TTA Fall Follies Week 3: redux strikes again with Doro, Teladoc suing Amwell, Theranos’ non-stick wall; also Tunstall and Buddi

 

 

Mostly a ‘redux’ of a week, with Doro acquiring another company, Teladoc suing Amwell, and Theranos’ judge telling the defense that nothing they threw at the wall stuck. Tunstall reminds us that the most vulnerable are at risk during the winter–you should too. And if you are seeking a sales manager position, see our UK highlights article–Buddi is hiring.

UK highlights: Doro acquires Connexus Careline, Tunstall warns on winter isolation and disconnected care, Buddi seeks Sales Account Manager  (Doro increases its second position, and happy to see more hiring!)
Teladoc sues Amwell on patent infringement–again (This time, much larger companies go head to head, creating bountiful Christmas bonuses for their lawyers)
The Theranos Story, ch. 67: the Holmes/Balwani indictments stay, Holmes’ defense strategy fails (Waiting for the Twinkie Defense II, or the money running out)

Leaves have started to turn and fall, but digital health just keeps rising with $9.4 bn in investment this year. Tunstall UK and Group Holdings report their financial status and preview their new ownership. And la scandale Theranos continues with a revelation of defense strategy.

Digital health investment smashes the ceiling: $9.4 bn invested through 3rd Q (It’s Bubble City!)
The Theranos Story, ch. 66: Walgreens and Safeway aren’t investors, they’re business partners! (Holmes’ defense strategy–erode her most serious charges)
Tunstall Healthcare (UK) and Group Holdings’ 2019 year end reports filed: highlights (The state of the company and a preview of new ownership) 

We open October with the US DOJ’s blockbuster indictments of multiple ‘telemedicine’ companies reaping billions in fraudulent payments. Sweden’s Doro continues its acquisition tear with Victrix, adding data analytics and proactive intervention capability to monitoring. Clinical trials are another coronavirus casualty–but RPM and telehealth may be able to help.

DOJ ‘takedown’ charges 86 defendants with $4.5 bn in fraudulent telemedicine claims in largest ever action (‘Telemedicine’ enters the big leagues of Medicare fraud for DME, tests, and drugs)
COVID-19’s negative impact on clinical trials–can remote patient monitoring and telehealth companies help? (Arkivum’s extensive study has implications)
Doro adds Spain’s Victrix SocSan to its growing brand portfolio for £1.28 million plus shares (A small but big move in Doro’s data analytics capabilities)

It’s summer’s last weekend, and we leave a Summer Like No Other bracketed by Amwell’s blockbuster IPO and Thank and Praise’s book on the early pandemic. Plenty of telehealth related reading with two reports from the Taskforce on Telehealth Policy and the UK TECS study. Walmart’s place in the Clinic Wars and a sensor-based fall detection system from Israel debuts. And the latest chapter in la scandale Theranos is la Holmes’ mental status.

News roundup: Amwell’s socko IPO raises $742M, Walmart and the Clinic Wars, Taskforce on Telehealth Policy report released, Israel’s Essence releases fall detection sensor system
Public Policy Projects, Tunstall UK release joint TECS study finding growth during pandemic, recommendations
The Theranos Story, ch. 65: Elizabeth Holmes’ “mental disease or defect” defense revealed (Stock up on popcorn and Twinkies)
The book of ‘Thank and Praise’ with a selection of their 1,000 messages (UK) (Thanking those who helped others)

Getting close to the unofficial end of summer in a year like no other (unless you count 1919?). We catch up with news and ISfTeH, Amwell finally IPOs with a Google kicker, Theranos’ denouement moves to 2021, and payer Humana sues a scam masquerading as a telehealth company. And we profile a movie project which will engage people on dementia.

Connected Health Summit 1-3 September (virtual): last days to register–50% off for TTA Readers! (see above)
Is the NHS ready to adopt telemedicine through and through–and is telemedicine ready? (COVID revealed the need, now for getting to the goal)
News roundup: CVS cashing out notes, catching up with ISfTeH, India’s Stasis Labs RPM enters US, Propeller inhaler with Novartis Japan, Cerner gets going with VA
QuivvyTech: a ‘telehealth’ company, sued by Humana in telemarketing scheme (US)
(An apparent scam with telehealth ‘lipstick’)
The Theranos Story, ch. 64: Holmes’ trial moved to March 2021 (Lady Justice is crying with boredom under that blindfold)
Amwell plans $100 million IPO, plus $100 million from Google as a kickoff (As predicted, but surprisingly modest in scope)
‘Before the Ashes Fall’: the story behind the book and the movie in development about dementia (Funding needed)

More signs of normality as we turn to topics other than COVID. We return to issues like data privacy and a Genomic Bill of Rights. ‘What’s hot in digital health’ lists reappear. And there’s another bumper crop of funding and acquisitions. Plus a fresh look at VR in medical education stimulated by the pandemic reaction.

Will the rise of technology mean the fall of privacy–and what can be done? UK seeks a new National Data Guardian. (Guarding the chicken coop with an open gate?)
CB Insights rounds up a 2020 Digital Health Top 150 (Not that different from 2019)
News Roundup of acquisitions, funding: Health Catalyst-Vitalware, Change Healthcare-Nucleus.io, Medtronic-Companion Medical, Cecelia Health; Proteus Health sale contested, but sold (updated 20 Aug) (More signs that we’re returning to a frothy ‘normal’)

Medical education going digital, virtual, and virtual reality (US/UK) (How med ed is adapting)

Is something vaguely resembling normality returning? We note and opine on multiple sales, acquisitions, and IPOs. The Propel@YH accelerator in Yorkshire returns for year 2. Walmart Health’s leader departs mysteriously. And another gimlety take on the Teladoc-Livongo deal from the ‘flight deck’.

News roundup: Ancestry sells 75% to Blackstone, Cornwall NHS partners with Tunstall, most dangerous health IT trends, Slovenski departs from Walmart Health (Activity a leading indicator of a return to normality)
Propel@YH digital health accelerator open now for applications to 24 September (UK) (Return to normality #2–important for your early stage company)
Doro AB acquires Eldercare (UK) Limited, creating #2 in telecare  (Piece by piece strategy)
Drug discounter GoodRx plans US IPO; Ginger mental health coaching raises $50 million (It’s getting foamier out there in the Digital Health Bubble Bath) 
Reflections in a Gimlet Eye: further skeptical thoughts on the Teladoc acquisition of Livongo (updated) (A message to Teladoc: just like on the flight deck, Human Factors will make–or doom–your success)

Have a job to fill? Seeking a position? Free listings available to match our Readers with the right opportunities. Email Editor Donna.


