Feds May Ban Elizabeth Holmes, Founder Of Embattled Startup Theranos, From Blood-Testing Industry For 2 Years

The next two years or so of Elizabeth Holmes' life could take a sharp turn if federal health officials are unconvinced by what Theranos — the once-vaunted, now-embattled blood-testing company she founded — says in its latest defense of its practices.

The Centers for Medicare and Medicaid Services said in a letter from March 18 that it would revoke Theranos' federal license and ban its owners, including Holmes, from owning or running laboratories for the next two years or longer, as a result of the company's failure to fix major problems at its laboratory in California. In addition to Holmes, the letter was addressed to Sunil Dhawan, laboratory director, and Ramesh Balwani, owner. The Wall Street Journal first reported the sanctions proposed by CMS.

Holmes, who is also the company's CEO, founded Theranos in 2003. Once valued at $10 billion, the company promised — and its website still does -- better, faster lab tests using revolutionary, proprietary blood-testing technology that it said required only a few drops of blood, instead of the usual vial. The pharmacy Walgreens, which has 8,200 locations nationwide, made plans to use Theranos' bloodwork centers in all of them.

But in October, an investigation by the Wall Street Journal revealed that the technology was proving problematic and being used for only a tiny portion of the tests the company ran. Walgreens soon shelved its plans with Theranos, as did the supermarket chain Safeway, while the Cleveland Clinic, which in March 2015 announced it would begin using the company's technology to "enhance clinical quality, improve turnaround times, reduce the cost of care and increase patient satisfaction," said it would aim to verify that technology. In March, researchers at the Icahn School of Medicine at Mount Sinai in New York published the results of a monthslong study that suggested Theranos' technology was more likely than other companies' tests to report abnormal results, findings that raised concerns about the accuracy of Theranos' tests.

The company had 10 days to respond to the March 18 letter and explain why its federal license should not be revoked. The Wall Street Journal reported that CMS was currently reviewing Theranos' response.

In that letter, CMS said that in a previous letter dated Jan. 25, 2016, it had "provided Theranos with a listing of all deficiencies" that it said posed "immediate jeopardy to patient health and safety." It gave the company 10 days to credibly prove that it had corrected those deficiencies and so that it would comply with regulatory standards.

But even after Theranos requested an extension, CMS found that the company had failed to fix the problems regulators cited and that the lab's claims of compliance were "not credible." As a result, regulators proposed to revoke the lab's licenses, starting 60 days after a notice of imposition, and to limit the lab's license to do bloodwork eight days after the notice. The letter also listed, as an alternative, a $10,000 daily fine for every day of noncompliance starting five days after the notice of imposition. The fine would continue to mount until CMS could determine that the laboratory was no longer violating regulations.

Those sanctions were based on 10 different factors, CMS said, of which the deficiencies themselves were only part of the problem. "The laboratory failed to remove the jeopardy after being provided an opportunity to do so," the letter said. The laboratory failed to meet "all hematology requirements," among other regulations, it added. Finally, "the laboratory has expressed no rational reasons for its failure to achieve compliance with all applicable" requirements.

If regulators revoke Theranos' license, that by law bars its owners or operators from "owning or operating (or directing) a laboratory for at least two years from the date of the revocation."

Theranos has laboratories in California and Arizona.