The patient counts
Theranos is remembered for defrauding investors. For doctors the lesson is what happened to patients. Products that change care still reach them on their makers' word, before the evidence.
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read by an AI voiceOn Oct. 5 the Supreme Court turned away the appeal of Ramesh Balwani, who was president of Theranos. That leaves standing a federal appeals court opinion that reads in places like a case report. One woman testified that an HIV test she took through Theranos came back positive. Two later tests showed she was negative. Another testified that a Theranos blood test gave her incorrect results about her pregnancy.
A jury convicted Elizabeth Holmes of defrauding investors and acquitted her on the counts that concerned patients. Mr. Balwani, tried separately, was convicted on every count, patients included. For doctors, the patient counts matter most. What hurt those patients was an inaccurate test, and an honest company can sell one of those. Theranos sold its tests in pharmacies for two years before inspectors found that its laboratory endangered patients. A product that changes a patient's care should prove itself on patients before it is sold at scale, and the people who build it need a clinician with the power to stop it.
Ms. Holmes founded Theranos in 2003, after leaving college in her second year, according to the Securities and Exchange Commission. The company claimed it could run “fast, accurate, and affordable tests with just a drop of blood.” Of 300 small-sample tests it developed, the court wrote, only twelve were ever run on its Edison device. Inspectors from the Centers for Medicare and Medicaid Services arrived unannounced in late 2015 and concluded that the lab's practices posed “immediate jeopardy” to patient health. Theranos voided every patient result from the Edison. The appeals court said the trial judge reasonably treated this as an admission that the results “were, and always had been, unreliable.” When the agency imposed sanctions, Ms. Holmes said the company accepted “full responsibility for the issues at our laboratory in Newark, California” and had begun “comprehensive remedial actions.”
Dr. Adam Rosendorff, one of Theranos's laboratory directors, had trained in medicine and in laboratory medicine and had overseen testing at a children's hospital for five years. His job, the court wrote, was to make sure the tests leaving the lab were fit for patient care. He came to worry about “the systemic inaccuracy of the Theranos device.” He worried about proficiency testing that federal rules required and that management was unwilling to do properly, and about the pressure to account for bad results when patients and physicians complained. He had the duty but, in practice, not the power to stop the testing.
It is happening again, and it does not take a fraud. Cue Health's co-founders hold degrees in mathematics and in retail and consumer science, according to its 2023 proxy statement. The FDA authorized its COVID-19 test for use at home in 2021, the year the company reported $618 million in revenue. In May 2024 the agency told patients, caregivers and health care providers “not to use Cue Health’s COVID-19 Tests due to an increased risk of false results.” An inspection had found that the company changed the tests without the agency's authorization, and the agency said the changes reduced their reliability. The company said it was “evaluating the letter and determining its response.” Cue had begun a review of strategic alternatives, including a possible sale, by April. Two weeks after the warning, “after considering all strategic alternatives,” it filed for liquidation.
The Epic Sepsis Model, which scores a patient's sepsis risk every 15 minutes, was running in hundreds of American hospitals when Michigan researchers found, in a retrospective study of more than 38,000 hospital stays, that, at the alert threshold the hospital used, it missed two-thirds of patients with sepsis. It performed, they wrote, “substantially worse than the performance reported by its developer.” Epic said in an emailed statement, reported by Fierce Healthcare, that the study left out the tuning required before deployment and used a relatively low threshold, suited to “a rapid response team that wants to cast a wide net to assess more patients.” It has since rebuilt the model. When the FDA warned in 2022 that prenatal genetic screens, known as NIPS, can give false results, it had authorized none of them. It wrote that “pregnant people have ended pregnancies based only on the results of NIPS tests.” The screens were marketed as laboratory-developed tests, and a federal court has since struck down the FDA's rule to regulate those. The agency did not appeal.
Founders will call this unfair, and they have a case. The Theranos crimes were punished, with prison terms of more than 11 and nearly 13 years and $452 million in restitution. A sepsis score that misses cases and alerts too often is not a blood test sold by fraud, and a demand for trials before every launch could bury useful tools. But verdicts come after the harm. What protected patients at the time was an inspection, and it came late. The changed home tests, the sepsis model and the prenatal screens reached patients the ordinary way, on their makers' word.
