Theranos and Ethical Perspectives

Background

In 2003, the company Theranos was founded in Palo Alto, CA. The company claimed to have invented a portable medical device that could run over 200 blood tests from a fingerstick. These tests were said to be “easy, quick and painless” and would provide savings to the patient and healthcare system. The only problem was that the device never worked as described. In fact, in the company's fifteen-year history, it received FDA clearance for only one test. (Carreyrou and Chatterley)

Criticisms

While Theranos received varied criticism, the overlapping critique was misstating the viability of their technology. The Edison, the medical device meant to analyze blood samples, never accurately accomplished its task. Much more goes into how the company hid and misled shareholders and stakeholders. Highlighted is a non-comprehensive list.

Shareholders - Investors, Potential Investors, and Business Partners

Claim One: The Edison can run any blood test, approximately 250, from a micro-sample of blood.

Claim's Scope: Stated during equity raising, investor calls, presentations, and various written and broadcast interviews. Used journal articles within the investor binder to reinforce claims validity.

Reality: Theranos' technology could only run 12 tests at its peak level of performance. Often test results were inaccurate. The micro-sample claim accounted for a minority of the blood tests run. Most blood tests were from a venous draw, and all were sent to a central lab using modified diagnostic equipment manufactured by Siemens rather than on their proprietary Edison device. (The Inventor: Out for Blood in Silicon Valley)

Claim Two: The Edison was used by the military, specifically within evacuation helicopters, and saved soldiers' lives in the field.

Claim's Scope: This claim was spoken and found on the cover page of the investor binder.

Reality: In a 2017 SEC deposition, Elizabeth Holmes testified that Theranos did not have any government contracts, nor had their technology been used by US armed forces. (“Tale of Theranos Devices Saving Soldiers Haunts Holmes at Trial”)

Claim Three: 10 of the largest 15 pharmaceutical companies vetted Theranos.

Claim's Scope: Specific misrepresentation included an endorsement document generated by Theranos, which included the Pfizer logo within the top left corner. The investor binder housed this document.

Reality: Pfizer did not recommend the use of Theranos' technology, stating their device "could not run the tests Pfizer needed, not FDA approved, and not ready for use." (The Inventor: Out for Blood in Silicon Valley)

Customers - Patients and Providers

Patient marketing not only sets false expectations about interactions with Theranos at Walgreens, but inaccurate results put patients' health at risk. Walgreens Wellness Center commercials shared that patients could have a catalog of blood tests conducted using "One drop of blood." The statement was made twice within the commercial. (Weiss) Many patients were surprised when they went to the center to take a venous draw instead of the micro-sample they were expecting. In one case, an inaccurate test result led a patient to believe she had a miscarriage. The patient did not have a miscarriage and yet had a history of miscarriages.

As Theranos discovered that more and more of their tests yielded erroneous results, they began misleading physicians. Instead of knowingly providing test incorrect results, the company trained customer service representatives to say that testing results "were not reported due to temporary unavailability." (Judge) These test results were available, just inaccurate.

Ethical Perspectives

When reviewing Theranos through the lenses of various ethical theories and principles, we must identify that we have one known reality and a reality that was never realized. The known reality is that the technology that they promised society did not exist. The reality that was never realized was their vision and that, maybe, in time, Theranos would have created the technology that they had promised. Because the company folded in 2018, we will never know if the vision could have been realized. This delineation of realities lends to the discussions around the presented ethical schools of thought.

Kantian

A Kantian belief system focuses on universalizability. Is a specific action consistent and acceptable to rational beings? Are all beings treated rationally regardless of the context or situation? Kantian ethics is acting in a universal manner without self-interest. (“Ethics”)

Reflecting on Theranos' behavior, a Kantian theorist would denounce the company. Their actions were unethical because they failed to treat patients universally. Expectations were set with all patients that only a fingerstick of blood would be taken to run tests. Most patients experienced a venous draw. Inconsistency exists between these two segments of patients.

In another example, test results were not accurate and occasionally came back as "not reported due to temporary unavailability." Through a comparison of actual patients to unrealized future patients, parity does not exist. Thernos' moved their business forward with the expectation that they would eventually figure out the technology. This is why we must consider the unrealized future patients. Sharing this, the notion of faking it until you make it denies universalizability to those early adopters of Theranos. Additionally, it is not rational to provide false results or lie about the availability of results, regardless of the situation. Theranos served their own self-interest with their actions.

