Thursday news roundup: FTC now investigating Cerebral, Balwani’s Theranos trial rests at last, Proscia pathology AI $37M Series C, health data breaches pile up

Telemental health Cerebral’s miseries pile on. The Federal Trade Commission (FTC) is now investigating Cerebral on deceptive advertising and marketing practices. The Wall Street Journal (may be paywalled) reviewed the 1 June letter sent to the company. The letter requests the usual preservation of documents and asks ‘dozens of questions’ related to their business. Of particular interest to the FTC is the ‘negative option’ practice that continues the subscription fee unless the subscriber takes positive action to cancel it. Subscribers have complained that Cerebral did not cancel their subscriptions after repeated attempts to do so and did not refund their money. Reuters, FierceHealthcare

Also of interest to the FTC will be the dodgy advertising claims about ADHD and obesity which ran on TikTok and Instagram [TTA 10 May]. The WSJ reported that their ad spend topped $65 million for this year–$13 million on TikTok alone from January to May this year, making Cerebral the third-largest advertiser behind HBO and Amazon, according to research firm Pathmatics.

The FTC action follows the Department of Justice (DOJ) investigation of their prescribing of controlled (Schedule 2, high potential for abuse) substances such as Adderall and Xanax, CVS and Walmart refusing their prescriptions, the unceremonious booting of the CEO and co-founder, and a wrongful dismissal lawsuit by a former VP of product and engineering, Matthew Truebe. Certainly, its investors led by SoftBank, which raised $300 million in December less than six months after a raise of $127 million, are unhappy at watching their $4.8 billion baby crash and burn.

The second “rerun” Theranos trial of Sunny Balwani rests. This much-muted trial is winding towards its close. Receiving much less breathless and near-sensational coverage than Elizabeth Holmes’, Theranos president Balwani was tried in the same San Jose Federal district court, with the same prosecutor (Robert Leach), just about the same charges (12 counts of wire fraud), and Judge Davila presiding. Holmes was convicted and her sentencing is scheduled for September.

The prosecution rested on 20 May and the defense on 9 June. The trial took some delays due to at least two jurors falling ill from Covid. The defense strategy rested on Holmes’ founding and operating the company without Balwani for a few years and that he never sold his shares, making him as victimized as any ordinary investor. The prosecution is relying on how close Holmes and Balwani were, that he had great power at Theranos–and used it, plus in his position was well aware of the problems with the lab machines and deliberately sought to defraud investors by covering it up. Unsurprisingly, Holmes did not testify at his trial, although she was a looming presence at his as he was somewhat at hers, especially in her testimony about their relationship. Closing arguments took place on Tuesday (14 June) and the jury will be charged after their conclusion. NBC Bay Area, New York Post, Wall Street Journal

Happier news comes from Proscia, a pathology software company, funding a $37 million Series C. Highline Capital Management, Triangle Peak Partners, and Alpha Intelligence Capital led the round along with participation from five earlier investors. Their total funding is up to $72 million. Their AI-enabled Concentriq platform combines “enterprise scalability with a broad portfolio of AI applications to accelerate breakthroughs and unlock clinical insights that advance precision medicine.” Clients include 10 of the top 20 pharmaceutical companies as well as the Joint Pathology Center, Proscia release, Becker’s 

Adding to the tally of healthcare data breaches are several this week. The year-to-date winner, of course, are the 2 million at Shields Health Care Group in Massachusetts [TTA 10 June], but this week, reports have been breaking out like late spring roses:

  •  A clinical guidance software vendor’s breach reported 10 June has exposed the protected health information (PHI) of patients at Omaha, Nebraska-based CHI Health and Sioux Falls, South Dakota based Avera Health. Avera has about 900 exposed patients, but the number at CHI is not yet known. MCG Health is the vendor. Becker’s
  • Yuma (Ariz.) Regional Medical Center reported an April ransomware attack that while short in duration, exposed PHI of 700,000 patients. An unauthorized user removed files from the hospital’s system that included patient health information such as names, social security numbers, health insurance information, and limited medical information relating to care. The hospital went offline until it was resolved, including reporting to law enforcement. Becker’s, Healthcare Dive
  • UChicago Medicine had its employee accounts hacked in March by an unauthorized user. It exposed about 2,500 patient records that included patient first and last names, social security numbers, health information, legacy Medicare beneficiary identification numbers, health insurance policy numbers, and driver’s license numbers. Becker’s
  • And Kaiser Foundation Health Plan of Washington had about 70,000 patient PHIs exposed on 5 April when an unauthorized user gained access to one employee’s emails with information on patient first and last names, dates of service, laboratory test information, and medical record numbers.

Short, but certainly not sweet, and expensive.

Categories: Latest News.

Leave a Reply

Your email address will not be published.