Start with the buyer, usually a hospital full of doctors. Before a health system switches on software that changes care, it should do what the Michigan researchers did afterward: test it on its own patients' records and publish the results. Founders and their investors have the harder job. A company whose product touches patients needs evidence from patients before it sells at scale. It needs a clinician who can stop a launch and answers to the board, not the chief executive. Theranos had a laboratory director who saw the problem, and the testing went on.
The Supreme Court's order closed an appeal. It did nothing for the doctor deciding this week whether to trust a new score or a new screen. Courts count what founders took from investors. Somebody has to count what products do to patients, and count it before the product is everywhere. That job falls to doctors.
- What the appeals court recountedThe Ninth Circuit's opinion in the appeals of Elizabeth Holmes and Ramesh Balwani was filed Feb. 24, 2025 and amended Dec. 22, 2025, by Judges Mary M. Schroeder, Jacqueline H. Nguyen and Ryan D. Nelson, with Judge Nguyen writing. The Securities and Exchange Commission's 2018 complaint against Mr. Balwani says Holmes founded Theranos, a diagnostics company, in 2003 after leaving college during her second year. The opinion recounts that Theranos claimed it could run fast, accurate and affordable tests with just a drop of blood; that although Theranos developed 300 small-sample assays during Holmes's time at the company, only twelve were ever run on the Edison; and that other general chemistry tests were run on third-party-manufactured machines. Theranos publicly launched its testing services at Walgreens in the fall of 2013. CMS conducted an unannounced inspection in late 2015, and its report concluded that deficiencies in the lab's practices and procedures presented immediate jeopardy to patient health. Theranos voided all patient tests run on the Edison.
- The patients and the laboratory director at trialThe opinion records that one patient testified that an HIV test she took through Theranos came back positive, but two subsequent tests showed that she was negative, and that another testified that she received incorrect results from a Theranos blood test about her pregnancy. It describes Dr. Adam Rosendorff as one of Theranos's former laboratory directors, who completed medical school, a fellowship in basic science research, post-doctoral work at Harvard University and specialized training in laboratory medicine, and oversaw laboratory testing at a children's hospital for five years. He was responsible for ensuring that tests coming out of the lab were appropriate for patient care. During his tenure he developed concerns about the systemic inaccuracy of the Theranos device, specific tests offered to patients, management's unwillingness to perform proper proficiency testing as required by federal regulations, and the pressure he felt to explain problematic results when patients and physicians complained.
- Verdicts, sentences and restitutionOn Jan. 3, 2022 a jury convicted Ms. Holmes of four investor-related counts, the investor-related conspiracy (Count 1) and wire fraud relating to three investor-victims (Counts 6-8). It acquitted her on the patient-related counts, conspiracy (Count 2) and wire fraud (Counts 10-12), and could not reach a unanimous verdict on three investor counts. A separate jury convicted Mr. Balwani of all counts, including conspiracy to commit wire fraud against Theranos patients (Count 2) and patient wire fraud (Counts 9-12). Ms. Holmes was sentenced on Nov. 18, 2022 to 135 months (11 years, 3 months) and Mr. Balwani on Dec. 7, 2022 to 155 months (12 years, 11 months), each with three years of supervision. The court later held them jointly and severally liable for $452 million in restitution, including $397 million for the twelve victims identified at sentencing and $54.5 million for Safeway and Walgreens.
- Where the case standsMr. Balwani's petition for a writ of certiorari, No. 25-1330, seeking review of the Ninth Circuit's decision of Dec. 22, 2025, was docketed June 1, 2026. The United States waived its right to respond, and the Supreme Court denied the petition on Oct. 5, 2026; Justice Thomas took no part. News Channel 9 reported on Sept. 24, 2026, citing the Justice Department's Victim Notification System, that Ms. Holmes, held at Federal Prison Camp Bryan in Texas, is scheduled to move to the Austin Transitional Center in Del Valle, Texas, on Aug. 23, 2027, with projected release from federal custody on Feb. 22, 2030. In January 2026 ABC News reported a request filed in 2025 to commute her sentence, then pending, and gave a Bureau of Prisons release date of Dec. 30, 2031. The two release dates were reported eight months apart.
