Feds Propose Banning Theranos CEO Elizabeth Holmes from the Blood Testing Biz for at Least Two Years

Feds Propose Banning Theranos CEO Elizabeth Holmes from the Blood Testing Biz for at Least Two Years
April 14, 2016
By Alex Keown, BioSpace.com Breaking News Staff

PALO ALTO, Calif. – Things could get worse for embattled Theranos chief executive Elizabeth Holmes as she faces a possible federally-mandated two-year suspension from the blood testing industry over failures to address deficiencies at lab facilities in California.

Not only could Holmes face suspension, but the company could also face crippling sanctions, including the shuttering of its heavily criticized Newark, Calif.-based lab, as well as suspension of its eligibility to receive payments under Medicare, the New York Times reported this morning. Citing a letter from officials from the Centers for Medicare and Medicaid Services (CMMS), the Times reported that Holmes and Theranos' president, Sunny Balwani would be banned from owning a laboratory facility for two years, which would be a major blow to the already heavily criticized company that has an estimated value of $9 billion. The letter from the CMMS has yet to be made public, but information contained in the letter was disclosed Wednesday by the Wall Street Journal, which has led the media examination of Theranos practices since last fall.

Brooke Buchanan, vice president of communications for Theranos said the company is addressing the concerns raised in the letter from the Centers for Medicare and Medicaid Services.

“CMS has not imposed sanctions on Theranos’ Newark lab. Due to the comprehensive nature of the corrective measures we’ve taken over the past several months, which has been affirmed by several experts, we are hopeful that CMS won’t impose sanctions. But if they do, we will work with CMS to address all of their concerns,” she said in an email to BioSpace .

Buchanan told the Los Angeles Times the company is waiting for federal regulators to finish examining some of the changes Theranos has both proposed and made to its facilities since concerns were first raised about the practices at the lab. Buchanan told the Times that the possible sanctions are a “worst case scenario.”

The majority of Theranos’ lab work is conducted at a facility in Arizona, which is not under threat of sanction, Buchanan told the L.A. Times.

Still, if Holmes, the youngest self-made billionaire in the United States, is banned from operating a lab, it raises questions about the future of the company she founded at 19 years of age. For the past nine months, Holmes and Theranos have attempted to fight off scathing criticism of the company’s technology and questions of efficacy.

Earlier this year, Theranos took another hit to its reputation after a scathing government report shows Theranos’ Edison blood testing devices has failed to meet the company’s own standards. The U.S. Centers for Medicare and Medicaid Services released a 121-page report of its findings following a series of inspections at Theranos’ Newark, Calif. lab and the news for the company valued at $9 billion based on its proprietary blood-testing is not good. The CMMS report showed 29 percent of quality control checks performed on Theranos’ Edison devices in October 2014 “produced results outside the range considered acceptable by Theranos,” the Journal reported. A February 2015 test using the Edison device to measure testosterone levels failed quality control checks 87 percent of the time. The CMMS report shows several months-long stretches of quality control issues when it comes to the Edison device.

In a statement on the Theranos’ website, Brooke Buchanan, Theranos’ vice president of communications, said the company has dedicated every resource to make corrections to the Newark lab. She noted several course corrections the company has made to the lab, including personnel changes, the adoption of “enhanced “quality systems, policies and procedures” and the suspension of some testing at the Newark site. Buchanan said the company has also “voided results associated with any findings that were not consistent with the quality standards the lab holds itself to today, under our lab’s new leadership.”

The concerns raised by the CMMS jeopardized Theranos’ relationship with Walgreens, the company’s biggest source of revenue. More than 40 Walgreens stores in Arizona offer Theranos blood tests. Walgreens has considered severing its relationship with Theranos, according to reports.

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