The US Centers for Medicare and Medicaid Services has proposed to ban Theranos' founder, Elizabeth Holmes, from the blood-testing business for a minimum of two years, according to a letter obtained by The Wall Street Journal. This is one of the most severe sanctions that the US government can impose on a laboratory.
The letter was sent to Theranos on March 18th, after the company submitted its plan to correct the deficiencies identified at Theranos' California lab. In it, federal regulators explain that they want to revoke the license for Theranos' California lab and bar its owners from owning or running a lab for at least two years. That means that if these sanctions go through, both Holmes and Theranos president Sunny Balwani would be banned from operating any and all Theranos labs — including the company's Arizona facility.
"The laboratory's allegation of compliance is not credible."
The proposed sanctions are the product of a lab inspection late last year that showed that Theranos employed unqualified personnel and had them review patient test results. That same inspection also revealed that Theranos employees weren't performing proper checks on the company's blood tests, including one that's used determine how long blood takes to clot. This isn't the first time that regulators have found deficiencies at Theranos' labs, but these were the most serious.
After receiving the letter, Theranos had 10 days to respond and explain why its owners shouldn't be penalized. Federal regulators are currently reviewing Theranos' response, the WSJ reports. If the reviewers don’t find in favor of Theranos, sanctions would begin to take effect in eight to 60 days (not all sanctions are implemented at the same time).
"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," Theranos spokesperson Brooke Buchanan told The Verge in an emailed statement. "But if they do, we will work with CMS to address all of their concerns."
"We are hopeful that CMS won’t impose sanctions"
The letter's a very interesting read, but if you're not into the lab jargon, here's the gist: the corrections that Theranos submitted to CMS after inspectors found serious deficiencies at Theranos' California lab just didn't cut it. "The laboratory's allegation of compliance is not credible and evidence of correction is unacceptable," regulators write. Because of this, CMS details six possible sanctions. Among them, the US government says it might fine Theranos $10,000 for each day that the California lab wasn't in compliance. That's the maximum fine that CMS can impose. Federal regulators also ask that the company submit contact information for every doctor and patient who used the lab starting in January 2014.
Theranos currently operates 40 clinics inside Walgreens' drug stores. The startup's lawyers could appeal the sanctions, but getting a decision from a judge could take months. And even then, there's no telling what the decision will be. If there’s a path forward for Theranos, it may be one without its founder.
Update April 13th, 5:55PM EST: This story has been updated with a comment from Theranos.