Elizabeth Holmes, Theranos CEO and founder, our favorite blood-fearing, turtleneck-loving, disruption-preaching and increasingly fraudulent-looking biotech entrepreneur, appears to be facing a blanket ban from her own business sector for at least the next two years.
The Wall Street Journal reports that the Centers for Medicare and Medicaid Services, a federal agency responsible for clinical lab standards, has “conclud[ed] that the company failed to fix what regulators have called major problems at its laboratory in California,” and has written a 45-page letter detailing their “plans to revoke the California lab’s federal license and prohibit its owners, including Ms. Holmes and Theranos’s president, Sunny Balwani, from owning or running any other lab for at least two years.”
This letter—which the Wall Street Journal reviewed in writing, but does not quote directly—gives Theranos 10 days to address CMS concerns before the sanctions are imposed: “The company has responded, and CMS is reviewing the response, according to a person familiar with the matter,” writes the WSJ. If the company doesn’t respond to the regulators’ satisfaction, the CMS will go ahead with the sanctions, which could be in place in anywhere from 8 to 60 days—and longer, if Theranos appeals, which seems likely, given the company’s history of proclaiming that everything’s fine despite compelling evidence to the contrary.
From the WSJ:
The company’s most urgent challenge is to persuade government officials not to impose the crippling penalties detailed in the 45-page letter. The agency completed an inspection of the California lab in November and found five major categories of infractions that violate the federal law governing clinical labs.
In February, Theranos submitted a correction plan to address the problems, but federal officials concluded it was insufficient, according to the March 18 letter. CMS declined to comment.
[...] CMS also proposed to fine Theranos $10,000 a day and said it wants the company to submit the names and addresses of all doctors and patients who used the lab’s services since January 2014.
“The proposed penalties are among the most severe in CMS’s power,” Barbara Cammarata, a lawyer in the field, said to the WSJ. Greg Ingle, a chief executive of a lab-auditing firm, told the paper that it’s very unusual for the government to revoke the licenses of a firm like Theranos, which is large and heavily, famously capitalized.
This seems less like an overcorrection, though, than the type of action that becomes necessary when a company is endangering the health of their patients by dodging compliance, obscuring their methods, and accepting that their would-be revolutionary collection methods sometimes turn up blood test results that—as the WSJ found in their earlier reporting on Theranos—would be impossible unless the patient were dead. In response to these recent CMS reviews:
Officials found that Theranos failed to adequately correct 43 of 45 deficiencies identified by inspectors last year. The failures included not providing evidence that Theranos sent corrected reports to patients who got flawed test results.
One of those tests, a blood-coagulation test known as prothrombin time, measures how long it takes blood to clot and is often used by doctors to determine which dosage of the blood thinner warfarin to give patients.
Wrong prothrombin time results could cause doctors to prescribe too little or too much warfarin. Too much of the drug, also known by its brand name Coumadin, can cause fatal bleeding, while too little can leave patients vulnerable to clots and strokes, according to medical experts.
The full 45-page letter may or may not be released to the public, depending on whether or not Theranos’s usual strategy—asking for nondisclosure in the interest of protecting trade secrets—works. In this case, the company has requested redactions to the letter.
Theranos continues to be a fascinating case study in what the combination of an irresistibly “disruptive” idea, an unusually compelling central character (Ken Auletta’s 2014 New Yorker piece on Holmes explains this terrifically), and a perfectly packaged narrative can do to get people to suspend skepticism and disbelief for a long, long time.
Image via AP