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Telehealth & Telecare Aware: covering the news on latest developments in telecare, telehealth, telemedicine and health tech, worldwide–thoughtfully and from the view of fellow professionals

Thanks for asking for update emails. Please tell your colleagues about this news service and, if you have relevant information to share with the rest of the world, please let me know.

Donna Cusano, Editor In Chief
donna.cusano@telecareaware.com

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The Theranos Story, ch. 67: the Holmes/Balwani indictments stay, Holmes’ defense strategy fails

What Elizabeth Holmes needs is Perry Mason and a good scriptwriter from the 1960s. On Tuesday, Judge Edward Davila hit the ‘REJECT’ button on Holmes and ‘Sunny’ Balwani’s six motions since August to have the July indictments by a grand jury–a second indictment of 14 July, then a third and operative charging document of 28 July, dismissed. In a single compact, well-reasoned order, all six motions were denied for both cases:

  1. Pre-indictment delay. The first indictment was made in June 2018. The findings were that the delays were due to defense motions which were agreed to by the government and the judge, then the pandemic which suspended all in-person court proceedings and then became remote. The separate trial dates were moved to October 2020 and then at defense requests due to preparation and witness travel, moved to March 2021. 
  2. Statute of limitations on the fraud counts from investors. Even the definition of investor was narrowly defined here as securities purchasers. However, the broader interpretation, for example business partners such as Safeway [TTA 8 Oct] and board members, are also included as investors. 
  3. The indictments did not provide fair notice of the charges. Fair notice was found. Again, investors include business partners and even their board members who had promissory or convertible notes.
  4. Duplicity of the multiple counts was not found.
  5. Failure to omit doctors as victims of the Theranos scheme; doctors were omitted after the first indictment. The judge did find some lapses in prosecution language.
  6. All the dismissal requests for the first indictment applied to the later two.

It seems as if the defense, particularly Holmes’, threw a lot at the wall to lessen charges against their clients, and none of it stuck. One wonders how Holmes (who did marry a wealthy man) but particularly Balwani, are affording all this legal churn.

Unless there are publicly released findings on Holmes’ mental defect defense, alleging her inability to discern right from wrong (a/k/a insanity defense lite, Twinkie Defense II, High Anxiety) [TTA 18 Sept], hold off on popcorn purchases till next spring. San Jose Mercury News (which incorrectly reverses the analogy, sorry), Wall Street Journal, and the Register (UK), which helpfully provides a PDF of the court order.

The Theranos Story, ch. 66: Walgreens and Safeway aren’t investors, they’re business partners!

The difference is not hair-splitting in the defense effort to have charges tossed. In Federal District Court on Tuesday (6 October) in San Jose, Elizabeth Holmes’ defense made the case to Judge Edward Davila on dismissing some of the prosecution’s charges against her. As petitioned in late August, the defense maintains that two of the entities, Walgreens Boots and Safeway (a Western regional supermarket chain), were unfairly classified as investors versus ‘business partners’. As investors, the prosecution could charge Holmes with fraud crimes with a longer statute of limitations. If they were to be classified as business partners and ‘transactions’, while there were crimes committed, the statute of limitations has expired.

The prosecution’s rebuttal is that Walgreens and Safeway could be considered as both investors and partners. The defense response was that the government took too much time to file the charges and failed to get the proper consent, which may be the hair that splits the ability of the prosecution to use these charges.

Let’s look back at both companies’ involvement with Theranos

  • Walgreens reportedly invested over $140 million in Theranos. This consisted of direct funding (a $40 million loan convertible into equity), and an “innovation fund’ designed to fund the rollout of Theranos Wellness Centers in Walgreens US locations starting in 2013. Walgreens filed suit against Theranos in November 2016 to recoup that investment based on breach of contract, after civil lawsuits were filed against them jointly, halted development, and settled for $25 to 30 million in late July 2017 when Theranos assets were dwindling to barely breathing status [TTA 3 Aug 17]. More details on their Partnership from Hell are recapped here from the 2016 lawsuit.
  • Safeway’s involvement as the exclusive supermarket partner was planned to be even more extensive. Their 2012 deal was $350 million for building 800 clinic locations in Safeway stores. This was dropped in November 2015 [TTA 20 Nov 15], around the same time as Walgreens halted the expansion of the Theranos Centers. According to reports at the time, Safeway had already built out the 800 locations, later repurposing them for flu shots and similar. Direct investment was estimated at $10 million (WSJ). Safeway settled with Theranos for $30 million in June 2017. 

The publicly available history shows that both funded Theranos directly in addition to being business partners. Both took substantial additional risk investments from building out facilities to showcase Theranos’ services for their customers. Both settled civilly for amounts far below the fair recoupment of their investment.

While this sounds like legal nitpicking, the defense strategy, in this Editor’s layperson’s calculation, is to erode the number of charges against Holmes and their seriousness so that her inevitable sentence becomes lighter. Another move in this vein is the mental defect defense [TTA 18 Sept] alleging Holmes’ psychic inability to discern right from wrong in her business dealings. Start with something over the top like ‘insanity defense lite’, and then chip away at the rest of the charges. Fox Business, Mercury News

The Theranos Story, ch. 65: Elizabeth Holmes’ “mental disease or defect” defense revealed

Going the ‘Twinkie Defense’ one better? While this Editor was enjoying a much-needed break from the Insanity of the World, hurtling across the wires was the revelation that Elizabeth Holmes’ pricey defense attorneys have prepared a defense for her that includes evidence “relating to a mental disease or defect or any other mental condition of the defendant bearing on the issue of guilt.” Interpreted, her mental state may have affected her intent and judgment in her business dealings. 

According to the filing, the defense is introducing testimony from Mindy Mechanic, Ph.D., a clinical psychologist and professor at California State University at Fullerton. According to her bio, her “work focuses on the psychosocial consequences of violence, trauma, and victimization with an emphasis on violence against women and other forms of interpersonal violence. Her work has addressed the mental health consequences of violence, such as Post-Traumatic Stress Disorder and depression as well as other important physical and social health outcomes.” 

The defense attempted to introduce this evidence without further examination by the Federal prosecution. Unfortunately, US District Judge Edward Davila did not agree. Ms. Holmes will be examined by two experts for the prosecution: Daniel Martell, Ph.D., a forensic neuropsychologist for the forensic litigation consulting firm Park Dietz & Associates, and University of California San Francisco psychiatrist Renee Binder, MD. Over the objections of the defense, the examination will be videotaped. The trial will commence with jury selection on 9 March 2021 [TTA 27 Aug].

