False marketing doesn’t pay. On Wednesday, Forbes.com downgraded a member of its billionaires list, Theranos CEO Elizabeth Holmes, now listing her as having an estimated net worth of “nothing.” Nada. Zilch. Zero.
Here’s part of the reasoning in the “From $4.5 Billion to Nothing: Forbes Revises Estimated Net Worth of Theranos Founder Elizabeth Holmes” piece by Matthew Herper:
“Theranos’ target market may not exist,” Herper says of the blood-testing company. “Outside experts are skeptical of the idea that Theranos could be worth nearly as much as incumbents like Laboratory Corp. of America (market capitalization: $13 billion) and Quest Diagnostics DGX +0.36 percent (market capitalization: $11 billion). Theranos, which charges less per test, would need to dramatically improve margins on its tests (which it has said it can do), as well as get many more people to take its blood tests.”
Herper says Holmes’ company may also have made false claims about its product, which is where the false marketing— rather than just the poorly researched target audience claims — comes into focus.
Oddly, though, it’s the cult of personality surrounding Holmes’ wealth that trended on Facebook on Wednesday. Earlier news that the Theranos tests may not work broke in May in the Wall Street Journal to much less fanfare.
Herper highlights that “an alphabet soup of federal agencies” are investigating Theranos and Time reports on May 19 that “Theranos Has Junked Two Years of Blood Test Results.”
One tweet mentions that false brand claims sanctioned by the Federal Trade Commission happen all of the time.
@upbeatprof Theranos is just one of countless examples. Pavlok, Luminosity, Neuro Drink, and so many others.
— Lenny Teytelman (@lteytelman) May 23, 2016
Regarding the other brands Teytelman mentions:
- In April, Neurobrands — the “maker of the ‘Neuro’ line of drinks … agreed to a permanent court injunction that requires it to change its marketing practices. The company will also pay $500,000 in penalties and restitution as part of a settlement with [Los Angeles] prosecutors.” [Author’s note: In a search for this product on Wednesday, I found results still touting its brain-boosting properties. The injunction requires the company stop making those claims.]
- In May, Mark Cuban said on ABC’s “Shark Tank” that the maker of Pavlok, an “electric-shocking wristband [the maker claims] has been proven to shock people out of their bad habits,” is a “con artist,” according to the Boston Business Journal.
- In January, Lumosity (not Luminosity, as Teytelman writes) settled with the FTC for $2 million for “deceptive advertising” claiming its “brain-training” games would “ ‘stave off memory loss, dementia and even Alzheimer’s disease,’ Jessica Rich, the FTC’s Bureau of Consumer Protection director, said in a statement,” writes Slate.
So what’s worse? That “Theranos has not delivered,” as Herper says? Or that “tens of thousands of patients could have been given incorrect test results,” as Time writes? Or is it that the American public feels betrayed by a rags to riches story that may have been made out of whole cloth?
The reaction to Holmes doesn’t seem to have reached the outrage consumers reserved for Martin Shkreli, another medical marketer who is infamous for raising the price of AIDS and cancer “life-saving drug Daraprim [to] $750 per pill — up from $13.50,” reports the Daily Beast in 2015.
“Shame on Elizabeth Holmes and her empty promises,” Elizabeth Eisemann posts on Facebook on Wednesday. “There were people that had such high expectations of Theranos and microfluidic technology to run a vast battery of tests using a single drop of blood. However, when asked for documentation and peer reviewed studies, I was able to find no proof of precision, accuracy or analyte [sic] sensitivity. What a joke.”