Did Theranos' blood-testing technology work? That was the key question prosecutors hammered away at as the fraud trial of former CEO Elizabeth Holmes continued Wednesday in a San Jose courtroom.
The company's proprietary Edison machines routinely failed quality control tests to the point that former lab employee Erika Cheung said she sometimes refused to run patient samples on the devices, she testified in court.
Patients "don't know the fact that behind closed doors we're having all these problems, and they think they're getting correct results," Cheung said. "It was starting to get very, very uncomfortable and very stressful for me working at the company."
Holmes now faces charges of fraud and conspiracy to commit fraud against investors and patients who paid directly for their tests. Cheung's testimony for the prosecution laid out the case that Theranos devices failed often and were not accurate compared to traditional blood-testing machines, which could prove crucial to the prosecution's claims that Holmes touted technology she knew didn't work — if they can prove she was aware of the problems.
Cheung eventually left Theranos and is now known as one of the whistleblowers who first sounded the alarm about the company. She is the second witness in the blockbuster case, following testimony from the company's former controller about the company's financials.
In March 2014, 25.6% of quality control runs on Edison devices failed, according to a spreadsheet shown in court. For one of the thyroid tests, the failure rate in quality control runs was 51.3%, according to the data.
"Was March an especially bad month for [quality control] at Theranos?" asked Assistant U.S. Attorney John Bostic.
"No, this was pretty standard," Cheung testified.
Erika Cheung, a Theranos employee turned whistleblower, speaks at a film-industry event in 2019.Photo: Jeff Kravitz/FilmMagic for HBO/Getty Images
She called the level of failures "immensely concerning," since labs would want to see less than 1% failing. While Theranos did remove machines that were failing control tests from the lab until they were fixed, Cheung said that the level of problems that she found running the tests in the research lab made her concerned about the results patients would ultimately get.
"You would have about the same luck flipping a coin on whether your results were right or wrong," she said, describing her concerns about the thyroid test.
She also testified that the company had a habit of "cherry-picking data" and deleting outlier information. There was no standard for what outlier data was so the company would often delete two out of six in tests, typically when something was wrong, she said.
"There were no rules. There were no protocols," she said. (The defense did show later some of the company's validation reports that did disclose when outliers had been deleted or that contained all data.)
The company also prepared proficiency tests that compared the Edisons' performance to off-the-shelf testing devices. In the test, vitamin D levels measured by the Theranos Edison were three times higher than what the standard devices measured, Cheung said. On a different test, the company re-ran the numbers a second time, she testified. On the off-the-shelf devices, the values stayed the same each time it was run, but on the Theranos devices, it reported new values for the same blood, according to Cheung.
Cheung said she had tried communicating the challenges to many people at the company, including Sunny Balwani, whom she met with directly. Balwani, who is also facing fraud charges related to his time as chief operating officer at Theranos, is set for a separate trial in January. Cheung said Balwani seemed irritated by her discussing it and told her she should just run the tests.
She also had dinner with George Shultz, a Theranos board member and grandfather to Tyler Shultz, one of Cheung's co-workers. Cheung had shared data with Tyler Shultz that supported some of her concerns about the lab quality. Tyler Shultz ended up emailing Holmes with a detailed letter of his concerns about the company, but Cheung said she never contacted Holmes directly herself.
Holmes' defense has tried to distance the CEO from challenges in the lab and show they were the responsibility of a lot of people other than Holmes. In their cross-examination of Cheung, they asked her to explain who reported to whom at Theranos. A frequent question was whether a given Theranos employee had a Ph.D. (a degree neither Holmes nor Cheung have).
Cheung ultimately left Theranos in 2014. She had begun talking to a Wall Street Journal reporter the following year when she noticed a black SUV outside of her new employer. When she left work, a man jumped out of the SUV and hand-delivered a letter from David Boies, Theranos' attorney, warning her against sharing trade secrets and defamation or else it would pursue litigation. Undaunted, Cheung said she called the Centers for Medicare and Medicaid Services, which regulates laboratory testing, and ended up filing a letter with the agency outlining her concerns.
Beyond discussing the letter from Boies, Cheung wasn't asked much about her experience as a whistleblower. The judge blocked the prosecution from allowing Cheung to talk about her current job of running a nonprofit called Ethics in Entrepreneurship.
Her testimony will continue on Friday.
See Protocol's in-depth coverage of the Theranos trial for more.