Most of our Readers who care about this will be wondering, after they’ve picked themselves off the floor laughing at the above notion, that any person with a mental defect of this type could have fooled the savviest Sand Road VCs, Stanford/Hoover Institution luminaries, an admiral, a Marine general later Secretary of Defense, and Rupert Murdoch for years, to the tune of nearly $1 bn. That they should be gulled and fooled is disturbing enough. What is equally disturbing is the desperation of the defense to attempt an ‘insanity defense lite’ that sources and justifies Ms. Holmes’ inability to discern right from wrong.

This then proceeds to exactly what was the ‘interpersonal violence’ or post-traumatic stress that caused her judgment to warp quite this way. Was it her upbringing, which apparently was a bit upper-middle-class flaky–the ‘it’s not High Anxiety, it’s parents!’ reason? Was it a head trauma (the Howard Hughes defense), drugs, or surgery gone wrong? Did Sunny get Blue (in more than one way) on her? Stock up on the popcorn–la scandale Theranos has just gotten even more interesting. CBS Bay Area, Bloomberg News, Forbes, MedCityNews

A historical footnote. The term ‘Twinkie Defense’ came into usage in 1978 during the defense of the murderer of San Francisco mayor George Moscone and the better-known supervisor Harvey Milk. While not used per se by the defense team, the testimony of a psychiatrist for the defense that the murderer excessively consumed junk food, including Twinkies, as an indicator of depression and a sign of diminished capacity was hyped by the press as the ‘Twinkie Defense’. The term has passed into the vernacular. Ironically, both trials are occurring in the Bay Area.  Hat tip to The Crime Report.

The Theranos Story, ch. 64: Holmes’ trial moved to March 2021

What a difference two years makes. Once the subject of breathless headlines and breaking news, the latest news on the trials of Elizabeth Holmes and Ramesh ‘Sunny’ Balwani in la scandale Theranos earned hardly any notice in the healthcare press. Only this Editor’s search for an update found information that the Federal court trials, due to the pandemic and corresponding difficulty with trial preparation and jury selection, have been moved to 2021. Pretrial hearings for both have been moved to October and December.

So not to further punish our Readers who are dreaming of mountain lakes and ocean beaches, your Editor, a/k/a Glutton for Punishment, has summarized the Court’s next steps. 

  • The Holmes and Balwani trials have been severed–legalspeak for separated
  • Holmes will go first starting on 9 March 2021 with jury selection in the Federal Court, San Jose, Judge Edward J. Davila presiding. Balwani’s trial will not start until Holmes’ trial is concluded.
  • The next court hearings for Holmes will be 6 October (pretrial motion), 2 December (status), and 16 February 2021 (status)
  • Balwani will have a status hearing on 8 December

In early August, the Department of Justice (DOJ) prosecutor added a 12th fraud charge to Holmes’ list, relating to a patient’s blood test. A grand jury was empaneled in June during the midpoint of the pandemic, leading to Holmes’ legal team attempting to obtain 21 broad categories of documents on the jury selection. Their intent is to overturn the indictment as improper.

No need to stock up on popcorn till a month before Easter 2021, but it will be munch-worthy as rumored witnesses will be ‘faces’ such as General James Mattis (ret.), former board member and customer; Henry Kissinger; and Rupert Murdoch. This Editor’s bet is that these aged titans will not appear, with the exception of the youngest, General Mattis. More likely to be called to appear, in this Editor’s view, are executives from Walgreens who did the deal with Theranos, the last-ditch investors at Fortress Investment Group, major investors such as Partner Fund Management, and early unrepentant backer Tim Draper of Silicon Valley VC Draper Fisher Jurvetson.

The Federal charges are summarized in TTA 13 May]The full sturm und drang by chapter are here.

CNBC, US Department of Justice, Northern District of California published notice  The 14 June indictment (15 pages)

The Theranos Story, ch. 63: 12 new wire fraud, conspiracy, forfeiture charges for Holmes, Balwani

The Fraud That Is Theranos manages to stay in the news, despite a global pandemic, with more fraud charges. Only a few weeks ago, things were looking up for former executives Elizabeth Holmes (left, in the Female Steve Jobs days) and ‘Sunny’ Balwani. The defense insisted that they couldn’t prepare a proper defense without breaking shelter-in-place executive orders, which built their case for delaying the original August trial date. Prosecutors are requesting 27 October; the defense 2021. In February, the nine counts of wire fraud and two counts of conspiracy were reduced by the judge, who dismissed the two conspiracy charges related to defrauding patients who did not pay directly (e.g. insurance payment) and directing doctors to misrepresent Theranos to patients. 

Now Federal prosecutors have filed 12 fresh counts of wire fraud and conspiracy against Holmes and Balwani, plus forfeiture, in the Federal US District Court, Northern District of California, in San Jose. The superseding information (link to PDF) filed on 8 May details the very public splash and claims on their capabilities made by Holmes to the media, on their website, in their Walgreens partnership, and in advertising, from 2013 to 2015. Revealed today (12 May), the expansion of charges include 12 counts of:

  • Wire fraud against Theranos investors, including conspiracy to defraud investors through false representations of their revenue, financial models, and technology, going back to 2010
  • Wire fraud against Theranos patients, through representing to doctors that the tests were accurate while knowing they were not
  • Six additional charges of wire fraud through using electronic media and electronic transfers of funds
  • Four additional charges of wire fraud in transmitting through phone and internet laboratory and blood test results, plus payments for the purchase of nearly $1.3 million in ads targeting patients and doctors for the Wellness Centers

Wrapping this up is a demand for forfeiture of proceeds (which were at least $700 million).

These felony charges carry a potential sentence of 20 years imprisonment, a $250,000 fine, three years supervised release, plus a $100 special assessment (ahem), in addition to whatever proceeds can be clawed back in what is now a worthless company.

The actual indictment needs a grand jury to be convened, which cannot happen until 1 June or later.

Additional information on The Register, BioSpace, and Fox Business.

