Theranos in Jeopardy of Losing Biggest Blood-Testing Client

Theranos in Jeopardy of Losing Biggest Blood-Testing Client
February 11, 2016
By Alex Keown, Breaking News Staff

PALO ALTO, Calif. – Blood-testing company Theranos continues to face fallout from a critical report of its laboratory in Newark, Calif. as Walgreens, Theranos’ biggest retail partner, is threatening to terminate its relationship with the company, The Wall Street Journal reported Wednesday afternoon.

In January, Theranos received a scathing report about conditions at its Newark lab, which prompted Walgreens to inform the company it has 30 days to bring that lab into compliance, or the company may have no other option but to terminate its relationship with the company, the Journal said, citing unnamed people “familiar with the matter.” Walgreen’s warning expires at the end of February.

Within hours of the release of the scathing report from the U.S. Centers for Medicare & Medicaid Services about the conditions of the Newark lab, Walgreens notified the company about it displeasure.

“Walgreens informed Theranos that tests collected at 40 Theranos Wellness Centers located at stores in Arizona must be sent only to Theranos’ certified lab in the Phoenix area or to an accredited third-party lab for analysis. No patient samples will be sent to the Newark lab until all issues raised by CMS have been fully resolved,” Walgreens said in its Jan. 28 letter to Theranos. Walgreens has toyed with the idea of closing its 40 Theranos centers at stores across Arizona, Reuters reported.

The warning letter from the Centers for Medicare and Medicaid Services told Theranos that its laboratory practices at the Newark site were not in compliance with conditions set forth by the federal Clinical Laboratory Improvement Amendment (CLIA). The letter said the company’s hematology practices at that site “posed immediate jeopardy to the health and safety” of patients. The letter defined immediate jeopardy a situation in which corrective action is necessary due to the laboratory's non-compliance, which “has already caused, is causing, or is likely to cause, at any time, serious injury or harm, or death, to individuals served by the laboratory or the health and safety of the general public."

The letter noted deficiencies in Theranos’ hematology practices, its analytic systems and also issues with three employees. Theranos has 10 days to comply with the issues raised by regulators, which Theranos said it will do.

Brooke Buchanan, vice president of communications at Theranos, told BioSpace the company is working to fix the issues identified at the Newark facility. She also said the company continues to work with Walgreens to provide access to “reliable, high quality and low-cost lab testing services.” Buchanan added Theranos remains confident in its technologies. BioSpace reached out to Buchanan this morning, but has not yet received a response.

Theranos said the deficiencies found in Newark does not reflect the whole of the site, nor does it include the company’s Arizona facility, where it says more than 90 percent of its testing is done.

Walgreens operates 40 stores in Arizona where patients can have their blood tested by Theranos. The tests have typically been sent to labs in either Arizona, where the company does the bulk of its work, or the California site that has been under scrutiny. Theranos’ partnership with Walgreens is the California-based company’s biggest source of revenue, the Wall Street Journal said. There had been talks of Walgreens expanding its partnership with Theranos into other stores, but so far those plans have been put on hold since the Wall Street Journal first began scrutinizing the company and its practices in the fall of 2015.

Theranos’ issues at its Newark lab is not the first time the company’s laboratory operations have been scrutinized. Following an inspection of its labs in the summer of 2015 by the U.S. Food and Drug Administration, federal regulators called the company’s proprietary Nanotainer tubes an uncleared medical device. Regulators were critical of some of the practices its inspectors observed, including improper classification for its proprietary Nanotainer tubes used for blood specimens. The FDA said Theranos’ Nanotainer blood specimen tubes are not properly filed as a Class II medical device, but are instead being identified as a Class I medical exempt device. As a result, the FDA said Theranos is “currently shipping this uncleared medical device in interstate commerce between California, Arizona and Pennsylvania.” Other observations made by FDA inspectors include a criticism that a method for addressing complaints regarding a possible failure of the device to meet its specifications were not “reviewed, evaluated and investigated where necessary.”

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