A Kantian theorist would have never lied about their ability to run over 200 blood tests with only a fingerstick. The theorist would have made truthful statements throughout the development of their proprietary technology. This action would enhance the long-term viability of the company because Theranos would have had more time to figure out the technology. They had pigeonholed themselves in a situation where they moved too quickly into Walgreen's Wellness Centers, promising something they could not deliver. It was inevitable that their lies would have been discovered. Long-term viability could have been possible by avoiding the pigeonhole and focusing on the science more than the vision.

Utilitarian

There are diverging schools of thought within utilitarianism. However, most generally, a utilitarian ethicist aligns with those actions that benefit the majority. Individuals' rights may be violated to serve the greater good. (Santa Clara University) This is in direct ideological conflict with Kantian beliefs.

Reflecting on Theranos' behavior, I wish to consider our known and unrealized realities. Within the known reality, a utilitarian theorist would deem the company's actions unethical because no greater good was served through any of their deceit. Their technology put patients in harm's way, and they defrauded their investors. On the contrary, within the unrealized reality, a utilitarian theorist would have deemed Theranos' actions ethical because of the positive societal effects once the technology is realized. This medical advancement would have allowed patients access to an array of their own biological data points in a convenient, affordable, and consistent manner. Early detection of diseases could be achieved more often because of the visibility of the personal health information that Theranos would be providing. Lastly, anxiety associated with venous blood draws would no longer be a concern. Future society would benefit from the sacrifices of the early adopters, thus serving the greater good of mankind. But as with a common critique of the ethical theory, these actions do not account for justice to those harmed along the way.

A utilitarian living in the known reality would have never lied about the capabilities of their technology, whereas the utilitarian living in the unrealized reality would have remained on the chosen course. Within the known reality, the utilitarian theorist who did not choose the path of deceit could have enhanced the long-term viability of the company. Through the continuation of incremental technological progress and running a lean and lawful operation, the company would still be pursuing its vision today.

Stockholder

More commonly referred to as the shareholder theory, it was developed by economist and Nobel laureate Milton Friedman. His theory shares that "the social responsibility of business is to increase its profits." Maximizing shareholder returns are the duty of the business, and further, the wishes of the shareholders should be carried out by the business leaders "while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom." (Friedman) This second criterion is an often-forgotten component of stockholder theory.

Reflecting on Theranos' behavior, I wish to consider our known and unrealized realities. Within the known reality, a stockholder theorist would have deemed the company's actions unethical because the business lost its capital investments. Profits were not maximized as the business collapsed before it could receive any investment return. Within the unrealized reality, the stockholder theorist may have initially deemed Theranos' actions ethical because when the company realizes its vision and creates the technology it promised, the stockholder would make financial gains. However, the second criteria of stockholder theory are not met as Theranos' actions weren't lawful, per a guilty verdict issued to Founder and CEO Elizabeth Holmes on January 3rd, 2022, and the company was not ethical towards their early adopter patients. In both realities, a stockholder theorist would have deemed Theranos' actions unethical.

A stockholder theorist would have never lied to shareholders about the capabilities of the proprietary technology. These lies cost investors their capital and were both unlawful and unethical. The theorist would have made truthful statements throughout the development of their technology to avoid making unlawful or unethical actions. Further, making truthful statements when pitching potential investors deters those investors who want to receive a return on investment in the short-run and would attract those investors that are aligned with the long-term vision. Being truthful to investors would enhance the long-term viability of the company because you would only be attracting long-term investors willing to wait for the technology. The need to rush to market with a device that doesn't work would have never occurred, meaning that Theranos could still be in operation today.

Stakeholder

Stakeholder theory accounts for the entire footprint a company leaves behind. These are the interconnected relationship between the shareholders, staff, customers, suppliers, and communities. The stakeholders' needs should be considered prior to any action. (Stakeholder Theory)

Theranos' actions were unethical to a stakeholder theorist because they did not consider several stakeholders prior to taking destructive actions. Staff, specifically those who worked within the lab, were both ignored and harassed if they spoke negatively about the limited capabilities of their technology. Some employees were even threatened with defamation lawsuits if they spoke about Theranos outside of work. Customers, both patients and providers, were disregarded, as previously discussed. Shareholders lost their capital in the known reality, though their interests were considered in the unrealized reality. Even so, because all stakeholders' needs were not met, Theranos would be denounced.

