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The Wild West of Biotech Innovation

By Ainsley Newson & Wendy Lipworth

The failure of a US$9 billion health technology start-up provides a stark example of how venture capitalists can let market potential overrule evidence of efficacy.

Recently, we avidly listened to a podcast from ABC Radio America called The Dropout. This five-part series followed the rise and fall of Theranos, a Silicon Valley health start-up that folded in 2018.

Theranos (a combination of “therapy” and “diagnosis”) was founded in 2003 by Stanford University drop-out Elizabeth Holmes. She had been inspired by the possibility that micro­fluidics technology could lead to “near-patient” blood testing conducted in pharmacies, supermarkets or even a patient’s home.

This would not only be convenient, but would also herald the end of traumatic blood tests. A fingerprick sample would be all that was needed to run hundreds of tests. Patients would benefit from early detection and prevention. Holmes and the company she built aimed to do this via a proprietary device called the Edison.

Having secured significant investment over many funding rounds, the company was at one point valued at US$9 billion. It had a stellar Board, but no members had a medical background.

Theranos generated significant media attention, but a series of whistle-blowers and the work of the Wall Street Journal’s John Carreyrou revealed a darker side of Theranos and its technology.

Ultimately, it seems that Theranos’ technology could not live up to the hype. The Edison device and its successor appeared to generate erroneous results. Machines sold by other providers were also being used, having been modified to suit the company’s needs – but also seemingly at the cost of accuracy.

In the end, the company folded. Investors lost large sums of money, and Holmes will soon defend criminal charges. But perhaps most significantly, thousands of blood test results given to patients had to be voided, many of which had no doubt already been acted upon by trusting doctors and patients.

This raises a crucial question: is there a fundamental problem with start-ups whose products happen to be health technologies?

Such start-ups are not hard to find. From smartphone apps to help us manage our medicines, to companies selling whole genome sequencing for newborn babies, health tech entities are mushrooming in Silicon Valley and beyond.

Some may say that these are just part of the broader commercialisation of health care. While not universally welcomed, healthcare has always existed in a marketplace, and there is significant blurring between private and public sectors.

But there’s a big difference between, for example, a pharmaceutical company that is highly regulated and arguably risk-averse, and a tech start-up that values high stakes bets above all else.

In the latter context it makes sense to “fake it ‘til you make it” but, as we have seen, such a mentality can lead to the premature dissemination of technologies that end up posing a risk to the health of the population.

Are health start-ups the “wild west” of health technology innovation, and can bioethics help to create some order?

Bioethicists have had a lot to say about the commercialisation of health care, but the bioethics of health start-ups is a nascent area of inquiry. We think there are a few useful concepts that a bioethics analysis can offer.

First, there’s “hype” – the tendency to exaggerate or overplay the value of something. Many of the products being generated by tech start-ups play into the hype surrounding notions of individualised care and calls for patient empowerment. Start-up marketing appeals to a notion of personal control of health, but consumers may not know who and what to trust and how to choose a quality health intervention.

Another useful concept is “precaution”. Companies like Theranos flourished because of private venture capital investment, not public funding following rigorous peer review. There was no-one doing checks. Academics such as Prof John Ioannidis of Stanford University were early critics of how such start-ups push out new health technologies with little peer-reviewed evidence behind them.

And then there is the idea of health needs. Despite Theranos’ appeals to disease prevention, did the world really need more blood tests? We increasingly know that early detection does not necessarily equal a better health outcome – it might just mean more treatment and more expenditure. More testing doesn’t necessarily make us healthier.

In 2015, Prof Steven Pinker of Harvard University ruffled feathers in the bioethics world with his comment that bioethicists should “get out of the way” when it comes to advances in biomedical science. As examples like Theranos show us, sometimes “in the way” is exactly where bioethics should be.


Ainsley Newson and Wendy Lipworth are from Sydney Health Ethics, The University of Sydney.