Theranos’ fraudulent blood testing is even more relevant in this Age of COVID with reports of the proliferation and uneven performance of virus and antibody tests. Tyler Shultz, who worked at Theranos and was related to investor/advisor George Shultz, warned on 2 May that Theranos would have thrived in this hothouse. The UK alone ordered millions of kits from China, only to send them back due to poor sensitivity (ability to avoid false negatives) and specificity (ability to avoid false positives). Rapid testing kits have come under particular fire. The US opened the gates to non-FDA cleared tests in March, only to close them shut a few days ago. Only Belgium, with the highest rate of fatalities per 1,000 infections, has banned the rapid tests. Other tests are more accurate but they take more time to return results and cannot be administered at home. Many believe that they already had COVID and anxious to see if they have the antibodies (IgG) floating about in their plasma. Bloomberg

The Theranos Story, ch. 62: Holmes’ attorneys request breaking ‘shelter in place’ orders for trial prep, charges shrink–and a coronavirus testing patent twist

Even the ‘Bad Blood’ trial has a Coronavirus Twist. The trial of Theranos former CEO Elizabeth Holmes surfaced last week in the midst of the Public Health Emergency in the US District Court in San Jose, where Holmes is scheduled to go on trial in August. Williams & Connolly lead attorney Lance A. Wade filed a motion with Federal Judge Edward Davila to permit Holmes’ attorneys to travel, serve subpoenas and meet with potential witnesses, which would include health care professionals and testing laboratories, all in preparation for the trial. Judge Davila basically swatted it aside, stating “I have to tell you sir, I read [the document] and I was a little concerned,” the judge said. “You’re basically filing a motion in essence asking the court to violate orders in the midst of a national crisis.” Wade stated that it would be nearly impossible to prepare Holmes’ defense without violating shelter-in-place orders and public health warnings. While both the judge and the lead counsel agreed that much could be done remotely to prepare for trial, Wade maintained that it would be ‘almost impossible’ to complete it. 

The trial date may change at the next hearing on 15 April, since the judge has requested both the prosecution and defense to propose alternative trial schedules. Jury selection is scheduled to start in late July. 

A prosecutorial deteriorata? In February, the nine counts of wire fraud and two counts of conspiracy were reduced by the judge, who dismissed the two conspiracy charges related to defrauding patients and directing doctors to misrepresent Theranos to patients. He also severed Holmes’ trial from former president and live-in Sunny Balwani’s. One wonders that, between the reduction of charges and the delay which has made The Biggest Healthcare Fraud of the 21st Century old news, whether Holmes and Balwani will serve any significant Club Fed time at all. Law360. CNBC, Observer

Another Corona Twist is that a SoftBank/Fortress Investment shell company, Labrador Diagnostics LLC, which happens to own several Theranos patents, sued a small company, BioFire, developing COVID-19 tests. Labrador now states that the patent infringement doesn’t entail the COVID tests but others over the past six years. Our Readers will recall that SoftBank/Fortress was a ‘last ditch’ investor in Theranos in December 2017, collateralized by the patent portfolio. The Verge

Comings and goings, wins and losses: VA’s revolving door spins again, NHS sleep pods for staff, Aetna’s Bertolini booted, Stanford Med takes over Theranos office

VA’s revolving door spins again with #2 person fired, but VistA replacement implementation moves on. James Byrne, deputy secretary, was fired on 3 Feb “due to loss of confidence in Mr. Byrne’s ability to carry out his duties” according to secretary Robert Wilkie. Mr. Byrne, a Naval Academy graduate and former Marine officer, had been VA general counsel, acting deputy secretary starting August 2018, then confirmed five months ago.

Mr. Byrne’s responsibilities included the Cerner implementation replacing VistA and other IT projects (HISTalk), of which Mr. Wilkie stated in a press conference today (5 Feb) “will not impact it at all” (FedScoop). The termination comes in the wake of a House staff member on the House Veterans Affairs committee, herself a Naval Reserve officer, stating that she was sexually assaulted at the VA Medical Center in Washington (NY Times). Axios claims that the White House was disappointed in the way the VA handled the investigation. At today’s presser, Mr. Wilkie denied any connection but attributed the dismissal to ‘not gelling’ with other team members. The launch of Cerner’s EHR is still on track for late March. The turnover at the VA’s top has been stunning: four different secretaries and four more acting secretaries in the last five years. Also CNBC, Military Times.

NHS’ sleep pods for staff to catch a few ZZZZs. A dozen NHS England hospitals are trialing futuristic-looking ‘sleep pods’ for staff to power nap during their long shifts and reduce the possibility of errors and harm by tired clinicians. Most of the locations are in the A&E unit, doctors’ mess, and maternity department. They are available to doctors, nurses, midwives, radiographers, physiotherapists, and medics in training. The pods are made by an American company, MetroNaps, and consist of a bed with a lid which can be lowered along with soothing light and music to aid relaxation. The pods may cost about £5,500 each but are being well-used. Other hospitals are fitting areas out with camp beds and recliner chairs. The sleep breaks take place both during and end of shifts before returning home and average about 17-24 minutes. Everything old is new again, of course–dorm areas were once part of most hospitals some decades back and doctors’ lounges with sofas were popular snooze-gathering areas. Guardian (photo and article)

Mark Bertolini bumped off CVS-Aetna Board of Directors. The former Aetna CEO, who was the engineer of the sale to CVS Health two years ago, isn’t going quietly out the door with his $500 million either. The high-profile long-time healthcare leader told the Wall Street Journal that he was forced off the BOD. He maintains the integration of the Aetna insurance business is incomplete, contradicting CVS’ statement that it’s done. Mr. Bertolini and two other directors are being invited out as CVS-Aetna reduces its board following, it says, best practices in corporate governance. Looking back at our coverage, Mr. Bertolini had hits, bunts (ActiveHealth Management) and quite a few misses (Healthagen, CarePass, iTriage). According to the WSJ, the contentious nature of the statement plus the departure of the company’s president of pharmacy is raising a few eyebrows. And recently, an activist shareholder, Starboard Value LP, has taken a stake in the company. CVS is demonstrating some innovation with rolling out 1,500 HealthHubs in retail locations as MinuteClinics on steroids, so to speak.  Hartford Courant (Aetna’s hometown news outlet) adds a focus on how many jobs will be remaining in the city with a certain skeptical context on CEO Larry Merlo’s promises. 

Stanford taking over Theranos Palo Alto HQ space. HISTalk’s Weekender had this amusing note (scroll down to ‘Watercooler Talk’) that the 116,000-square-foot office building in Stanford Research Park will now house the Stanford medical school. Theranos had been paying over $1 million per month in rent for the facility. The writer dryly notes that Elizabeth Holmes’ bulletproof glass office remains. This Editor humbly suggests the floor-to-ceiling application of industrial-strength bleach wipes and disinfectant, not only in the lab facility but also in that office where her wolf-dog used to mess.

The LA Times reports that Ms. Holmes is also defending herself without counsel in the Phoenix civil class-action lawsuit against Theranos. On 23 January, she dialed in to the court hearing’s audio feed and spoke for herself during that hour. One has to guess that she doesn’t have much to do other than read legal briefs. (Perhaps she sees herself as a cross between Saint Joan and Perry Mason?) Last fall, Ms. Holmes was dropped by Cooley LLP for non-payment of fees [TTA 9 Oct 19]. Williams & Connolly continues to represent her in the criminal DOJ suit, where prison time looms. 

