Just Blood · Finance
I SAW THERANOS
COMING.
In 2014, when I was Co-CEO of Access Labs, I started getting emails about a laboratory called Theranos.
They were taking some of our clients in Arizona. And I immediately paid attention.
Their client pricing was basically the same as ours—maybe 2–5% lower in some cases.
I KNEW THOSE PRICES
COULD WORK.
I knew how much money could make it to the bottom line—EBITDA—at those prices. And I knew what happens when you add:
SCALE.
Access charged a lot less than Quest and LabCorp, and our turnaround time was approximately 24 hours. Theranos was offering something similar.
But then I started looking at the rest of what they were doing.
AND I RECOGNIZED THE MODEL IMMEDIATELY.
BECAUSE IT WAS OUR MODEL.
At Access Labs, Guest Experience was #1.
We built our patient centers in South Florida around that philosophy. The experience mattered—from the moment a patient walked through the door to the moment they received their results.
When I saw the Theranos Wellness Centers, I understood exactly what they were doing.
GUEST EXPERIENCE? ✓
Their centers reminded me of what we had built in South Florida.
Then came price. Access had built its business around pricing dramatically below the large national laboratories. Theranos was doing the same thing.
PRICE? ✓
But Theranos had something we didn't.
THEY ONE-UPPED US ON
CONVENIENCE.
WALGREENS.
FINGERSTICKS.
Instead of asking patients to find a traditional laboratory and have tubes of blood drawn, Theranos was planning to put testing somewhere millions of people already went:
THE NEIGHBORHOOD PHARMACY.
And they were proposing to do it with a fingerstick.
CONVENIENCE? ✓
ACCESS LABS
Guest Experience ✓
Low Price ✓
Fast Turnaround ✓
THERANOS
Guest Experience ✓
Low Price ✓
Fast Turnaround ✓
Walgreens ✓
Fingersticks ✓
THEY HAD TAKEN THE MODEL
I ALREADY KNEW WORKED...
AND MADE IT BETTER.
From my experience operating Access Labs, I knew how patients and clients responded to service, price and convenience. I knew how much money could make it to EBITDA at those prices. And I knew what happened financially when you added volume.
So when I looked at Theranos, I wasn't wondering whether consumers would want this. I believed I already knew.
THE MODEL HAD BEEN PERFECTED.
And if the technology worked and they could execute it nationwide...
I KNEW HOW THE MARKET
WOULD RESPOND.
I remember telling my family:
“ACCESS IS DEAD IN FIVE YEARS
IF WE DON'T DO SOMETHING.”
“THERANOS IS COMING.”
This wasn't another Quest or LabCorp dominating the laboratory industry through enormous scale and insurance contracts. I saw something different.
GUEST EXPERIENCE.
PRICE.
CONVENIENCE.
And potentially taking that model nationwide through Walgreens.
THEN OCTOBER 2015 HAPPENED.
The Theranos story broke. And I remember feeling something I probably wouldn't have admitted before:
RELIEF.
I remember thinking to myself:
“IT WAS TOO GOOD TO BE TRUE.”
“IT MUST HAVE BEEN A FRAUD.”
The competitor I thought could change our entire industry suddenly appeared to be gone. And for years, that's basically where I left it. Until September 2021.
THEN I SAW
THE EDISON.
For the first time. On YouTube. The video was:
“THERANOS AACC PRESENTATION.”
I watched the Edison operate. And something clicked. What I was looking at didn't match the story I thought I understood.
That moment sent me down a path that would eventually lead to everything you're seeing on this website:
THE CHEMISTRY.
THE PATENTS.
THE EDISON.
THE VALIDATION REPORTS.
THE CLIA LABORATORY.
THE THERANOS–PFIZER CANCER STUDY.
And now:
THE MONEY.
Because when I eventually went back and looked at Theranos' financial model, there was one number that didn't shock me:
$2.355 BILLION EBITDA.
Not because that's a small number. It's enormous. But because I had already operated a laboratory built around low pricing, low costs and high margins.
I understood the economics.
LOW COST PER TEST.
VOLUME.
SCALE.
And Theranos wasn't planning to scale to a few laboratories. They were planning to scale through:
WALGREENS.
So before we look at Theranos' financial projections, let's do something else.
Let's take the economics of the national laboratories today... and ask what happens if reimbursement eventually resets dramatically lower.
THE 60% STRESS TEST.
WHAT WOULD TODAY'S NATIONAL LAB ECONOMICS LOOK LIKE IF REIMBURSEMENT EVENTUALLY RESET 60% LOWER?
CHECK THIS OUT.
THIS IS A STRESS TEST.
NOT A FORECAST.
PART 01 / 07
QUEST DIAGNOSTICS.
Diagnostic Information Services
REIMBURSEMENT ↓ 60%
Illustrative operating result
Stress-test arithmetic: 40% × $10.785B = $4.314B. 2025 DIS segment costs implied by the reported segment results are approximately $8.956B.
PART 02 / 07
LABCORP.
REIMBURSEMENT ↓ 60%
Illustrative adjusted operating result
Stress-test arithmetic: 40% × $10.8765B ≈ $4.351B. 2025 Diagnostics adjusted operating costs implied by the reported segment results are approximately $9.097B.
PART 03 / 07
THE PROBLEM ISN'T VOLUME.
IT'S THE COST STRUCTURE.
Under this deliberately simple scenario, neither company's current diagnostic cost structure could absorb a 60% revenue-per-test shock unchanged. Both companies would respond — by cutting costs, restructuring operations, changing mix, renegotiating contracts and taking other actions.
