Author: Samantha Burton

Analyzing Theranos: Why Medical Tech Needs More Defined Whistleblower Rights

From developments in data cloud software that enable hospital systems to improve internal efficiency to developments in nanotechnology that enable the targeting of individual cancer cells, the healthcare field benefits significantly from increased intersection and collaboration between tech and medicine. However, despite the huge potential for good that comes with this intersection, sometimes what works in a tech setting doesn’t work when applied to the development of a medical device. This is very apparent in the trial of Elizabeth Holmes, the founder of medical startup Theranos. Holmes claimed to have developed a device that could perform over 240 blood tests on a single drop of blood and have the results back to the patient within hours. This medical advancement was hailed as on par with the development of penicillin. The only problem: it was all a hoax. 

The devices simply did not work. Even when the devices succeeded in testing blood samples, the results were so wrong most of the time that they endangered patients. Imagine getting a false positive for cancer, herpes, or diabetes. Or worse: a false negative. What makes this case one that has garnered so much attention is the fact that Holmes was well aware of the devices’ inaccuracies and inadequacies: when the prototype was far from full development, she told investors that the devices were ready to be rolled out to storefronts; when employees told her the devices’ results were wildly inaccurate, she told investors they could be relied upon by doctors and patients. Many have been left asking: how could a company get so far—valued at 10 billion dollars in July 2015—when both the technology and the company were so inherently flawed?

While the answer is not simple, the ‘fake-it-till-you-make-it’ attitude widely celebrated in Silicon Valley seems to be a convincing culprit. Budding tech CEOs idolize figures like Steve Jobs, and Uber founder, Travis Kalanickfor their entrepreneurial spirit in (sometimes questionably) maneuvering their way around the rules. However, problems occur when this approach is applied to medical tech. While not having all the bugs worked out of a new ride-share app before launching might have some adverse consequences that can usually be curtailed, doing the same thing with a medical device could seriously and negatively affect hundreds of thousands of patients.

Yet, because of the cutthroat nature of Silicon Valley competition for venture capital, many tech startups, including Theranos, have relied heavily on nondisclosure agreements to ensure trade secrets are kept secret. John Carreyrou, investigative journalist largely responsible for unmasking Theranos’ fraud, describes in his book ‘Bad Blood’ how Theranos was able to silence many of its ex-employees by wrongfully leveraging nondisclosure agreements. While there are many potential legal remedies to encourage more transparency and hopefully prevent fraud like that of Theranos, better-adapting whistleblower protections to the medical tech setting seems like a promising option. 

Currently, whistleblower protections vary significantly across states. Despite wide variation, most states have some form of statute forbidding employers from discharging employees because of whistleblowing. However, employers can still easily file claims against whistleblowers for breach of nondisclosure agreements or for misappropriation of trade secrets. Though the 2016 Defend Trade Secrets Act (DTSA) endeavors to give whistleblowers immunity from claims of misappropriating trade secrets, courts have held that the statute’s immunity provision only gives the whistleblower an affirmative defense rather than sovereign immunity. Additionally, though the DTSA requires that employers inform employees of their whistleblowing immunity rights, this requirement can be satisfied simply by cross-referencing to a company policy that sets forth the provision. Lauren Rogal, legal scholar, posits that employees need to be more effectively notified of their whistleblower protections—had Theranos been required to adhere to a higher standard of notice, it’s possible that employees would have come forward sooner (page 1697). Ultimately, creating stronger requirements for notice of whistleblower protections, among other reforms, can help ensure that employees understand their rights and are empowered in keeping companies accountable. Enacting legislative reform to focus on the specific field of healthcare tech as it relates to whistleblower protections will prove incredibly important as advancements in healthcare tech continue to define the medical field.