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Theranos founder Elizabeth Holmes banned from operating labs

Federal ban will last two years

Andrew Burton/Getty Images

Elizabeth Holmes, the founder of blood-testing company Theranos, has been banned from operating labs in the US for two years, the Silicon Valley company announced in a press release. Theranos has been fined an undisclosed amount of money. The announcement is vindication for The Wall Street Journal, which first reported on irregularities at the company eight months ago.

Theranos has also had its Newark lab's certification revokedThe sanctions also included revoking Theranos's Newark, California lab's certification under the relevant regulation (called CLIA), a correction plan, a suspension of any payments from Medicare or Medicaid, and  the cancellation of any payments from those agencies. The Newark, California lab's certification will be rescinded in 60 days, but Theranos won't conduct any patient testing effective immediately, the statement said.

Only one of Theranos's blood tests received federal approval. The rest — more than 80 — were sold under a regulatory loophole as lab-developed tests. So the supervising agency for most of the tests wasn't the US Food and Drug Administration — it was, instead, the Centers for Medicare and Medicaid Services. That's the agency that imposed the sanctions.

At one time, Theranos was valued at $9 billion, and Holmes was a media darling (you can see her TED talk here). Following WSJ's reporting, the company unraveled. The Verge reported no federal regulators had examined the company's proprietary technology for two years. Walgreens ended a partnership with Theranos; now, shareholders are filing lawsuits against the company.

Holmes once compared the controversy around Theranos to a witch hunt. Today, she says "We accept full responsibility... While we are disappointed by CMS’ decision, we take these matters very seriously."