But will government stifle it?
Imagine how convenient it would be to get a battery of blood tests for under $30, with no prescription and your results ready in hours, not days!
A story that begins with a 19-year-old dropping out of college doesn’t sound like one that will have a happy ending. But in the case of Elizabeth Holmes, the money her parents had set aside for her education went instead to create Theranos, a biotech company that has raised $100 million over the past ten years. One of her high profile investors (former Secretary of State George Shultz) says that Holmes could be the “next Steve Jobs or Bill Gates.”
Her breakthrough technology has the potential to completely upend the blood testing business, which has remained unchanged for decades. We all know the drill: you visit a LabCorp or Quest Diagnostics facility, present the order from your doctor, wait and then have a vial of blood drawn for each test. The results are sent to your doctor in three to seven days, so you must see your doctor a second time to find out the results and what they mean. The total bill may be near a thousand dollars for a full battery of tests.
What LabCorps and Quest rarely disclose is that, even after all that, some test results may be off by as much as thirty percent plus or minus—a sixty percent error range!
While most healthy adults have little problem parting with multiple vials of blood, the situation is different for infants, children, the elderly, and cancer patients. Infants have tiny veins that can be difficult to locate, older children squirm and generally detest the entire procedure, elderly people may have collapsed veins, and cancer patients endure such frequent blood draws that the repeated punctures can damage their veins and cause clotting and collapse.
Enter Elizabeth Holmes. You stop into your local Walgreens and visit the Theranos Wellness Center—with or without an order from a doctor. A technician warms your hand to increase blood flow and then pricks your finger to squeeze out a few drops. A test for fasting glucose will set you back $2.70; a complete blood count is $5.35. And you have your results later that day.
Plus, Theranos’s technology is automated, removing most human error from the process. It can thus achieve much lower error rates, with claimed margins of “allowable error” of less than ten percent.
It’s not hard to see why investors are practically lining up to give Holmes their money.
The first Theranos Wellness Center opened last month in a Palo Alto, California, Walgreens, but Holmes hopes to one day have a center within five miles of everyone in the US. Anyone, whether insured or not, will be able to keep tabs on their own health, at a fraction of the cost and inconvenience of traditional blood testing. “Patients are empowered by having better access to their own health information, and then by owning their own data,” says Holmes.
Yet the road ahead is not necessarily clear for Theranos. CEO Holmes plans to compete primarily on price, with at least a fifty percent discount on the current Medicare fees for blood testing—conservatively saving Medicare $61 billion and Medicaid $96 billion over 10 years. One industry observer believes that this strategy is flawed, as doctors are accustomed to ordering tests from the two industry leaders, LabCorp and Quest Diagnostics, and if health insurers and Medicare are both willing to pay their prices, there is little reason for either doctors or patients to care that Theranos is cheaper.
The problem, of course, is that Medicare and Medicaid have a virtual monopoly on many health services. Medicare sets fees according to a clinical price schedule (essentially a price-control system), with little transparency on how it sets up these schedules. The only thing we know is that they are heavily influenced by a committee of the American Medical Association, a group which in turn is heavily subsidized by payments provided by a government enforced medical coding monopoly.
Medicare more often than not refuses to accommodate new diagnostic technologies. Moreover, it forbids billing for more than one blood test per year not directly connected to an illness or suspected illness. We all know that such blood testing is one of the most important features of an emerging new medicine. But Medicare does not care; they just see it as additional expense, even though it can save billions in the long run.
It is therefore unlikely that Medicare will adjust its approach even with lower costs like those offered by Theranos: the federally administered system may suffocate this budding technology. The federal price control system has encouraged very little innovation in blood testing for many years, precisely because it makes no connection between services and costs.
Still, with all the advantages offered by the Theranos method, it’s hard to see how it can fail to capture some percentage of the blood test business. A person might read an article about the importance of vitamin D in the morning and, on the spur of the moment, pop in to a Walgreens that afternoon to get a vitamin D 25-OH test (cost: $20.35), thus providing a near-immediate answer to the question of their own vitamin D level. Anyone who has ever had to try to convince their doctor of why a certain test is needed will appreciate the approach pioneered by Holmes—and with prices for some tests lower than an office co-pay, it may not be only the uninsured who will be walking into Theranos wellness centers on their own initiative.
The only thing that would make the Theranos product even better would be a kit to gather your own blood drop at home and drop it at Walgreen’s or another site. But that would probably come too if the government gets out of the way. As it happens, the Life Extension Foundation (LEF) offers two home blood tests: one to check your omega-3, 6, and 9 levels, and one to test for food allergies. As always, they offer discounts for LEF members.
But will government stifle it?