[3 weeks before first article] Erika Cheung’s email to Gary Yamamoto (CMS) spurred the surprise inspection on Theranos’s labs in less than 3 days. They found so many problems and missing documentation that they planned to return. When they returned, WSJ’s article was out and there was pressure. CMS released a letter calling Theranos an “immediate jeopardy to patient health and safety”.
Theranos claimed to have fixed many of the deficiencies, and that the problems had no bearing on the soundness of its proprietary tech. Theranos invoked trade secrets to keep the report confidential.
Elizabeth spotted at a Hillary Clinton fundraiser, addressing guests with Chelsea Clinton at her side. Elizabeth was politically connected. What if she made her regulatory problems go away?
Carreyrou cajoled a CMS source to leak the report. The Edison only ran 12 of the 250 tests on its menu, and produced wildly erratic results. A new CMS letter to Theranos said Theranos had failed to correct 43/45 deficiencies.
On NBC, Elizabeth professed to be “devastated”, but apparently, not enough to apologize to the patients she had put in harm’s way.
Tyler disclosed the ambush to Carreyrou and how he had resisted Boies Schillers. His parents spent $400k+ on attorneys. Carreyrou regards Tyler as influential in getting the article out. George Shultz had continued to side with Elizabeth in spite of everything. He and Tyler communicated only through lawyers.
Elizabeth broke up with Sunny and fired him.
Theranos voided tens of thousands of blood test results in an effort to come back into compliance and avoid the CMS ban.
CMS banned Elizabeth and Theranos from the lab business in early July. Theranos was the subject of a criminal investigation by US Attorney’s Office in SF and in a civil probe by the SEC.
Elizabeth still believed she could turn public opinion around by demoing her tech. In effect, she was going back to portable blood-testing machines operated remotely. But she’d need FDA approval for that which would take years.
Request for emergency-use authorization of the finger stick was denied by the FDA because the company failed to include basic patient safeguards in its study.
The Partner Fund (invested ~$100m) sued Elizabeth, Sunny and Theranos for deceit with “series of lies, material misstatements and omissions”. Murdoch sold his stock back to Theranos for $1 so that he could claim a big tax writeoff.
Boies stopped legal work for Theranos after falling out with Holmes over how to handle the federal investigations.
Walgreens sued Theranos for failing to meet the “most basic quality standards and legal requirements” of the companies' contract.