Private Sector Vigilance, Not Government Regulation, Protects Patients

Last July, I cheered Arizona for passing a law allowing patients to order blood tests without a doctor’s prescription. The company that lobbied for the change, Theranos, was also interesting because it posted its prices at venues where patients could get blood drawn. It had a widely promoted partnership with Walgreens, which has a strategy of using new technologies to deliver more value-added services in the retail environment.

Since then, Theranos has gotten into trouble for being opaque about how it actually conducts its tests when the samples get back to its labs. This has led to turmoil in the business media and among investors which are interested in backing entrepreneurs with new approaches to lab testing.

The Wall Street Journal announced just announced that the Centers for Medicare & Medicaid Services has:

… found serious deficiencies at Theranos Inc.’s lab in Northern California, according to people familiar with the matter.

The problems were found during an inspection by the Centers for Medicare and Medicaid Services, the chief federal regulator of clinical labs, at the blood-testing company’s facility in Newark, Calif. Failing to fix the problems could put the Theranos lab at risk of suspension from the Medicare program.

Theranos already has stopped collecting tiny samples of blood from patients’ fingers for all but one of its tests while it waits for the Food and Drug Administration to review the company’s applications for wider use of the proprietary vials called “nanotainers.” In October, the FDA said it had determined that the nanotainers were an “uncleared medical device.”

(John Carreyrou, et al., “Deficiencies found at Theranos lab,” Wall Street Journal, January 24, 2016.)

On the surface, it looks like our trusty government is looking out for us. On the contrary, actions by both CMS and the FDA lag private sector responses to Theranos’ problems. It was not the government which first notified the public of Theranos’ questionable technology, but the same Wall Street Journal reporter who wrote the article above (John Carreyrou, “Hot startup Theranos has struggled with its blood-test technology,” Wall Street Journal, October 15, 2015).

Carreyrou’s investigative report led Walgreens to suspend its relationship with Theranos last October. One can question Walgreens’ judgment for getting into business with Theranos in the first place. Nevertheless, it reacted much quicker than the government when problems arose. Walgreens cannot afford to have its reputation suffer through association with a potentially bad actor.

When it comes to patient safety, the private sector leads, and the government lags.

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John R. Graham is a former Senior Fellow at the Independent Institute.
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