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Theranos Founder Could Get Shut Out of Business

CMS is proposing a host of penalties against Theranos and its top brass over deficiencies at its California laboratory.

Nancy Crotti

Elizabeth Holmes Theranos
Elizabeth Holmes

The federal government has proposed banning Theranos  Inc. founder and CEO Elizabeth Holmes from the blood-testing business for at least two years if the company cannot prove it has fixed serious problems at its California laboratory.

In a letter dated March 18 and obtained by the Wall Street Journal, the Center for Medicare and Medicaid Services cited Theranos for continued failure to address issues at the plant following a CMS inspection in November.

CMS said in January that, unless the company addressed the issues to its satisfaction, it could fine the firm, or suspend or revoke its certification for testing human samples. The agency is now threatening fines and revocation in addition to shutting Holmes and Theranos president, Sunny Balwani, out of the business.

The $9-billion Silicon Valley startup became well-known for its blood-testing technology, which promised to perform multiple diagnostic tests with a single drop of blood. Following previously released CMS reports stating that the company may be putting patients in danger and that its test results are erratic, the company has been on the defensive publicly.

CMS gave Theranos 10 days to respond to the latest letter. The company has done so, and the agency is reviewing the response, the Journal story said.

"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," company spokesperson Brooke Buchanan wrote in an email statement to Qmed. "But if they do, we will work with CMS to address all of their concerns."

If CMS imposes sanctions, some could take place within eight days. Others, including stripping the California lab of its license, could occur in 60 days. The company has another lab in Arizona.

Theranos could delay the effective dates of some of the sanctions if it appeals CMS' decisions to an administrative law judge and then to a departmental appeals board, according to WSJ. The lab could keep its license during an appeal, the newspaper added. If CMS revokes the lab's license, the proposed ban on Holmes and Balwani would take effect at the same time and be subject to the same appeals process.

The company had gone silent last fall, but recently beefed up its scientific and advisory board after public questioning of the board's composition.

Learn more about cutting-edge medical devices at MD&M East/a>, June 14-15, 2016 in New York City.

Nancy Crotti is a contributor to Qmed and MPMN.

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