The Theranos Story, ch. 61: Elizabeth Holmes as legal deadbeat

Did her lawyers expect otherwise? This weekend’s news of Elizabeth Holmes’ legal team at Cooley LLP withdrawing their representation services due to non-payment should not have caused much surprise. Cooley’s attorney team petitioned the court to withdraw from the case, stating that “Ms. Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year.”

Cooley was representing Ms. Holmes in a class-action civil suit in Phoenix brought against her, former Theranos president Sunny Balwani, and Walgreens, charging fraud and medical battery. (When they withdraw, will she seek public representation based on poverty?)

Perhaps Ms. Holmes is the one who’s setting priorities, as the civil suit would be for monetary damages, and no money means there will be none for the plaintiffs to collect. The DOJ charges are a different story. She is on the hook for nine counts of wire fraud and two counts of conspiracy related to her actions at Theranos. Conviction on these could send her to Club Fed for 20 years plus a fine of $250,000 plus restitution for each charge. [TTA 16 June]

Last Wednesday, both Ms. Holmes and lawyers for her and Mr. Balwani were in Federal court in San Jose on the wire fraud and conspiracy charges, demanding that the government release documents from the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) that allegedly would clear them. After an hour, Judge Davila set 4 November as the next hearing date. 

Defending oneself does not come cheap, but after your company’s value crashes to $0 from $9bn, one might be looking for change in your Roche-Bobois couch and wondering if your little black Silicon Valley-entrepreneur formal pantsuit/white shirt ensembles will last through the trial. CNBC 2 Oct, CNBC 4 OctFox Business, Business Insider

Health tech bubble watch: Rock Health’s mid-2019 funding assessment amid Big IPOs (updated: Health Catalyst, Livongo, more)

Updated for IPOs and analysis. The big time IPOs add extra bubbles to the digital health bath. Rock Health’s mid-year digital health market update continues its frothy way with a topline of $4.2 bn across 180 deals invested in digital health during the first half of 2019. 2019 is tracking to last year’s spending rate across fewer deals and is projected to end the year at $8.4 bn and 360 deals versus 2018’s $8.2 bn and 376 deals.

This year has been notable for Big IPOs, which have been absent from the digital health scene for three years. Exits come in three flavors: mergers and acquisitions (43 in their count so far), IPOs, and shutdowns (like Call9). IPOs are a reasonable outcome of last year’s trend of mega deals over $100 million and a more direct way for VCs to return their money to investors. So far in 2019, 30 percent of venture dollars went to these mega deals. (Rock Health tracks only US digital health deals over $2 million, so not a global picture.)

Reviewing the IPOs and pending IPOs to date:

  • Practice intake and patient management system Phreesia closed its NYSE IPO of 10.7 million shares at $18 per share on 22 July. The company earned approximately $140.6 million and the total gross proceeds to the selling stockholders were approximately $51.6 million for a value over $600 million. The market cap as of 26 July exceeded $949 million with shares rising past $26. Not bad for a company that raised a frugal $92.6 million over seven rounds since 2005.  Yahoo Finance, Crunchbase
  • Chronic condition management company Livongo’s picture is frothier. Their 22 July SEC filing has their IPO at 10.7 million shares at $24 to $26 per share offered on NASDAQ. This would total a $267.5 million raise and a $2.2 bn valuation. This is a stunning amount for a company with reportedly $55 million at the end of its most recent reporting period, increasing losses, and rising cash burn. Livongo raised $235 million since 2014 from private investors. Crunchbase 
  • Analytics company Health Catalyst’s IPO, which will probably take place this week on NASDAQ with Livongo’s, expects to float 7 million shares. Shares will be in a range of $24 to $25 with a raise in excess of $171 million. Their quarterly revenue is above $35 million with an operating loss of $9.8 million. Since 2008, they’ve raised $377 million. IPO analysts call both Livongo’s and Health Catalyst’s IPOs ‘essentially oversubscribed’. Investors Business Daily, Crunchbase
    • UPDATE: Both Livongo and Health Catalyst IPOs debuted on Thursday 25 July, with Livongo raising $356 million on an upsized 12.7 million shares at $28/share, while Health Catalyst’s 7 million shares brought in $182 million at $26/share.  Friday’s shares closed way up from the IPOs Livongo at $38.12 and $38.30 for Health Catalyst. Bubbly indeed! Investors Business Daily, Yahoo Finance
  • Change Healthcare is also planning a NASDAQ IPO at a recently repriced $13 per share, raising $557.7 million from 42.8 million shares. With the IPO, Change is also offering an equity raise and senior amortizing note to pay off its over $5 bn in debt. The excruciating details are here. Investors here are taking a much bigger chance than with the above IPOs, but the market action above will be a definite boost for Change.
  • Connected fitness device company Peloton, after raising $900 million, is scheduled to IPO soon after a confidential SEC filing. (UPDATED–Ed. Note: Included as in the Rock Health report; however this Editor believes that their continued inclusion of Peleton in digital health is specious and should be disregarded by those looking at actual funding trends in health tech.) Forbes

Rock Health itself raised the ‘bubble’ question in considering 2018 results. Their six points of a bubble are:

  1. Hype supersedes business fundamentals
  2. High cash burn rates
  3. High valuations decoupled from fundamentals
  4. Surge of cash from new investors
  5. Fraud or misuse of funds
  6. Unclear exit pathways

This Editor’s further analysis of these six points [TTA 21 Jan] wasn’t quite as reassuring as Rock Health’s. As in 2018, #2, #3, and #6 are rated ‘moderately bubbly’ with even Rock Health admitting that #2 had some added froth. #3–high valuations decoupled from fundamentals–is, in this Editor’s experience, the most daunting, as as it represents the widest divergence from reality and is the least fixable. The three new ‘digital health unicorns’ they cite are companies you’ve likely never heard of and in ‘interesting’ but not exactly mainstream niches in health tech except, perhaps, for the last: Zipline (medicine via drone to clinics in Rwanda and Ghana), Gympass (corporate employee gym passes), and Hims (prescription service and delivery).

Editor’s opinion: When there are too many companies with high valuations paired with a high ‘huh?’ quotient (#3)–that one is slightly incredulous at the valuation granted ‘for that??’–it’s time to take a step back from the screen and do something constructive like rebuild an engine or take a swim. Having observed or worked for companies in bubbles since 1980 in three industries– post-deregulation airlines in the 1980s, internet (dot.com) from the mid-1990s to 2001, first stage telecare/telehealth (2006-8), and healthcare today (Theranos/Outcome Health), a moderate bubble never, ever deflates–it expands, then bursts. The textbook #3 was the dot.com boom/bust; it not only fried internet companies but many vendors all over the US and kicked off a recession.

