FDA Regulation of Medical Devices: Lessons from the Theranos Trial (2024)

An essay by Cayce Dorrier

In early 2022, Elizabeth Holmes was found guilty of conspiracy and wire fraud for her actions as the founder and CEO of the biotech company Theranos. Theranos claimed it had developed a device that could run hundreds of blood tests using small drops of blood from a finger prick. Theranos opened testing centers in Walgreens in the Southwest and ran a variety of blood tests on thousands of patients; however, only one of the blood tests was approved by the Food and Drug Administration (FDA). Many patients received results that were incorrect, including one patient who claimed to receive a false positive result for HIV antibodies. Additionally, blood tests were not run on the analysis machine that Theranos advertised (referred to as the “Edison”), but on third party devices that Theranos modified to handle smaller quantities of blood. How was Theranos able to administer so many tests without FDA approval, and what should be done to prevent this in the future?

According to the FDA, the Edison device Theranos used was classified as a medical device. Section 201(h) of the Federal Food, Drug and Cosmetics Act defines a medical device as, “An instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory” which is used for “the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals”. These devices can’t achieve their goals through chemical actions and cannot be metabolized (differentiating them from drugs). This definition is broad enough to include devices ranging from medical thermometers to pacemakers. However, the process to get a medical device approved is complex and can require large sums of money.

There are 3 classes of medical devices ranging from Class 1 devices, which pose little potential for harm, to Class 3 devices, which sustain or support life or present potential unreasonable risk of illness or injury. Each class has a different level of regulatory controls and different options for approval submission type, with many exceptions. Class 1 and 2 devices generally require a 510(k) submission, although many Class 1 devices such as bandages are exempt. There is no 510(k) form, but applicants must compare their device to one that has been FDA approved and demonstrate substantial equivalence, or that their device has the same intended use as another legally marketed device, and any differences in technology do not raise questions of safety and effectiveness. If the device is found substantially equivalent, it can be marketed in the US. If not, the manufacturer can resubmit or submit a premarket approval application, a more stringent approval process used for Class 3 devices that requires scientific evidence that the product is safe and effective. The FDA does not usually perform 510(k) pre-clearance facility inspections, but says manufacturers should be prepared for an inspection any time after clearance.

So how was Theranos able to skip all these steps before working with human patients? First, Theranos reported that its device was a Class 1 medical device, subject to the lowest level of scrutiny, while it should have been classified as a Class 2 device. It was also designated as a laboratory developed test, which is a “type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory”. The FDA does not currently enforce pre-market review of devices of this type, which they claim to be because they are “relatively simple lab tests and generally available on a limited basis”. However, in recent years these devices have become more complex as our technological capabilities have advanced. Theranos actually went through the 510(k) approval process for many of their tests, even though they weren’t required as laboratory developed tests, but only one of them, a test for herpes virus, was approved by the FDA.

There have been other examples of recent laboratory developed tests that also led to misdiagnoses, such as a Lyme disease blood test. This could have led to patients receiving treatments that they didn’t need. The FDA announced its plans to reconsider its policies for laboratory developed tests in 2010 and held public workshops and issued discussion papers on the topic. Despite these steps, the overall policy surrounding the regulation of these devices has not changed, in large part due to industry pushback. Interestingly, with the onset of the coronavirus pandemic and the declaration of a public health emergency, the FDA started to require premarket review of laboratory developed tests, which included coronavirus tests. However, this policy only lasted a few months as the FDA stopped requiring premarket review in August 2020. This change made coronavirus tests more accessible but less regulated and brought the FDA back to its initial policy of not requiring premarket approval for laboratory developed tests.

Although FDA policy and initial oversight led to the expansion of Theranos’ testing, the FDA eventually placed restrictions on the Theranos labs and played a large role in the trial of Elizabeth Holmes. Former Theranos employees filed complaints with the FDA and the CMS (Centers for Medicare and Medicaid services) in 2015. The CMS investigated Theranos in the fall of 2015 and found issues with quality-control checks, unqualified personnel, and lab operations. The labs eventually had their licenses revoked and could not bill Medicaid for any expenses. In the trial of Elizabeth Holmes, the FDA’s Office of Criminal Investigations partnered with the US Attorney’s Office to prosecute Holmes and stated that it would continue to “investigate and help bring to justice individuals and companies responsible for putting the public health at risk”. It is worth noting that while Elizabeth Holmes was found guilty of wire fraud, she was found not guilty of defrauding patients.

So, how do we prevent this from happening again? One way is to pass legislation that would require the FDA to most closely regulate laboratory developed tests. The VALID Act was introduced to congress last June and would require the FDA to regulate laboratory developed tests more closely and is currently with the Subcommittee on Health in Congress. We would strongly advise that this bill be passed to prevent situations like this happening in the future. Additionally, rapid and frequent inspections of laboratory facilities by the FDA and CMS are vital to ensure all medical devices meet acceptable standards and are not defrauding patients.