Theranos CEO Banned From Operating Lab for Two Years

CMS drops hammer on beleaguered company

Embattled blood-testing company Theranos has received notice from the Centers for Medicare and Medicaid Services (CMS) regarding the imposition of sanctions arising from a 2015 evaluation of its laboratory in Newark, California. Among several rulings, the CMS has banned Theranos CEO Elizabeth Holmes from owning or operating a laboratory for two years.

The CMS sanctions include:

  • Revocation of the laboratory’s Clinical Laboratory Improvement Amendments (CLIA) certificate, which includes a prohibition on owners and operators of the laboratory from owning, operating, or directing a lab for at least two years from the date of revocation
  • Limitation of the laboratory’s CLIA certificate for the specialty of hematology
  • An unspecified civil money penalty
  • Suspension of the laboratory’s approval to receive Medicare and Medicaid payments for any services performed for the specialty of hematology
  • Cancellation of the laboratory’s approval to receive Medicare and Medicaid payments for all laboratory services

The revocations won’t take effect for 60 days.

The decisions by the CMS have been looming over Theranos for some time, particularly since the company announced that it was invalidating test results for tens of thousands of patients. The voiding of these results, plus intense scrutiny of Theranos’ blood-testing claims, led its partner Walgreens to terminate its contract for 40 Theranos “wellness centers” in 40 of its Arizona stores—a critical blow to the company, since the drugstore chain was its largest source of revenue.

Last week, a congressional committee issued a letter to Theranos seeking information on the company’s failure to comply with federal clinical laboratory testing standards as well as its decision to cancel two years’ worth of testing data sent to customers. Several lawsuits have been filed as a result of the test results being voided.

Theranos is also the subject of a criminal investigation by the U.S. Department of Justice centering on whether the company and its executives misled investors with regard to the efficacy of its blood-testing products.

Sources: Theranos; July 7, 2016; and BioSpace; July 8, 2016.