A guilty verdict for Elizabeth Holmes

Jan 04, 2022

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Quick Fix

— A jury found former Theranos CEO Elizabeth Holmes guilty of fraud, ending a nearly four-month trial.

— The Biden administration is struggling to stave off school closures sparked by staffing shortages and rising caseloads.

— The Capitol's physician is urging congressional offices to limit their in-person activities amid a dramatic increase in Covid-19 cases on Capitol Hill.

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In today's health care system, PBMs and health insurers often leave patients paying far more than they should for medicines. Unfortunately, the drug pricing plan being considered by Congress would do nothing to address the shady practices these middlemen use to overcharge patients. Our seniors deserve better. Tell Congress to make middlemen share the savings they receive with patients at the pharmacy counter. Learn more.

Driving the Day

ELIZABETH HOLMES FOUND GUILTY — Seven years after a series of fawning cover stories made her a Silicon Valley star, and six years after a Wall Street Journal investigation brought her tumbling down, Elizabeth Holmes is facing prison time for defrauding investors.

A jury found the former Theranos CEO guilty of four of 11 fraud charges, ending a lengthy trial that drew national attention and capped Holmes' dramatic rise and fall over two decades as an entrepreneur.

Holmes founded Theranos as a 19-year-old, claiming the company would be able to provide quick and accurate medical test results with just a finger prick's worth of blood. Yet even as she raised hundreds of millions of dollars, won over big-name investors and garnered widespread media attention, the company's devices were never able to deliver on Holmes' promises.

The Wall Street Journal's John Carreyrou exposed those misrepresentations in 2015, publishing several stories about flaws in Theranos' technology that spurred federal investigations, lawsuits and eventual SEC and criminal charges.

Holmes' downfall also prompted a reckoning in Silicon Valley and Washington over the culture that allowed Holmes to flourish despite no track record of actual success — and the lack of scrutiny of flashy startups capable of winning big valuations on the promise of being the next Apple or Google.

Among the big names who poured their money into Theranos: Rupert Murdoch, former Secretaries of State Henry Kissinger and George Schultz, former Education Secretary Betsy DeVos' family and former Defense Secretary James Mattis.

During the nearly four-month trial, Holmes' attorneys portrayed her as an ambitious and overconfident CEO who made mistakes but didn't commit outright fraud. But the jurors ultimately concluded she had deliberately lied to investors.

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BIDEN BATTLES OMICRON OVER SCHOOL CLOSURES — The Biden administration is sticking to a simple message in the face of Omicron's surge: Schools should remain open. But soaring cases and staff shortages make the issue far more complicated across the country, POLITICO's Juan Perez Jr., Madina Touré and Susannah Luthi report.

The virus' rapid spread has forced cities like Atlanta and Detroit to close their classrooms. In Chicago, the teachers union is squaring off against city officials over a move to remote learning. And some California districts are trying all manner of strategies to keep from shutting down.

The disarray comes despite Biden officials' assurances that schools would get everything they need to remain open, such as expanded vaccine availability and broader access to testing.

But Omicron is simply infecting too many people too fast, endangering Joe Biden's vow early on in his presidency that his Covid-19 response would ensure school doors remain open.

"Where I'm frustrated is we don't have a federal system," American Federation of Teachers President Randi Weingarten said. "Some places have been able to put in testing and masking, and other places have not."

OMICRON HITS THE HILL — Congress is battling a Covid-19 surge inside the Capitol that's swamped House and Senate offices with infections ahead of their first scheduled sessions of the new year.

In a letter to Hill offices Monday, Capitol physician Brian Monahan warned of an "unprecedented" number of cases and a 13 percent positive rate at the on-site testing center — up from less than 1 percent before Omicron emerged, POLITICO's Sarah Ferris and Marianne LeVine report.

Monahan is now urging offices to scale back in-person meetings and require masks for any indoor gathering. He also advised lawmakers and staff to ditch cloth and surgical masks for N-95s or KN-95s (a step that goes beyond even White House protocols, our colleagues at West Wing Playbook note).

