Elizabeth Holmes Through the Director’s Lens
Kira Peikoff was the editor-in-chief of Leaps.org from 2017 to 2021. As a journalist, her work has appeared in The New York Times, Newsweek, Nautilus, Popular Mechanics, The New York Academy of Sciences, and other outlets. She is also the author of four suspense novels that explore controversial issues arising from scientific innovation: Living Proof, No Time to Die, Die Again Tomorrow, and Mother Knows Best. Peikoff holds a B.A. in Journalism from New York University and an M.S. in Bioethics from Columbia University. She lives in New Jersey with her husband and two young sons. Follow her on Twitter @KiraPeikoff.
Elizabeth Holmes.
"The Inventor," a chronicle of Theranos's storied downfall, premiered recently on HBO. Leapsmag reached out to director Alex Gibney, whom The New York Times has called "one of America's most successful and prolific documentary filmmakers," for his perspective on Elizabeth Holmes and the world she inhabited.
Do you think Elizabeth Holmes was a charismatic sociopath from the start — or is she someone who had good intentions, over-promised, and began the lies to keep her business afloat, a "fake it till you make it" entrepreneur like Thomas Edison?
I'm not qualified to say if EH was or is a sociopath. I don't think she started Theranos as a scam whose only purpose was to make money. If she had done so, she surely would have taken more money for herself along the way. I do think that she had good intentions and that she, as you say, "began the lies to keep her business afloat." ([Reporter John] Carreyrou's book points out that those lies began early.) I think that the Edison comparison is instructive for a lot of reasons.
First, Edison was the original "fake-it-till-you-make-it" entrepreneur. That puts this kind of behavior in the mainstream of American business. By saying that, I am NOT endorsing the ethic, just the opposite. As one Enron executive mused about the mendacity there, "Was it fraud or was it bad marketing?" That gives you a sense of how baked-in the "fake it" sensibility is.
"Having a thirst for fame and a noble cause enabled her to think it was OK to lie in service of those goals."
I think EH shares one other thing with Edison, which is a huge ego coupled with a talent for storytelling as long as she is the heroic, larger-than-life main character. It's interesting that EH calls her initial device "Edison." Edison was the world's most famous "inventor," both because of the devices that came out of his shop and and for his ability for "self-invention." As Randall Stross notes in "The Wizard of Menlo Park," he was the first celebrity businessman. In addition to her "good intentions," EH was certainly motivated by fame and glory and many of her lies were in service to those goals.
Having a thirst for fame and a noble cause enabled her to think it was OK to lie in service of those goals. That doesn't excuse the lies. But those noble goals may have allowed EH to excuse them for herself or, more perniciously, to make believe that they weren't lies at all. This is where we get into scary psychological territory.
But rather than thinking of it as freakish, I think it's more productive to think of it as an exaggeration of the way we all lie to others and to ourselves. That's the point of including the Dan Ariely experiment with the dice. In that experiment, most of the subjects cheated more when they thought they were doing it for a good cause. Even more disturbing, that "good cause" allowed them to lie much more effectively because they had come to believe they weren't doing anything wrong. As it turns out, economics isn't a rational practice; it's the practice of rationalizing.
Where EH and Edison differ is that Edison had a firm grip on reality. He knew he could find a way to make the incandescent lightbulb work. There is no evidence that EH was close to making her "Edison" work. But rather than face reality (and possibly adjust her goals) she pretended that her dream was real. That kind of "over-promising" or "bold vision" is one thing when you are making a prototype in the lab. It's a far more serious matter when you are using a deeply flawed system on real patients. EH can tell herself that she had to do that (Walgreens was ready to walk away if she hadn't "gone live") or else Theranos would have run out of money.
But look at the calculation she made: she thought it was worth putting lives at risk in order to make her dream come true. Now we're getting into the realm of the sociopath. But my experience leads me to believe that -- as in the case of the Milgram experiment -- most people don't do terrible things right away, they come to crimes gradually as they become more comfortable with bigger and bigger rationalizations. At Theranos, the more valuable the company became, the bigger grew the lies.
The two whistleblowers come across as courageous heroes, going up against the powerful and intimidating company. The contrast between their youth and lack of power and the old elite backers of Theronos is staggering, and yet justice triumphed. Were the whistleblowers hesitant or afraid to appear in the film, or were they eager to share their stories?