Rock Health also downplayed #5, fraud and misuse of funds. It’s hard to tell why with troubles around uBiome, Nurx, and Cleo in the news, Teladoc isn’t mentioned, but their lack of disclosure for a public company around critical NCQA accreditation only two months ago and their 2018 accounting problems make for an interesting omission [TTA 16 May]. (And absurdly, they excluded Theranos from 2018’s digital health category, yet include drones, gym passes, connected fitness devices…shall we go on?)

Rock Health’s analysis goes deeper on the private investment picture, particularly their interesting concept of ‘net liquidity overhang’, the amount of money where investors have yet to realize any return, as an indicator of the pressure investors have to exit. Pressure, both in healthcare and in early-stage companies, is a double-edged sword. There’s also a nifty annual IPO Watch List which includes the five above and why buying innovation works for both early-stage and mature healthcare companies. 

(Editor’s final note: The above is not to be excessively critical of Rock Health’s needed analysis, made available to us for free, but in line with our traditionally ‘gimlety’ industry view.)

SNF emergency telehealth provider Call9 shuts down most operations, after $34M raise (updated)

Is it a symptom of a bubble’s downside? In an interview with CNBC, Dr. Timothy Peck, the CEO of Call9, profiled in TTA only a month ago, confirmed that his company will be shutting down operations. Call9 provided embedded emergency first responders in skilled nursing facilities (SNFs) on call to staff nurses. The first responders not only could provide immediate care to patients with over a dozen diagnostic tools, but also would connect via video to emergency doctors on call. 

Headquartered in Brooklyn, the shuttering of the four-year-old company has laid off over 100 employees as it winds down operations. They claimed 142,000 telemedicine visits and 11,000 patients who were treated via its services. In the past few months, Call9 had inked deals with Lyft for patient transportation and was expanding to Albany NY. They also operated a community paramedicine division utilizing their emergency doctor network.  

This Editor can now reveal that through a reliable industry source, I was informed of Call9’s difficulties earlier this month. Not wanting to ‘run with a rumor’, I contacted Dr. Peck. He confirmed to me information that later appeared in the CNBC article: that the company was refining its model in the face of a change in previous funders and working with some new partners to stay in a model with embedded clinical care specialists in nursing homes. While they would scale back, they still had current contracts. However, the changes in their model would mean that the company would be in a ‘bit of a stealth mode’. After we discussed the business situations that most early-stage health tech companies have faced with funding, we agreed to touch base in a few weeks when things developed.

CNBC, with a different source, had essentially the same information from Dr. Peck on the winding down of the company but in this case also confirmed layoffs, including a ‘pivot’ of the company into a different model around technology in nursing homes. They also confirmed that a part of the company, Call9 Medical, will remain in operations.

Update: Skilled Nursing News had additional detail on Call9’s partnerships which included SNF providers Centers Health Care, CareRite, and the Archdiocese of New York’s long-term care arm, ArchCare. Their first client was Central Island Healthcare, where Dr. Peck lived for three months testing the model. The article goes on with Central Island’s executive director explaining that he is now seeking a telemedicine provider, as they adjusted their services to Call9’s capabilities.

Payer providers included Anthem, Blue Cross Blue Shield, and Healthfirst, plus some Medicare Advantage plans, splitting the savings from avoiding unnecessary ER admissions. Another appeal made by the company for its services was to keep in place higher acuity–sicker–patients in SNFs who would otherwise have to go into the hospital.

As our Readers know, these pages have covered the comings and goings of many health tech and app companies. Some succeed on their own, are acquired/combined with others and go on in different form, or are bought out at their peak, leaving their founders and some employees cheerful indeed. On the other hand, and far more common: the demise of some is understandable, others regrettable, and nearly none of them are cause for celebration in our field–Theranos and Outcome Health being exceptions. This Editor has been a marketing head of two of them (now deceased except for their technology, out there somewhere), and has discussed marketing, funding, and business models with more startups and early-stage companies than she can count.

If anything, investors have less patience than they did back in the Grizzled Pioneer period of the early 2000s, when a $5 million round put together from a few personally (more…)

The Theranos Story, ch. 60: becoming a Cautionary Tale of Silicon Valley Ethics

It’s just weird. It’s just a bit surreal. When you see someone have this situation and pretend that everything is normal. It’s so bizarre.–Erika Cheung, former Theranos lab associate, whistleblower

Will health tech learn its lesson? As in Chapter 58, we are now in Full Retrospective on Theranos, with Cautionary Tales abounding. One of the better ones is from one of the two young whistleblowers profiled in John Carreyrou’s ‘Bad Blood’, Erika Cheung. She was the young (23) lab associate who saw patient samples from Walgreens and other patients constantly fail quality controls, finally reported it to regulators when nobody listened, then quit. The interview in STAT is refreshing. Ms. Cheung’s contrast of what she saw on the lab bench and in her encounters with Ms. Holmes versus the wide-eyed hype of Elizabeth Holmes in Fortune and Forbes circa 2014 is worth the read, along with her restart at 28 in Hong Kong founding an accelerator, Betatron, and a non-profit with fellow Theranos whistleblower Tyler Shultz, Ethics in Entrepreneurship, to try to pin the Jello On The (Shady) Wall that embodies Silicon Valley Ethics. Also Mobihealthnews on Ms. Cheung’s appearance at The Atlantic’s Pulse event. (The Atlantic still has a pulse?–Ed.)

Cautionary Tales continue, with the recent examples of Nurx, an e-prescriber specializing in women’s health, storing returned birth control pills in a closet shoe organizer and illegally remailing them to new customers (NY Times) and uBiome, a company that sells tests that sequence the bacteria of the body’s microbiome, on fraudulent billing that triggered an FBI raid. Both companies raised significant funding of late: Nurx over $41 million and uBiome over $100 million. The Silicon Valley rules–fake it to make it, and move fast, break things–once again blowing back on what may be good companies. The temptation may be too great for these health tech startups, something reflected on in this CNBC article.

TechCrunch, which breathlessly hyped Theranos back in the day, while duly noting and linking to the programs on How Theranos Fell, puts on its hair shirt for Dear Hollywood, here are 5 female founders to showcase instead of Elizabeth Holmes. Interestingly, one is not Anne Wojcicki of 23andme. 

The Theranos Story, ch. 59: there’s life left in the corporate corpse–patents! And no trial date in sight.