- The 2016 sanctions and the company's responseIn July 2016 CMS imposed sanctions on Theranos's laboratory in Newark, California, as Healthcare Innovation and NPR reported, among them revocation of the lab's certificate under the Clinical Laboratory Improvement Amendments, a ban on its owners and operators running any lab for at least two years, a civil money penalty, and cancellation of the lab's approval for Medicare and Medicaid payment. NPR reported a fine of $10,000 for every day the lab was out of compliance and a finding of immediate jeopardy to patient health and safety. Ms. Holmes said in a statement that the company accepted full responsibility for the issues at the Newark laboratory and had already worked to undertake comprehensive remedial actions, and that while it was disappointed by the decision it was committed to resolving all outstanding issues with CMS.Sources: Healthcare Innovation, NPR
- Cue Health: the founders, the warning and the wind-downCue Health's proxy statement of April 25, 2023 says its co-founders hold a B.S. in mathematics from the University of California, Los Angeles (Ayub Khattak) and a B.S. in retail and consumer science from the University of Arizona (Clint Sever). Its 2021 annual report gives revenue of $618.1 million and an authorization for over-the-counter and at-home use granted in March 2021. On April 8, 2024 the company said it was undertaking a review of strategic alternatives that may include a sale. In a warning letter dated May 9, 2024 and addressed to Mr. Sever as Chief Executive Officer, the FDA said the firm had implemented several changes to its authorized devices without FDA authorization, in the absence of notification or FDA concurrence; the FDA's safety communication says the letter was issued May 10. The FDA warned against the tests on May 13. Cue filed for Chapter 7 on May 28, 2024. On Oct. 9, 2024 the FDA revoked the two tests' emergency use authorizations, and on Oct. 15 it classified the company's voluntary recall of them as Class II.
- The outside test of the Epic Sepsis Model, and Epic's answerWong, Otles, Singh and colleagues at the University of Michigan reported a retrospective cohort study in JAMA Internal Medicine 2021;181(8):1065-1070: 27,697 adults with 38,455 hospitalizations at Michigan Medicine from Dec. 6, 2018 to Oct. 20, 2019, scored every 15 minutes. Sepsis occurred in 2,552 (7%). The area under the receiver operating characteristic curve was 0.63 (95% CI, 0.62-0.64). The model identified 183 of 2,552 patients with sepsis (7%) who did not receive timely antibiotics, did not identify 1,709 (67%), and generated alerts at a score of 6 or higher for 6,971 of 38,455 hospitalized patients (18%). PubMed lists NIH extramural support. In an emailed statement reported by Fierce Healthcare, Epic said the analysis did not take into account the required tuning before real-world deployment, that the threshold selected by the researchers and Michigan Medicine was relatively low, and that a higher threshold reduces false positives and would be more appropriate for clinical use by attending physicians and nurses. It also said the full mathematical formula and model inputs are available to administrators on their systems, and that accuracy measurements and information on model training are on Epic's UserWeb, which is available to its customers. Becker's reported in October 2022 that Epic had rebuilt the model.
- The prenatal screen warning and the court ruling on laboratory testsIn a safety communication dated April 19, 2022, the FDA said that while health care providers widely use non-invasive prenatal screening tests, none had been authorized, cleared or approved by the FDA, and their accuracy and performance had not been evaluated by it; that the tests on offer are marketed as laboratory developed tests, most of which are offered without FDA review; and that it was aware of reports of critical health care decisions made on screening results alone, including ended pregnancies. On March 31, 2025, Judge Sean D. Jordan of the US District Court for the Eastern District of Texas held, in American Clinical Laboratory Association v. FDA and a consolidated case, that the FDA's final rule on laboratory-developed tests exceeds its statutory authority, Congress having vested authority over clinical laboratory regulation in CMS. The American Hospital Association reported on June 3, 2025 that the 60-day window for an appeal had passed, and AABB reported that the FDA formally vacated the rule on Sept. 19, 2025.