Theranos Inc.’s CEO Elizabeth Holmes was banned for two years from owning or operating laboratories as part of U.S. regulators’ sanctions against the troubled blood-testing startup.
The once high-flying Silicon Valley startup was also penalized for an undisclosed amount, and lost its eligibility to get payments from federal health insurance programs for lab services, according to a statement late Thursday from Theranos, citing a notice it received from the Centers for Medicare and Medicaid Services. The company is shutting down its Newark, California, lab and plans to rebuild it, Holmes said.
The sanctions follow an inspection of the company’s lab in Newark by federal health regulators that found failures so severe as to jeopardize patients’ health. In May, Theranos said it was canceling or altering tens of thousands of results, including two years of results on some of the company’s proprietary machines.
The company had promised to revolutionize the blood-testing industry — dominated by Quest Diagnostics Inc. and Laboratory Corp of America Holdings — with cheap, less-painful tests that used only a finger-prick of blood and could be run on what the company has said are its breakthrough analyzers.
Regulators have had doubts for some time. In January, CMS sent Theranos a scathing letter detailing deficiencies at its Newark lab that the department said was putting patients’ health and safety in “immediate jeopardy.”
Soon after, Theranos told the agency that there was “no evidence of systemic errors” at its lab and that “no patient impact is expected.” In March, the agency said the company hadn’t backed up those claims and threatened fines and potentially sanctioning company executives from working in the industry for as long as two years.
In recent months, as Theranos has faced questions over whether its technology worked, it has said that it stopped using its own devices and is submitting individual tests for FDA approval. Three class action lawsuits have been filed against the company, claiming consumer fraud and false advertising.
By Chitra Somayaji