Theranos gets wrist-slap fine from feds, agrees to do no clinical lab work for two years

Terribly troubled Palo Alto blood-testing firm Theranos will pay a $30,000 fine and has agreed not to own or operate any clinical labs for two years, after a settlement with federal regulators.

Theranos, led by charismatic CEO Elizabeth Holmes, had catapulted itself into infamy through the failure of its signature testing device, the “Edison” machine, and subsequent findings by the federal Centers for Medicare & Medicaid Services that Theranos was not in compliance with the law, had marketed inaccurate testing, and potentially endangered patients.

The company had claimed it could conduct dozens of diagnostic tests from a drop of blood.

Before the enterprise came crashing down, Theranos had reached a peak valuation of $9 billion, with Holmes estimated to be worth $4.5 billion herself. After failing federal inspections, the company voided a year’s worth of test results, closed its labs and blood-testing centers, was sued for $140 million by Walgreens and announced in January it would lay off 155 workers, about 41 percent of its workforce.

On April 17, Theranos announced the settlement with the federal regulator, saying the deal resolved all outstanding legal and regulatory proceedings between the company and the Centers for Medicare & Medicaid Services.

Although the company agreed not to own or operate labs for two years, it said it had “exited the clinical lab and retail business last year” and was focusing on its “miniaturized, automated testing platforms and related chemistries.”

These platforms will enable blood-testing for a variety of conditions, according to Theranos, and Holmes has said the firm’s test for the Zika virus has been submitted for FDA approval.

“The company looks forward to working with regulatory authorities to secure approval for these innovative technologies,” Theranos said in a press release about the settlement.

However, Theranos’ testing scandal gave birth to considerable skepticism about the firm’s future. After Holmes discussed the new automated-testing platforms last year, NYU bioethicist Arthur Caplan told the MIT Technology Review he couldn’t imagine anything that could be said that would “resurrect” the firm.

The Centers for Medicare & Medicaid Services said the settlement with Theranos had been finalized April 14.

“Through this agreement, CMS continues to protect patient safety which is our highest priority,” the agency said in a statement. “Theranos closed its labs in Scottsdale, Arizona and Newark, California in October following the initiation of enforcement actions by CMS.

“As a result of this settlement agreement, Theranos’ current and former owners, operators, and directors have agreed not to own, operate, or direct any clinical labs subject to CMS’ Clinical Laboratory Improvement Amendment (CLIA) for two years.”

SiliconBeat asked CMS to explain why the penalty against Theranos was relatively small, but did not immediately receive an answer. This post will be updated with any response to that question.

Photo: Theranos CEO Elizabeth Holmes in 2014 (Karl Mondon/Bay Area News Group)


Tags: , , , ,


Share this Post

  • Lynn

    Charasmatic? Holmes is not charasmatic… just staged and a poser. Her expressions are evasive at best, looking down to the floor, or at nowhere, rambling on while she thinks how to answer the interview questions. Her deliberately messed up hair (like she’s a brainy worker), is odd at best. It makes her look crazy. She changed it to normal and wore a cross necklace when being interviewed by Maria Shriver.

    She thinks she charmed media interviewers, but it was just acting unprofessionally. “Looking specially at the long-time experienced CNN doc, she tells him, “No one else has been in here before. You’re the first one (inside the lab).” He answers while looking away, “Wow.”