The rising caseload comes as the Senate returns today for its first vote, facing a to-do list that includes trying to break the stalemate over Biden's $1.7 trillion social spending bill.

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Vaccines

FDA EXPANDS KIDS' BOOSTER ELIGIBILITY — Adolescents as young as 12 can now get Covid-19 booster shots under the latest FDA authorization — a step that further opens up access to the extra dose key to protecting against Omicron, POLITICO's Lauren Gardner reports.

The decision clears the way for the CDC's advisory committee to evaluate the expanded eligibility on Wednesday.

While some medical experts have raised concerns about the potential for rare heart-related side effects associated with the shots, top FDA officials on Monday said the vaccine's benefits significantly outweigh its risks. In Israel, for example, none of the 6,300 teens ages 12 to 15 who received a booster have reported any instances of myocarditis or pericarditis.

The FDA also made a pair of other changes to its vaccine guidelines. The agency is shortening the wait time for a booster to five months from completion of a person's primary series, down from six months.

Meanwhile, some children as young as 5 will be allowed to get a booster if they're immunocompromised.

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Inside the Humphrey Building

HHS PRESSURED OVER COVID TEST SPENDING — Senior GOP senators are demanding details on how the health department spent tens of billions of dollars intended to bolster testing, citing the long wait times and scarce supplies amid the Omicron surge.

"It does not appear to be because of lack of funding, but a more fundamental lack of strategy and a failure to anticipate future testing needs by the administration," Sens. Richard Burr (R-N.C.) and Roy Blunt (R-Mo.) wrote to HHS Secretary Xavier Becerra.

Burr, the Senate HELP Committee's ranking member, and Blunt, the top GOP appropriator, seek details on how much of the $82.6 billion appropriated for testing in 2020 and 2021 remains — and whether the funds were diverted for other purposes.

The two senators are also asking for details on Biden's plan to buy and distribute 500 million rapid tests, including how much the purchase will cost and how long the administration expects that supply to last.

Coronavirus

NJ PLANS EXTENDED SCHOOL MASK MANDATE — New Jersey Gov. Phil Murphy is seeking a 90-day extension of the state's in-school mask mandate in response to a "tsunami" of Covid-19 infections driven by the Omicron variant, POLITICO's Carly Sitrin reports.

The masking requirement was set to expire on Jan. 11. But Murphy argued keeping it in place another three months is "necessary now to keep our schools safe." Roughly 40 New Jersey school districts are moving to remote learning amid the surge, and the state's health commissioner said pediatric hospitalizations are at their highest level of the pandemic.

The move comes as other governors spurn mandates. Colorado Gov. Jared Polis, also a Democrat, said in December he wouldn't impose a statewide mask mandate and "the emergency is over" now that vaccines are widely available. Instead, he's leaving masking requirements up to local officials.

Names in the News

The National Pharmaceutical Council is appointing Sharon Phares as its chief scientific officer. Phares was previously the senior vice president of research at Pharmaceutical Strategies Group.

BuzzFeed News is expanding its health desk, adding Katie Camero as a New Jersey-based health reporter and Loren Cecil as a health and fitness commerce writer. Camero was a science reporter at McClatchy News, and Cecil did internship stints at Esquire, New York Magazine, Marie Claire and the Hearst Lifestyle Group.

What We're Reading

For STAT, Jennifer Adaeze Okwerekwu writes about how the medical profession continues to be "shaped by the privileging of white norms and experiences."

The New York Times' David Streitfeld chronicles how Elizabeth Holmes and her "forceful resolve" duped Silicon Valley for years.

Florida's surgeon general is downplaying the need for Covid-19 testing despite ballooning caseloads, criticizing the "testing philosophy" he said has taken over the country, The Hill's Monique Beals reports.

A message from PhRMA:

Last year, brand drug companies provided $187 billion in total discounts, rebates and other payments to pharmacy benefit managers, insurers, and other entities. In fact, the net prices paid by PBMs and health plans for brand medicines declined 2.9% last year, on average. So how come payers and middlemen often don't share these savings with patients at the pharmacy counter? Policymakers should put an end to these gimmicks so patients can get a fairer deal at the pharmacy. Learn more.