You can get blood out of this. Really! The US Patent and Trademark Office (USPTO) awarded five–count ’em, five!–patents to Theranos in March and April. All of them were filed between 2015 and 2016, when the whispers of fraud were getting louder, as were the legal threats.

The five patents are:

1. Systems, devices, and methods for bodily fluid sample collection, transport, and handling
2. Systems, devices, and methods for bodily fluid sample transport
3. Systems and methods for sample preparation using sonication
4. Systems and methods for sample preparation using sonication (cell disruption)
5. Rapid measurement of formed blood component sedimentation rate from small sample volumes

The CB Insights Research article has the details on what they cover, including patent application illustrations. It’s not stated, but looking back to TTA’s many articles, in this Editor’s judgment, the heir to these patents cannot be Elizabeth Holmes or her many investors now feeling the lint in their pockets, but the company holding the last note, the $65 million (not $100 million) loan from Fortress Investment Group LLC, part of Japan’s SoftBank Group [TTA 28 Dec 17]–collateralized by the portfolio of over 70 patents. Hat tip to HISTalk 19 April

If you hunger for a deep dive into the design of Theranos’ blood analyzers that never really worked, and can appreciate that the miniLab was what “one expert in laboratory medicine called “theater … not science”, this Design World article is for you: Schadenfreude for Theranos — and satisfaction in how engineering doesn’t lie

Meanwhile, back in the US District Court in San Jose, California, we learn that the trial of Ms. Holmes (now engaged to William “Billy” Evans, a 27-year-old heir to the Evans Hotel Group, which has three West Coast resort properties and who is also a techie) and former Theranos president Ramesh ‘Sunny’ Balwani has been delayed indefinitely. Originally reported to be summer entertainment with a start date of 8 July, the judge set the next status conference for the case for 1 July, but refused to set a trial date, which means that the trial may not begin till next year. According to the San Jose Mercury News, the defense is seeking materials from the FDA and CMS, which are, according to defense lawyer, lawyer Kevin Downey, are “in many instances exculpatory.”

Ms. Holmes’ lawyers are also seeking information on the communications between John Carreyrou of the Wall Street Journal, the FDA, and CMS. In a motion filed last week, they accused Mr. Carreyrou under the guise of investigative journalism of “exerting influence on the regulatory process in a way that appears to have warped the agencies’ focus on the company and possibly biased the agencies’ findings against it.” Stat

The bubbly Ms. Holmes and Not-So-Sunny Balwani are facing Federal charges of two counts of conspiracy to commit wire fraud and nine counts of wire fraud. They each face a maximum of 20 years in prison and up to $2.7 million in fines.

About time: digital health grows a set of ethical guidelines

Is there a sense of embarrassment in the background? Fortune reports that the Stanford University Libraries are taking the lead in organizing an academic/industry group to establish ethical guidelines to govern digital health. These grew out of two meetings in July and November last year with the participation of over 30 representatives from health care, pharmaceutical, and nonprofit organizations. Proteus Digital Health, the developer of a formerly creepy sensor pill system, is prominently mentioned, but attending were representatives of Aetna CVS, Otsuka Pharmaceuticals (which works with Proteus), Kaiser Permanente, Intermountain Health, Tencent, and HSBC Holdings.

Here are the 10 Guiding Principles, which concentrate on data governance and sharing, as well as the use of the products themselves. They are expanded upon in this summary PDF:

  1. The products of digital health companies should always work in patients’ interests.
  2. Sharing digital health information should always be to improve a patient’s outcomes and those of others.
  3. “Do no harm” should apply to the use and sharing of all digital health information.
  4. Patients should never be forced to use digital health products against their wishes.
  5. Patients should be able to decide whether their information is shared, and to know how a digital health company uses information to generate revenues.
  6. Digital health information should be accurate.
  7. Digital health information should be protected with strong security tools.
  8. Security violations should be reported promptly along with what is being done to fix them.
  9. Digital health products should allow patients to be more connected to their care givers.
  10. Patients should be actively engaged in the community that is shaping digital health products.

We’ve already observed that best practices in design are putting some of these principals into action. Your Editors have long advocated, to the point of tiresomeness, that data security is not notional from the smallest device to the largest health system. Our photo at left may be vintage, but if anything the threat has both grown and expanded. 2018’s ten largest breaches affected almost 7 million US patients and disrupted their organizations’ operations. Social media is also vulnerable. Parts of the US government–Congress and the FTC through a complaint filing–are also coming down hard on Facebook for sharing personal health information with advertisers. This is PHI belonging to members of closed Facebook groups meant to support those with health and mental health conditions. (HIPAA Journal).

But here is where Stanford and the conference participants get all mushy. From their press release:

“We want this first set of ten statements to spur conversations in board rooms, classrooms and community centers around the country and ultimately be refined and adopted widely.” –Michael A. Keller, Stanford’s university librarian and vice provost for teaching and learning

So everyone gets to feel good and take home a trophy? Nowhere are there next steps, corporate statements of adoption, and so on.

Let’s keep in mind that Stanford University was the nexus of the Fraud That Was Theranos, which is discreetly not mentioned. If not a shadow hovering in the background, it should be. Perhaps there is some mea culpa, mea maxima culpa here, but this Editor will wait for more concrete signs of Action.

The Theranos Story, ch. 58: with HBO and ABC, let the mythmaking and psychiatric profiling begin! (updated)

This Editor thought that her next articles about Theranos would be trial coverage. There are court dates pending for Elizabeth Holmes and Not-So-Sunny Balwani–with the DOJ for 11 counts of wire fraud [TTA 16 June] and, for Mr. Balwani, with the SEC on (civil) securities fraud [TTA 15 March]. 

Instead, Theranos hits the headlines again. On 18 March, there’s the debut of an HBO documentary on Theranos. Titled The Inventor: Out For Blood In Silicon Valley (YouTube preview), we can treat ourselves once again to the SteveJobs-esque presence of Ms. Holmes, down to the unnaturally deep voice, blondined hair, and wide blue eyes, unpacking the deception and fraud that was part of the company from early days. But that’s not all! There’s a six-part ABC Radio ‘Nightline’ docu-podcast that started on 23 Jan and airs in six parts through February, which includes audio of depositions taken of board members, whistleblower Tyler Shultz, and patients affected by bad test results. (This Editor will give a listen on this alone.) Episode 5 and links to 1-4 are here via Yahoo.

On websites, we’re regaled with rehashes. The articles range from Teasing the Doc to Where The Ex (Balwani) Is Now (they don’t know) to What Is Her Net Worth (not $4.6 bn). There’s even a flurry of sensational podcasts and videos on YouTube–just Google them. 

