Theranos (a combination of the words therapy and diagnosis), the company she founded, aims to disrupt the $75 billion diagnostics industry by using a combination of miniaturization and automation to create a proprietary blood analyzer. Because only two drops are ever needed, the blood can be drawn via finger needle prick rather than from a vein. The sample is shipped to their lab from one of the many test sites that are being opened in thousands of Walgreens pharmacies. The cost savings can be staggering. Consider the blood work that a rheumatologist might order for a new patient presenting with a possible inflammatory arthritis. Let’s guess the cost of a complete blood count, erythrocyte sedimentation rate (ESR), C-reactive protein, comprehensive metabolic panel, antinuclear antibody (ANA), rheumatoid factor and cyclic citrullinated peptide. The total cost from Theranos is $39.15 to be exact.3 Doctors could also reassure their lupus patients that a double-stranded DNA antibody test plus the full range of extractable nuclear antigens totals a reasonable $83.39 from Theranos, nearly a 90% discount compared to the charges at many major hospital labs.
How does this menu compare to other current pricing schemes? Googling the terms, lab costs for ANA, ESR and uric acid, I found the lowest charges for each of these tests to be $59, $32 and $49, respectively. Compare this to Theranos, where the combined cost for all three tests was $12.78 ($8.31+ $1.36 +$3.11), and at a major teaching hospital in Boston, where they totaled $230 ($144+$32 +$54).
Once upon a time, inflated paper charges held little meaning for most patients, whose insurers had contracts with labs and hospitals that assured them far lower prices than those posted. But now, with the burgeoning growth of high-deductible healthcare plans, these deep discounts are not routinely passed on to patients, leaving them to cope with some major fiscal obligations.
The implications of miniaturized testing technology are likely to be profound. Investors have already valued Theranos at more than $9 billion, on par with Quest, the largest diagnostic lab in the U.S. The ability to have blood testing done simply, cheaply and close to home will challenge the entire sector.
If these concepts aren’t sufficiently disruptive, there’s a critical facet of the company’s business plan that may truly upend American medicine. As Holmes described it, her aim is “to redefine the paradigm of diagnosis away from one in which people have to present with a symptom in order to get access to information about their bodies to one in which every person, no matter how much money they have or where they live, has access to actionable health information at the time it matters.”2
