MINNEAPOLIS, Minn. — It's arguably the biggest story in health care of the last two years.
How did a 19-year-old Stanford dropout with bottle-blond hair, enormous unblinking eyes, a wardrobe of only black turtlenecks and a weird, seemingly feigned way of speaking in baritone convince investors to part with $700 million for a blood-testing machine she had no hopes of building?
A true-life fable of gullibility and hubris at the intersection of Silicon Valley and medicine, the forehead-slapping story of the now-defunct Theranos and its disgraced CEO Elizabeth Holmes has already been told in a 2018 book, 2019 HBO documentary and Nightline podcast.
Holmes' fifteen-year, unfulfilled promise to deliver a desktop-sized wonder-machine capable of conducting over 200 common medical tests from "one tiny drop of blood," is still slated for a cable series, a major motion picture and a criminal trial. But the lessons of the debacle are no closer to being understood.
That's the takeaway after hearing from Erika Cheung and Tyler Schultz, two twenty-something Bay Area lab professionals-turned whistleblowers at the center of the Theranos story. The pair appeared for the opening day of the influential Manova Summit on the Future of Global Health in downtown Minneapolis Monday, Oct. 14. They sat on sleek armchairs in front of a cavernous ballroom of believers in medical innovation who watched with morbid fascination as the ABC journalist and Minneapolis native Rebecca Jarvis led the pair through their impressions of the scandal and its implications for the ethics of health technology.
"Going into it, I didn't really know what I was getting myself into," said Cheung of her start at Theranos. "But from what I saw, it was impressive. You had a strong female entrepreneur who had raised a bunch of capital and was working on an ambitious dream, to bring affordable diagnostic technology to the forefront of patients' lives. ... Unfortunately, once I started to work for the company I started to see a lot of red flags."
Cheung and Schultz were both straight out of college and worked the third shift at Theranos, reviewing lab tests conducted by the machine. They quickly realized the prototype was incapable of giving the same answer to a blood test twice.
"On my first day as a full-time employee I remember someone walking by in a group of scientists and just casually saying that the director of a group that validated these blood tests just had a screaming match with Elizabeth ... and now she is in the parking lot crying," Schultz said. "So that was my first impression. It was a very disorienting day."
At the time, the company had a valuation of $10 billion, having just signed a deal to put the machine in thousands of Walgreens stores across the country. The pair said Theranos harbored a culture of secrecy, one in which work teams were discouraged from speaking with each other, a system that gave way to silos of information. That said, Schultz believes it was widely known the machine did not work.
"I had one scientist tell me at the end of my internship that I should quit and go work somewhere that did real science," Schultz said. "I thought that was strange comment at the time, but now I understand."
On another occasion, he said, "I remember being with a senior scientist and Elizabeth did a walkthrough of the lab with an older man. The scientist just turned to me and said, 'Well, there goes somebody's inheritance.'"
"I think it goes back to the culture of secrecy, and a culture of fear," said Cheung. "There's inherent risks in deciding to report a company. It can destroy your career. You have a mortgage, you might ask yourself how you are going to pay your rent. At Theranos, you were being told every day if you put on your LinkedIn that you worked here you're going to get sued for breaking your nondisclosure agreement. And some people were on immigration visas, so if they lost this job they may have to go back to their country. Maybe we were lucky in that we were fairly young in our careers and had less to lose."
Though jarring at times, the pair seemed to find humor in what they had been through.
"We had clothes hangers we would stick in there," Schultz said of the billion dollar machine. "It would give you an error message that it's too hot, so you would open the door and wave your hands to cool it off. It would go to 'too cold' ..."
"... so we would put a towel over it," Cheung said with a laugh.
But when the subject turned to reform, the conversation grew serious. Schultz harbors the view that Theranos was a something of a cosmic mistake.
"So many systems failed," he said. "The board of directors failed. The executive teams failed. The investors failed, the regulators failed, the media failed, and to some degree the employees failed. But all of those systems, I believe, were designed to fail by Elizabeth."
Cheung took a more somber view.
"You need people in your company asking the right questions," she said. "You need people associated with health care, with insurance, with the regulatory pathways ... and not just there to continuously raise capital. Do you have a way that people from any level can report it if they see a problem? When you're in team meetings, do you have some one who will say, 'Has anyone seen anything wrong today?'"
And she built on these concerns, when, at the end of the hour, Jarvis asked if Cheung thought Holmes would serve jail time.
"With that many people caught in the crossfire of what happened, at some point there has to be some justice here," she said, drawing a spontaneous burst of applause from the room.
"It can't end this way," she added. "It's such bad precedent that you could catch so many people in this trail of fire and pretend like it never happened."
Millions raised, lost at Theranos
2003: Theranos blood testing company founded by 19-year-old Stanford dropout Elizabeth Holmes.
2014: Theranos raises $700 million from investors, is valued at $10 billion.
March 2018: Holmes settles fraud charges with the Securities and Exchange Commission, resigns, agrees to pay $500 million in fines.
May 2018: "Bad Blood: Secrets and Lies in a Silicon Valley Startup," by Wall Street Journal reporter John Carreyrou is published and becomes a bestseller.
September 2018: Theranos ceases operations.
January 2019: "The Dropout" released, a Nightline podcast and documentary produced by ABC News reporter Rebecca Jarvis.
March 2019: "The Inventor, Out for Blood in Silicon Valley," a documentary by Alex Gibney, premiers on HBO.
2019-2020: "The Dropout", a series starring SNL's Kate McKinnon and produced by Rebecca Jarvis, to be released on Hulu.
2020: "Bad Blood," a feature-length motion picture starring Jennifer Lawrence and directed by Adam McKay, to be released in theaters.
August 2020: Elizabeth Holmes to face 11 charges of wire fraud in federal court in California. She faces the possibility of 20 years in prison.