BUT WHAT IF A LAB WAS DESIGNED
FOR THE LOWER PRICE FROM DAY ONE?
ENTER THERANOS.
PART 04 / 07
THE PRICING MODEL.
Trial Exhibit 3404 shows Theranos presenting laboratory testing at dramatically lower prices. For the public-facing comparison below, the Theranos and Medicare figures come from the trial exhibit; the Patient Retail column uses the retail assumptions shown here for comparison.
EVERYDAY TESTING.
| Test | Medicare | Theranos | Patient Retail |
|---|---|---|---|
| Vitamin D | $40.70 | $20.36 | $100 |
| Vitamin B12 | $20.72 | $10.36 | $80 |
| Comprehensive Metabolic Panel | $14.54 | $7.27 | $30 |
| Lipid Panel | $18.42 | $9.21 | $30 |
LOWER PRICE.
BY DESIGN.
NOW LOOK AT
MOLECULAR TESTING.
| Test | Medicare | Theranos | Patient Retail |
|---|---|---|---|
| Hepatitis B DNA Quantitative RT-PCR | $58.88 | $29.44 | $167.50 |
| Hepatitis C RNA Quantitative RT-PCR | $58.88 | $29.44 | $195.00 |
About 82% below the retail comparison shown here.
About 85% below the retail comparison shown here.
HEPATITIS C RNA QUANT RT-PCR
$195 → $29.44
LOWER PRICE WASN'T A DISCOUNT.
IT WAS THE BUSINESS MODEL.
Theranos also presented a price-transparency principle: the same test price regardless of insurance type or status. The financial question is therefore not simply how much revenue could be charged per test, but whether a lower-cost testing architecture could generate attractive margins at dramatically lower prices through volume and scale.
HOW DO YOU CHARGE $29.44
FOR A TEST PRICED AT $195
AND STILL PROJECT HIGH EBITDA?
Miniaturized chemistry means less reagent per test. Automation can reduce labor per test. And as testing volume increases, fixed costs are spread across more tests.
LOWER COST PER TEST.
MORE TESTS.
HIGHER OPERATING LEVERAGE.
Patient Retail figures are comparison assumptions for this Finance model. They should not be read as current universal Quest, Labcorp, insurer, or hospital prices.
PART 05 / 07
THE FINANCIAL MODEL.
Trial Exhibit 7411's PFM Base Case projected the following 2018 economics. These were projections, not realized results.
35.0% of revenue
46.1% projected margin
LOWER PRICE.
LOWER UNIT ECONOMICS.
MASSIVE VOLUME.
SCALE.
PART 06 / 07
NOW ADD WALGREENS SCALE.
The Theranos–Walgreens strategy was not built around a handful of locations. The 2013 Walgreens footprint was 8,116 drugstores, while a Theranos rollout proposal contemplated service centers in just over 6,000 Walgreens locations.
Walgreens locations contemplated in the rollout proposal.
Drugstores in Walgreens’ 2013 network.
WHAT DOES $5.106 BILLION LOOK LIKE
WHEN YOU SPREAD IT ACROSS THOUSANDS OF STORES?
| Illustrative allocation | 6,000 stores | 8,116 stores |
|---|---|---|
| Revenue per store / year | $851,000 | $629,128 |
| Revenue per store / month | $70,917 | $52,427 |
| Revenue per store / day | $2,332 | $1,724 |
Illustrative scale math only: $5.106B divided evenly across the stated store counts. The Theranos financial model did not state that all 2018 revenue would come from Walgreens or be distributed evenly across stores.
NOW TURN REVENUE INTO PATIENTS.
Take the full 8,116-store footprint and the illustrative $1,724 per-store daily revenue requirement. The number of patient visits needed depends on the average laboratory revenue generated per visit.
| Illustrative revenue per patient visit | Patients / store / day | Approx. annual patient visits across 8,116 stores |
|---|---|---|
| $50 | 34.5 | 102.2 million |
| $75 | 23.0 | 68.1 million |
| $100 | 17.2 | 51.1 million |
AT $75 PER PATIENT VISIT,
THE MATH IS ABOUT
23 PATIENTS PER STORE PER DAY.
Walgreens reported approximately 6.2 million customers visiting its stores each day in fiscal 2013. Across 8,116 stores, that works out to roughly 764 customer visits per store per day.
23 ÷ 764 ≈ 3%
ILLUSTRATIVELY, ABOUT 3% OF DAILY STORE TRAFFIC
AT $75 OF LAB REVENUE PER PATIENT
WOULD PRODUCE THE STORE-LEVEL REVENUE IMPLIED BY
$5.106 BILLION.
This is a unit-economics illustration, not a claim that 3% of Walgreens customers would have become Theranos patients. Actual revenue would depend on payer mix, test mix, tests per patient, utilization, store adoption, operating days and revenue from channels beyond Walgreens.
AND THEN COMES OPERATING LEVERAGE.
The Theranos model projected $1.789B of COGS on $5.106B of revenue in 2018 — about 35% of revenue — followed by $385M of R&D and $578M of SG&A.
THE THESIS WASN'T
HIGH PRICE.
IT WAS
LOWER PRICE + VOLUME + SCALE.
PART 07 / 07
WHY REIMBURSEMENT MATTERS.
Today's Medicare Clinical Laboratory Fee Schedule generally bases payment for most clinical diagnostic laboratory tests on the weighted median of private-payor rates, weighted by test volume. That means market pricing and volume are part of the reimbursement mechanism.
But the 60% scenario on this page is intentionally hypothetical. Current law phases in many CLFS reductions and limits affected reductions to 15% per year for 2027–2029; it does not impose an immediate 60% nationwide cut.