Theranos: Feds Launch Criminal Investigation

Clinton Theranos (JP Yim / Getty)
JP Yim / Getty

The U.S. Attorney’s Office and Securities and Exchange Commission (SEC) have opened criminal and civil probes into blood-testing company Theranos, just days after reports that the Centers for Medicare & Medicaid Services were proposing to shutter its labs and ban its founder from the medical testing business.

Theranos claimed its disruptive proprietary technology could offer a finger-prick blood analysis covering up to 100 healthcare indicators at a fraction of the price charged by multi-billion-dollar industry leaders, including Quest Diagnostics and LabCorp.

The U.S. Food and Drug Administration approved Theranos’s hardware, software, and blood-drawing equipment — as well as of one of the specific tests it performs on that platform — on July 2, 2015. The action was seen as a strong endorsement of the efficacy of the company’s breakthrough methods.

Theranos founder and CEO, Elizabeth Holmes hailed the agency’s action in a press release at the time as a “milestone” for the company: “We don’t know of a higher bar for review of the performance of our system than the FDA.”

But as part of the approval process, the FDA required the famously secretive company to make public specific details of how the business performed its first approved test — an assay to detect the sexually transmitted disease herpes simplex virus (HSV-1).

Breitbart News noted in October that with Theranos on the verge of going public at a valuation in excess of $9 billion, an “unnamed” former employee had leaked data to the Wall Street Journal revealing that the results Theranos formally reported to the FDA and CMS were massively inflated.

Holmes was forced to admit in a live-streaming interview at the October 29, WSJ Live 2015 tech conference in Laguna Beach that Theranos was seldom if ever using its own proprietary machines for blood testing.

The continuing Journal investigation over the next six months unearthed reams of data documenting that the bulk of Theranos blood tests were being conducted on traditional industry test machines because of comparatively poor performance by Theranos’ proprietary equipment.

With scandal in the air, and most of Theranos’ Board of Directors resigning, panicked FDA and CMS regulators sent battalions of investigators to review the company’s approval process and lab operations.

According to an April 13 Journal report, CMS concluded in its investigation of the period between June 1 to September 21 that Theranos failed to hire and train qualified people to run its test machines properly; allowed unlicensed workers to review patient test results; failed to follow equipment manufacturers’ instructions; and did not have a written protocol in place to calibrate the machines to maintain accuracy.

CMS recommended that Theranos labs’ licenses be terminated ,and as the “responsible parties,” 31-year-old Elizabeth Holmes and the company’s president Sunny Balwani both be banned for a period of two years from owning or running operations of any blood testing lab in both California and Arizona.

The U.S. Attorney’s Office is taking the lead in the criminal Theranos probe and the SEC will focus on the civil examination.

Subpoenas have already been issued to Walgreens Pharmacy, which had a partnership to offer the Theranos tests to its customers, and the New York State Department of Health is seeking documents and other information about the supposed misrepresentations made by Theranos, according to the Journal’s latest article.

On Monday, the American Association for Clinical Chemistry announced that Holmes will formally present Thermos’s data to its annual scientific conference on August 1 in Philadelphia, according to Bay Area public radio station KQED.


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