By the time I got to them, they were willing and eager to tell their stories, once I convinced them that I would honor their testimony. In the case of Erika and Tyler, they were nudged to participate by John Carreyrou, in whom they had enormous trust.
"It's simply crazy that no one demanded to see an objective demonstration of the magic box."
Why do you think so many elite veterans of politics and venture capitalism succumbed to Holmes' narrative in the first place, without checking into the details of its technology or financials?
The reasons are all in the film. First, Channing Robertson and many of the old men on her board were clearly charmed by her and maybe attracted to her. They may have rationalized their attraction by convincing themselves it was for a good cause! Second, as Dan Ariely tells us, we all respond to stories -- more than graphs and data -- because they stir us emotionally. EH was a great storyteller. Third, the story of her as a female inventor and entrepreneur in male-dominated Silicon Valley is a tale that they wanted to invest in.
There may have been other factors. EH was very clever about the way she put together an ensemble of credibility. How could Channing Robertson, George Shultz, Henry Kissinger and Jim Mattis all be wrong? And when Walgreens put the Wellness Centers in stores, investors like Rupert Murdoch assumed that Walgreens must have done its due diligence. But they hadn't!
It's simply crazy that no one demanded to see an objective demonstration of the magic box. But that blind faith, as it turns out, is more a part of capitalism than we have been taught.
Do you think that Roger Parloff deserves any blame for the glowing Fortune story on Theranos, since he appears in the film to blame himself? Or was he just one more victim of Theranos's fraud?
He put her on the cover of Fortune so he deserves some blame for the fraud. He still blames himself. That willingness to hold himself to account shows how seriously he takes the job of a journalist. Unlike Elizabeth, Roger has the honesty and moral integrity to admit that he made a mistake. He owned up to it and published a mea culpa. That said, Roger was also a victim because Elizabeth lied to him.
Do you think investors in Silicon Valley, with their FOMO attitudes and deep pockets, are vulnerable to making the same mistake again with a shiny new startup, or has this saga been a sober reminder to do their due diligence first?
Many of the mistakes made with Theranos were the same mistakes made with Enron. We must learn to recognize that we are, by nature, trusting souls. Knowing that should lead us to a guiding slogan: "trust but verify."
The irony of Holmes dancing to "I Can't Touch This" is almost too perfect. How did you find that footage?
It was leaked to us.
"Elizabeth Holmes is now famous for her fraud. Who better to host the re-boot of 'The Apprentice.'"
Holmes is facing up to 20 years in prison for federal fraud charges, but Vanity Fair recently reported that she is seeking redemption, taking meetings with filmmakers for a possible documentary to share her "real" story. What do you think will become of Holmes in the long run?
It's usually a mistake to handicap a trial. My guess is that she will be convicted and do some prison time. But maybe she can convince jurors -- the way she convinced journalists, her board, and her investors -- that, on account of her noble intentions, she deserves to be found not guilty. "Somewhere, over the rainbow…"
After the trial, and possibly prison, I'm sure that EH will use her supporters (like Tim Draper) to find a way to use the virtual currency of her celebrity to rebrand herself and launch something new. Fitzgerald famously said that "there are no second acts in American lives." That may be the stupidest thing he ever said.
Donald Trump failed at virtually every business he ever embarked on. But he became a celebrity for being a fake businessman and used that celebrity -- and phony expertise -- to become president of the United States. Elizabeth Holmes is now famous for her fraud. Who better to host the re-boot of "The Apprentice." And then?
"You Can't Touch This!"
Kira Peikoff was the editor-in-chief of Leaps.org from 2017 to 2021. As a journalist, her work has appeared in The New York Times, Newsweek, Nautilus, Popular Mechanics, The New York Academy of Sciences, and other outlets. She is also the author of four suspense novels that explore controversial issues arising from scientific innovation: Living Proof, No Time to Die, Die Again Tomorrow, and Mother Knows Best. Peikoff holds a B.A. in Journalism from New York University and an M.S. in Bioethics from Columbia University. She lives in New Jersey with her husband and two young sons. Follow her on Twitter @KiraPeikoff.
Breakthrough therapies are breaking patients' banks. Key changes could improve access, experts say.
