Despite persistent losses, Holmes’ salary increased from $200,000 to $400,000, Yam said.
Quality problems
The next witness was Erika Cheung, who was hired by Theranos out of undergrad as a lab associate. Cheung said she joined the company largely on the star power of its CEO. “She had a charisma to her; she was very articulate,” Cheung said of Holmes. “She had a strong sense of conviction to her mission.”
Cheung quit after seven months on the job and filed a whistleblower complaint with the Centers for Medicare and Medicaid Services, alleging that the company used expired lab supplies for tests run on its proprietary “Edison” testing devices, which themselves had “major stability, precision, and accuracy problems.”
She first grew concerned about Theranos’ proprietary machines when she used them to test her own blood. “Employees would essentially donate their blood to Theranos for cash,” Cheung said. When checking Edison’s performance on a vitamin D test, “it would always come up that I was deficient,” she added. Yet, when she ran a test on another company’s device, which Theranos kept in case its own machine wasn’t up to the task, her vitamin D levels appeared normal.
“I was uncomfortable processing patient samples,” she said. “I did not think the technology we were using was adequate enough to be engaging in that behavior.”
While working at Theranos, Cheung sent an email to others in the company, sharing her concerns about the Edison machines. Those emails eventually made their way to Holmes, who asked, “How fast can we resolve this issue?” Another employee replied that, after omitting some data, the problem appeared solved.
Most of the tests that Theranos was performing for clients were done on devices made by other companies, Cheung testified. Just 12 tests were performed on Edison devices, and “the Edison analyzer could only run one type of test for one patient at a given time,” she said.
Government inspectors who arrived at Theranos in response to Cheung’s letter found conditions similar to those in the complaint. They proposed revoking the company’s license to test human specimens. Theranos eventually settled that matter with the government, voluntarily closing all of its labs.
After Cheung went to the federal government, Theranos hired a private detective to spy on her, according to court documents released last week. The company spent over $150,000 surveilling her and another whistleblower. Cheung’s testimony continues today.