A stakeholder theorist would have never deceived any stakeholder about the capabilities of their technology. This would have ensured the safety of patients and shareholder investments. They would have corrected their toxic organizational culture and ensured that employees' needs were met and concerns were heard. These activities would enhance the long-term viability of the company because the action would have been taken to correct the technology, and Tyler Schultz and Erika Cheung would not have a reason to whistle blow.

Daniels Fund Ethics Initiative Principles

Integrity, Trust, Accountability, Transparency, Fairness, Respect, Rule of Law, and Viability are the principles of the Daniels Fund Ethics Initiative.

Theranos does not meet any of the criteria for the eight principles. They did not act with honesty in every situation or build trust with each stakeholder group. When lab employees shared the shortcomings of the technology, Theranos did not take accountability and resolve concerns. Open and truthful communication was infrequent from the top-down. Relationships were not respectful, equitable, or fair when considering employees who tried to resolve the company's technical issues. Laws were broken, and regulations were ignored, which resulted in a company that was no longer viable (“Daniels Fund Ethics Initiative Overview”). Simply put, the Daniels Fund Ethics Initiative would have done everything differently to enhance the long-term viability of the company. All actions previously stated throughout the body of my ethical perspective analyses would need to be taken. What I had not previously discussed was leadership's relationship to accountability.

Conclusion

Theranos was serving its vision without the science to back it up. Elizabeth Holmes idolized visionaries such as Steve Jobs and Thomas Edison and saw them as the blueprint to success in business and making a positive change in the world. The Mark Zuckerberg mentality of "move fast and break things" might work with pure technology companies, but it does not work within healthcare technology. You cannot misdiagnose and harm patients in the spirit of failing so many times that you will inevitably succeed. It is this key nuance paired with the business strategy selected that unraveled Theranos. At some point, it became clear to Theranos' leadership that what they were claiming was inaccurate and hurtful. But in the spirit of being a visionary that breaks things, the opportunity to take accountability and do the right thing was never realized.

Works Cited

Carreyrou, John, and Julia Chatterley. “The Rise and Fall of the BioTech Startup.” CNN Newsource, 2018. Accessed 5 Apr. 2022.

“Daniels Fund Ethics Initiative Overview.” www.danielsfund.org, www.danielsfund.org/ethics/overview.

“Ethics.” Tamu.edu, 2019, www.people.tamu.edu/~sdaniel/Notes/ethics3a.html.

Friedman, Milton. “The Social Responsibility of Business Is to Increase Its Profits.” The New Yorks Times Magazine, 13 Sept. 1970.

Judge, EDWARD J. DAVILA, District. “UNITED STATES v. HOLMES | Case No. 5:18-Cr-00258... | 20210601713| Leagle.com.” Leagle,

www.leagle.com/decision/infdco20210601713. Accessed 9 Apr. 2022.

Santa Clara University. “Calculating Consequences: The Utilitarian Approach to Ethics.” Markkula Center for Applied Ethics, 1 Aug. 2014, www.scu.edu/ethics/ethics-resources/ethical-decision-making/calculating-consequences-the-utilitarian-approach/.

Stakeholder Theory. stakeholdertheory.org.

“Tale of Theranos Devices Saving Soldiers Haunts Holmes at Trial.” Bloomberg.com, www.bloomberg.com/news/articles/2021-10-19/tale-of-theranos-devices-saving-soldiers-haunts-holmes-at-trial.

The Inventor: Out for Blood in Silicon Valley. Directed by Alex Gibney, HBO, 2019.

Weiss, Sabrina Rojas. “Watching Theranos Ads Now Is a Very Strange Experience.” www.refinery29.com, www.refinery29.com/en-us/2019/03/226939/theranos-commercials-ads-marketing-elizabeth-holmes. Accessed 9 Apr. 2022.

Submitted 4/8/22