Single-treatment therapies are revolutionizing medicine. But insurers and patients wonder whether they can afford treatment and, if they can, whether the high costs are worthwhile.
CSL Behring’s new gene therapy for hemophilia, Hemgenix, costs $3.5 million for one treatment, but helps the body create substances that allow blood to clot. It appears to be a cure, eliminating the need for other treatments for many years at least.
Likewise, Novartis’s Kymriah mobilizes the body’s immune system to fight B-cell lymphoma, but at a cost $475,000. For patients who respond, it seems to offer years of life without the cancer progressing.
These single-treatment therapies are at the forefront of a new, bold era of medicine. Unfortunately, they also come with new, bold prices that leave insurers and patients wondering whether they can afford treatment and, if they can, whether the high costs are worthwhile.
“Most pharmaceutical leaders are there to improve and save people’s lives,” says Jeremy Levin, chairman and CEO of Ovid Therapeutics, and immediate past chairman of the Biotechnology Innovation Organization. If the therapeutics they develop are too expensive for payers to authorize, patients aren’t helped.
“The right to receive care and the right of pharmaceuticals developers to profit should never be at odds,” Levin stresses. And yet, sometimes they are.
Leigh Turner, executive director of the bioethics program, University of California, Irvine, notes this same tension between drug developers that are “seeking to maximize profits by charging as much as the market will bear for cell and gene therapy products and other medical interventions, and payers trying to control costs while also attempting to provide access to medical products with promising safety and efficacy profiles.”
Why Payers Balk
Health insurers can become skittish around extremely high prices, yet these therapies often accompany significant overall savings. For perspective, the estimated annual treatment cost for hemophilia exceeds $300,000. With Hemgenix, payers would break even after about 12 years.
But, in 12 years, will the patient still have that insurer? Therein lies the rub. U.S. payers, are used to a “pay-as-you-go” model, in which the lifetime costs of therapies typically are shared by multiple payers over many years, as patients change jobs. Single treatment therapeutics eliminate that cost-sharing ability.
"As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket,” says Patricia Goldsmith, the CEO of CancerCare.
“There is a phenomenally complex, bureaucratic reimbursement system that has grown, layer upon layer, during several decades,” Levin says. As medicine has innovated, payment systems haven’t kept up.
Therefore, biopharma companies begin working with insurance companies and their pharmacy benefit managers (PBMs), which act on an insurer’s behalf to decide which drugs to cover and by how much, early in the drug approval process. Their goal is to make sophisticated new drugs available while still earning a return on their investment.
New Payment Models
Pay-for-performance is one increasingly popular strategy, Turner says. “These models typically link payments to evidence generation and clinically significant outcomes.”
A biotech company called bluebird bio, for example, offers value-based pricing for Zynteglo, a $2.8 million possible cure for the rare blood disorder known as beta thalassaemia. It generally eliminates patients’ need for blood transfusions. The company is so sure it works that it will refund 80 percent of the cost of the therapy if patients need blood transfusions related to that condition within five years of being treated with Zynteglo.
In his February 2023 State of the Union speech, President Biden proposed three pilot programs to reduce drug costs. One of them, the Cell and Gene Therapy Access Model calls on the federal Centers for Medicare & Medicaid Services to establish outcomes-based agreements with manufacturers for certain cell and gene therapies.
A mortgage-style payment system is another, albeit rare, approach. Amortized payments spread the cost of treatments over decades, and let people change employers without losing their healthcare benefits.
Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
The new payment models that are being discussed aren’t solutions to high prices, says Bill Kramer, senior advisor for health policy at Purchaser Business Group on Health (PBGH), a nonprofit that seeks to lower health care costs. He points out that innovative pricing models, although well-intended, may distract from the real problem of high prices. They are attempts to “soften the blow. The best thing would be to charge a reasonable price to begin with,” he says.
Instead, he proposes making better use of research on cost and clinical effectiveness. The Institute for Clinical and Economic Review (ICER) conducts such research in the U.S., determining whether the benefits of specific drugs justify their proposed prices. ICER is an independent non-profit research institute. Its reports typically assess the degrees of improvement new therapies offer and suggest prices that would reflect that. “Publicizing that data is very important,” Kramer says. “Their results aren’t used to the extent they could and should be.” Pharmaceutical companies tend to price their therapies higher than ICER’s recommendations.