Fascinating Fraud. There’s fascination in The Long Con perpetrated by the principals, and less examined, our tendency to Want To Believe. Many of us like legal procedurals and the drama inherent in them (the eternal appeal of the long-running Law & Order in several countries.) Let’s face it, there’s a substantial dollop of schadenfreude mixed in.

What we are witnessing is the building of a myth, increasingly divorced from the real world where it happened, and not improbably or with superpowers. 

Where it goes a little off the cliff. There is a curious article in Forbes that is written by a contributor who writes and teaches courses on stocks and entrepreneurship. He interviewed a former neighbor of Ms. Holmes, Richard Fuisz, MD. It turns out this psychiatrist, inventor, and former CIA asset knew her in childhood. The families were friends and Dr. Fuisz helped out her father when he hit a bad patch. There’s some sketchy profiling in this article, but it does make a fair attempt to get to the heart of the forces that put the gap in Elizabeth Holmes’ ethical makeup, including the Big Steal of Ian Gibbons’ IP. His position is somewhat complicated by a patent dispute (settled) between Dr. Fuisz & Son and Theranos. He’s still hammering on at it on Twitter (@rfuisz).

What’s missing? Much credit to the estimable John Carreyrou, who broke the story in the Wall Street Journal and got his livelihood (and perhaps a few other things) threatened a few times by Tough Guy Lawyer David Boies.

(Updated) At least it is here in a Vanity Fair article on the Last Days of Theranos, where they had to move to downscale Newark (California) and Ms. Holmes’ dog pooped where he wanted to poop. Her ‘persecution’ doesn’t seem to faze her from living in SF, frequenting cafes with said dog, and her new romance with a ‘younger hospitality heir’–a far cry from her former employees who wear the months or years of their lives at Theranos like a Scarlet Letter as they look for work and loose cash in the sofa.

We’ve gotten to the point where the hard business analysis ends and the looser parts of psychologizing begins, as we attempt to understand why. Beyond a certain point, does why matter when damage to real patients has been done? Collateral damage persists in funding of startups and for entrepreneurial women in health tech.

For this Editor, she looks forward to the warmer weather, when it’s expected when the Legal Action–and reality–resumes. 

Where’s the evidence? Healthcare unicorns lack the proof and credibility of peer-reviewed studies.

Another sign that too many healthcare unicorns are decoupled from the rock-solid fundamental reality–that they work. Healthcare unicorns–those startups valued over $1 bn–are unicorns because they have patents, processes, or a line of business that has immense potential to be profitable. The standard in healthcare, unlike other tech, is the peer-reviewed study. Is this process or device effective based upon the study? Does this drug looks like it will work? Is this study validating, encouraging? Peer-reviewed research takes place before a drug or device goes into clinical trials — a precursor. It ensures a certain level of disclosure, validation, and transparency at an early stage.

Instead, these unicorns largely rely on ‘stealth research’–a term coined by Dr. John P.A. Ioannidis, the co-director of the Meta-Research Innovation Center at Stanford University (METRICS). He summed it up in his latest peer-reviewed paper, “Stealth research: lack of peer-reviewed evidence from healthcare unicorns” (co-authored with Ioana A. Cristea and Eli M. Cahan), published in the European Journal of Clinical Investigation 28 Jan: 

In 2014, one of us (JPAI) wrote a viewpoint article coining the term “stealth research” for touted biomedical innovation happening outside the peer-reviewed literature in a confusing mix of “possibly brilliant ideas, aggressive corporate announcements, and mass media hype.”

The term ‘stealth research’ was prompted to the author by the practices of Theranos–ironically, a company that started and was funded in the Stanford nexus. By the time Dr. Ioannidis’ viewpoint paper was published in JAMA in Feb 2015, Theranos had ballooned to a $9 bn valuation. His paper was the first to question Theranos’ science–and Theranos aggressively pushed back against Dr. Ioannidis, including their general counsel attempting to convince the author to recant his own writing. Three years later, we know the outcome.

This latest study concludes that there is a real dearth of peer-reviewed research among healthcare unicorns–and that it’s detrimental. It measured whether these unicorns published peer-reviewed articles and whether they publish highly-cited (in other publications) articles; compared them against companies with lower valuations; and whether founders or board members themselves impacted the scientific literature through their own citations.

The meta-study looked at 18 current and 29 exited healthcare unicorns. Highlights:

  • Two companies–23andMe and Adaptive Biotechnologies published almost half of all unicorn papers–196 combined
  • Three unicorns (Outcome Health, GuaHao and Oscar Health) had no published papers, and two more (Clover Health, Zocdoc) had published just one
  • Seven of the exited unicorns had zero to one papers
  • In fact, ‘there was a negative, non-statistically significant association between company valuation and number of published or highly-cited papers’

As our Readers know, Outcome Health had a little problem around artificially inflated advertising placement wrapped in health ed and placed in doctors’ offices [TTA 29 Jan 18]. Oscar and Clover Health are insurers. Zocdoc…well, we know their business model is to get as many doctors to sign up in their scheduling app and pay as much as possible. But it’s the drug and device companies that are especially worrisome in a stealth research model. The paper points out among other examples StemCentrx, bought for $10.2 bn in 2016 by AbbVie for its Rova T targeted antibody drug for cancer treatment, was halted at Phase III because it was not effective. Acerta Pharma, also focused on cancer treatments, was bought by AstraZeneca for $7.3 bn; two years ago, AstraZeneca had to withdraw the Acerta data and admit that Acerta falsified preclinical data for its drug.

The conclusions are that healthcare unicorns contribute minimally to relevant, high-impact published research, and that greater scrutiny by the scientific community through peer-reviewed research is needed to ensure credibility for the underlying work by these startups. “There is no need for numerous papers. Discrete pivotal, high-impact articles would suffice.”

This Editor returns to #5 on Rock Health’s Bubble Meter: high valuations decoupled from fundamentals. Based on this, the lack of publishing represents risk–to investors and to patients who would benefit from better vetted treatments. To these companies, however, the risk is in having their technology or researched poached–as well as the investment in time and money research represents.

The study authors point out several ways to minimize the risk, including collaborating with academic centers in research, validation without disclosing all technical details, secure patents, and contributing their technology to other research. A higher-risk way is to “withhold significant publications until successful validation from agencies such as the Food and Drug Administration (FDA) or the European Medicines Agency (EMA)” but usually investors won’t wait that long. ‘Stealth Research’ paper, TechCrunch review Hat tip to David Albert, MD, of AliveCor via Twitter