Theranos: The importance of R&R (research & regulatory) strategies

Most people in medtech know the Theranos story by now: The company promised to revolutionize blood testing, removing needles from the equation, and rose to a $4 billion valuation before flaming out in spectacular fashion.

Formed by needle-phobic Stanford-dropout-turned-entrepreneur Elizabeth Holmes, Theranos sought to disrupt the blood testing industry with its 1.29-cm “nanotainer” – a needleless system designed to draw a minuscule amount of blood, but supposedly enough to perform a wide array of tests using the proprietary Edison tester.

In 2014, Theranos was offering more than 100 tests using the novel draw and test systems at a fraction of the cost of conventional lab tests.

For a time Theranos was a media darling, the poster child for disruptive innovation. But the company didn’t have the research to back up its claims. (Theranos media relations did not respond to requests for comment for this article.)

“This is one of my favorite sentences, and it’s so apropos to this,” said Medgineering managing partner and principal consultant David Amor in a presentation at the 10x Medical Device Conference last year. “‘In God we trust: All others bring data.’ If Theranos would have followed this model, I think they would be in less trouble than they are today.”

(The “In God we trust…” quote, by the way, comes from William Edwards Deming, an engineer and statistician best known for helping reinvigorate post-World War II Japanese industry.)

Theranos’s much-lauded technology had little in the way of solid research supporting its claims, but the company was still able to drum up more than $8 billion in funding. Although its failure would seem to rest largely on the shoulders of its management and board, Amor said some responsibility lies with its backers.

“I think investors systematically failed in their Theranos plays, because they also didn’t do enough vetting or due diligence,” he told Medical Design & Outsourcing recently.

Technologies can often promise too much, according to Kablooe Design president & CEO Tom KraMer. Enthusiasm for a particular technology can blind developers and investors to potential flaws, KraMer explained.

“In an effort to prove out the feasibility of the technology, the development team will jump on the first product device idea that they have that will embody this technology. They just go with that. Their focus isn’t proving out the technology. But as they focus on that, often they will forsake the development of the product and the device that’s encompassing the technology. That becomes a stumbling block to anyone adopting the use of technology, because it operates poorly,” he said.

Investing in early research and spending more time developing ideas, concepts and iterations of a device can create better scenarios for a device’s survival on the market, KraMer said.

Beyond a lack of appropriate research, Theranos faced a storm of regulatory issues related to its blood-drawing technology – issues that led the U.S. Centers for Medicare & Medicaid Services to ban Holmes from operating a medical lab for at least 2 years. (Theranos said in August 2016 that it would appeal.) Federal prosecutors and the U.S. Securities & Exchange Commission are also reportedly investigating the company.

Had investors dug a little deeper early on, they would have discovered significant errors in the company’s regulatory strategies, Amor said.

“Having a vetted regulatory strategy is always a necessity when it comes to medtech,” Amor said. “You can’t just take the Silicon Valley innovation approach that lots of high-tech companies do, with mobile labs and other tech plays, and think that you’re still going to have that same agile development pathway when you’re facing those sorts of regulations.”

Observations noted on Form 483s the company received from the FDA showed some deficiencies in design controls, CAPA, and production and process controls, illustrating that the firm is a long way off from achieving a successful regulatory strategy.

“The key takeaway for companies is to have multiple representatives in regulatory fields vet your strategy. I’m not sure why Theranos built their boat the way they did, with several big names – but not in health or related fields. I think it’s important to hire consultants who are strong in their regulatory fields,” Amor said.

More regulatory representatives and better communication with the FDA may have been a boon for the company, which seemed to struggle to nail down the regulatory pathway for its platform.

But Theranos, like many medtech companies, may have seen the FDA as more of a hindrance than an asset and tried to avoid cooperating on a robust regulatory pathway.

“One thing that frustrates me a lot about so many people in our industry, certainly not everybody, but many people, is they view the FDA as an obstacle, as a hurdle – in some cases even the enemy,” Drues said. “That’s very unfortunate. The FDA has a very difficult job to do. As one of my friends who used to be a senior FDA reviewer was fond of saying, ‘Physicians can kill patients one at a time, but an FDA reviewer can kill patients thousands at a time.’ Quite frankly, this is something that more people in our industry really need to remember.”

Research and regulatory pathways aren’t the only hurdles that keep innovative tech from taking off: Opposition can arise from the users the device looks to aid.

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