Drug Development Costs Soar
Drug developers have long pointed to the onerous costs of drug development as a reason for high prices.
A 2020 study found the average cost to bring a drug to market exceeded $1.1 billion, while other studies have estimated overall costs as high as $2.6 billion. The development timeframe is about 10 years. That’s because modern therapeutics target precise mechanisms to create better outcomes, but also have high failure rates. Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
Skewed Incentives Increase Costs
Pricing isn’t solely at the discretion of pharma companies, though. “What patients end up paying has much more to do with their PBMs than the actual price of the drug,” Patricia Goldsmith, CEO, CancerCare, says. Transparency is vital.
PBMs control patients’ access to therapies at three levels, through price negotiations, pricing tiers and pharmacy management.
When negotiating with drug manufacturers, Goldsmith says, “PBMs exchange a preferred spot on a formulary (the insurer’s or healthcare provider’s list of acceptable drugs) for cash-base rebates.” Unfortunately, 25 percent of the time, those rebates are not passed to insurers, according to the PBGH report.
Then, PBMs use pricing tiers to steer patients and physicians to certain drugs. For example, Kramer says, “Sometimes PBMs put a high-cost brand name drug in a preferred tier and a lower-cost competitor in a less preferred, higher-cost tier.” As the PBGH report elaborates, “(PBMs) are incentivized to include the highest-priced drugs…since both manufacturing rebates, as well as the administrative fees they charge…are calculated as a percentage of the drug’s price.
Finally, by steering patients to certain pharmacies, PBMs coordinate patients’ access to treatments, control patients’ out-of-pocket costs and receive management fees from the pharmacies.
Therefore, Goldsmith says, “As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket.”
Transparency into drug pricing will help curb costs, as will new payment strategies. What will make the most impact, however, may well be the development of a new reimbursement system designed to handle dramatic, breakthrough drugs. As Kramer says, “We need a better system to identify drugs that offer dramatic improvements in clinical care.”
In today's podcast episode, law professor Gaia Bernstein talks about the challenges of keeping control over our thoughts and actions, even when some powerful forces are pushing in the other direction.
Each afternoon, kids walk through my neighborhood, on their way back home from school, and almost all of them are walking alone, staring down at their phones. It's a troubling site. This daily parade of the zombie children just can’t bode well for the future.
That’s one reason I felt like Gaia Bernstein’s new book was talking directly to me. A law professor at Seton Hall, Gaia makes a strong argument that people are so addicted to tech at this point, we need some big, system level changes to social media platforms and other addictive technologies, instead of just blaming the individual and expecting them to fix these issues.
Gaia’s book is called Unwired: Gaining Control Over Addictive Technologies. It’s fascinating and I had a chance to talk with her about it for today’s podcast. At its heart, our conversation is really about how and whether we can maintain control over our thoughts and actions, even when some powerful forces are pushing in the other direction.
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We discuss the idea that, in certain situations, maybe it's not reasonable to expect that we’ll be able to enjoy personal freedom and autonomy. We also talk about how to be a good parent when it sometimes seems like our kids prefer to be raised by their iPads; so-called educational video games that actually don’t have anything to do with education; the root causes of tech addictions for people of all ages; and what kinds of changes we should be supporting.
Gaia is Seton’s Hall’s Technology, Privacy and Policy Professor of Law, as well as Co-Director of the Institute for Privacy Protection, and Co-Director of the Gibbons Institute of Law Science and Technology. She’s the founding director of the Institute for Privacy Protection. She created and spearheaded the Institute’s nationally recognized Outreach Program, which educated parents and students about technology overuse and privacy.
Professor Bernstein's scholarship has been published in leading law reviews including the law reviews of Vanderbilt, Boston College, Boston University, and U.C. Davis. Her work has been selected to the Stanford-Yale Junior Faculty Forum and received extensive media coverage. Gaia joined Seton Hall's faculty in 2004. Before that, she was a fellow at the Engelberg Center of Innovation Law & Policy and at the Information Law Institute of the New York University School of Law. She holds a J.S.D. from the New York University School of Law, an LL.M. from Harvard Law School, and a J.D. from Boston University.
Gaia’s work on this topic is groundbreaking I hope you’ll listen to the conversation and then consider pre-ordering her new book. It comes out on March 28.
