about a false diagnosis. Later in October 2015, the FDA ordered Theranos to stop using its Edison device because it wasn’t approved for blood tests except for limited trials.

Walgreens and Safeway had made agreements with Theranos for in store blood tests but after the October revelations, Safeway backed out of their deal. Walgreens has been attempting to extricate itself from its Theranos blood testing deal. A planned deal to handle blood testing for the US military hit a road block because of testing inaccuracies discovered by the military.

In January 2016, the Centers for Medicare and Medicaid Services issued a report on the numerous problems associated with the Edison blood testing devices and calling into question the accuracy of tests performed using the device. The CMS report showed that nearly 30% of all tests were inaccurate and outside the acceptable range of results. The report led to the shutdown notices to be issued to two different Theranos labs.

Full Blown Scandal

By April 2016, Theranos was confronting a full-blown scandal. Theranos divulged publicly that the Department of Justice and the SEC had begun criminal investigations into the actions of Theranos. This is the first time that the SEC has ever investigated a private company.

In May 2016, Theranos announced that they had voided two years worth of test results from their Edison blood test device. They also announced that in June 2015, they had begun outsourcing lab work away from the Edison device. In May 2016, patients who claimed that they suffered medically from false test results filed two different class action lawsuits. The test results either caused treatment to be delayed or caused patients to receive unnecessary treatments.

The Road Ahead

This is the rundown on how the Theranos scandal has developed. It’s difficult to know how Theranos will respond or rebound from the criminal investigations and the consumer fraud lawsuits. It really depends on what revelations continue to surface about Theranos and how much management knew about the problems with their Edison device.

Learn more about Consumer Fraud lawsuits.



Principal & Founder
This article was written by Mark Sadaka, a seasoned trial lawyer in nationally significant cases. He fearlessly champions clients impacted by fatal or severe injuries caused by others or corporations. Renowned for his expertise in complex litigation, he's featured in books, sought after by media for interviews, and a highly sought speaker. Notably, he exclusively represents individuals facing life-changing injuries or substantial financial losses.

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