Feb 2016

Theranos is under a lot of heat these days. But even if the controversial biotech startup fails, it was right about one major thing: the blood testing experience is ripe for disruption.

Right now, people are wondering whether or not the blood testing company once valued at $10 billion is actually able to accurately run the innovative diagnostic tests that catapulted them to prominence.

An inspection by the Centers for Medicare and Medicaid Services (CMS) recently found that one of the company’s laboratories was “not in compliance” with the conditions required for certification.

But Theranos’ recent struggles obscure a larger shift that’s already underway, whether or not Theranos continues to lead the charge.

The company offered a theoretically new, better, faster, cheaper diagnostic test that was easier to obtain. And that was appealing for at least two reasons: People want to have a better blood-testing experience, and new technology can make old-fashioned blood tests better. Whatever happens with Theranos, those things remain true.

Diagnostics is a more than $50 billion industry with a critical role in medicine and how we understand disease. And it’s an area that’s ripe for disruption.

While there have been innovations in blood testing over the years, new technology in development now — not just by Theranos, but groups ranging from tiny labs to IBM research centers — really does make more convenient, faster blood tests possible. And those changes could still revolutionize the diagnostics world. Theranos may be the most prominent of the companies trying to capitalize on that, but it isn’t the only one.

Theranos “struck a chord that needed to be played,” says Dr. Cary Gunn, the CEO ofGenalyte, another company that’s creating innovative diagnostic tests that rely on only a drop of blood. Unlike Theranos, they’re focusing on a smaller number of tests first and are planning to offer them in doctor’s offices, where tests could be run in 10 to 15 minutes for quick answers.

The current system “is still broken,” he says. “There’s controversy about how [Theranos] approached it, but that doesn’t mean there’s not a major problem here that needs to be solved.”

No matter what happens with Theranos — and it still could turn out that some of their tests work as advertised — that will remain true.

Someone, whether it’s Theranos, Genalyte, or some of the other companies fighting their way into this space, will take advantage of this moment.

The traditional two biggest players in the diagnostics world, Quest or LabCorp, could also make changes and adapt to take advantage of new technology. They might try to capitalize on a growing interest among consumers in being able to monitor health with blood tests without needing to involve a doctor (or with minimal supervision), and there are signs those companies are trying to do so.

blood vialShutterstock

Blood tests as they are now

Right now, diagnostic testing is far from perfect.

As an investigative report from the Milwaukee Journal Sentinel pointed out in May of 2015, “everyone assumes lab results are correct.”

But that’s not always the case.

There are a lot of places along the way where a lab test can be screwed up. It can happen when a sample is collected, when it’s sent for processing, while it’s being tested or analyzed, or even when the results are delivered back to a patient.

The Journal Sentinel found not only that labs make serious mistakes, as is theoretically possible in any industry, but their investigation — which covered labs run by Quest and LabCorp as well as smaller clinics and hospital labs — also “identified problems in laboratories that are systemic and the result of attempts to cut costs and save money.”

These mistakes can cause serious harm, ranging from inaccurate pregnancy or paternity tests to medical mishaps that can result in death.

The stat that Theranos CEO Elizabeth Holmes likes to mention about lab tests is that they are responsible for approximately 70% of clinical decisions. That makes lab testing an industry where a truly significant innovation, if it becomes widespread, could be enormously profitable. But these tests are different from a cool new app or delivery service; they’re essential for patient health.

Doctors rely on the results to make important judgments about whether patients are healthy or sick, safe or in danger. If the tests are flawed, medical decisions are flawed too. The stakes are sky high.

That’s why it’s perfectly reasonable for researchers to ask skeptical questions about Theranosor any new startup offering medical devices or services. But the fact that traditional labs are also far from perfect — and in some cases, have multi-step procedures that could be streamlined, reducing the chances for mistakes — is exactly why the diagnostic space is ripe for disruption.

GenalyteKevin Loria/Tech InsiderThis Genalyte device contains multiple chips, each of which can measure for 128 different factors.

Shaking things up

Theranos is still in the picture, despite the recent CMS inspection results and the news that for the most part, its centers are using traditional blood tests while its other tests are under FDA review. The company said a few months ago that it has enough money to keep operating comfortably.

But other companies are also developing tests that rely on microfluidics, technology that allows them to make a diagnosis based on just a drop of blood. Multiple researchers have been working with microfluidics for its potential to revolutionize a variety of scientific fields (not just diagnostics). As the story goes, Holmes developed an early interest in the field while she was a student at Stanford, but plenty of other companies have developed diagnostic tests in the same area — Theranos isn’t the first to do so and they won’t be the last.

When we first looked into Theranos, we spoke with Ben Moga, president and cofounder ofTasso, Inc, one such company that’s working on microfluidics diagnostic tests. That company is working on a device that collects blood samples from people at home who attach the collection vessel to their skin with an adhesive so it can draw a clean sample. As Moga explained to us then, Theranos isn’t the only player in this field.

The aforementioned Genalyte has developed a blood testing system, part of which can be seen above, that can run tests in 15 minutes, according to Gunn.

He says they’re starting with tests that focus on rheumatology, relevant to patients with lupus or rheumatoid arthritis, among other conditions. These tests, for now, would only be run at a doctor’s office. (A major part of Theranos’ strategy, in contrast, has been bringing blood tests directly to consumers.) Gunn says they’re seeking FDA approval before they put their tests into action. In the meantime, they’re publishing data from their tests on their website.

blood work Nguyen Kham/ReutersA health worker holds up a blood sample during a test for HIV.

“You need to pick an area and solve that area before you move on to the next one,” says Gunn. “There’s this saying in Silicon Valley, move fast and break things … but when you’re doing diagnostic disruption, you have to find the right balance, you still have to do a lot fast, but you can’t move so fast as to break things.”

Right now is an interesting time in the lab space. There are thousands of new diagnostic tests available that didn’t exist until recently, and for the moment, they’re largely unregulated (the FDA only regulates tests that a lab develops if they want to sell those tests to other labs, not if they are used internally).

That makes it easy for a clinic to develop a new test and start using it, but it also means that some inaccurate and imperfect tests make their way into the market. Some faulty tests have led people to take unnecessary antibiotics or to receive “unnecessary, harmful treatments for certain diseases such as Lyme disease,” according to the FDA.

The FDA is considering regulating lab-developed tests in the future. Even if that slows innovation, technological developments in areas like microfluidics mean that there are plenty of opportunities for disrupting this system that is a cornerstone of modern medicine.

The public became aware of this potential revolution because of Theranos. Right now, the company is looking less like it’s the one destined to change the status quo, especially when compared to one year ago. But that doesn’t mean the status quo won’t change.

“We applaud Theranos,” says Gunn, “for all the PR they brought to the diagnostic world.”