Regulators May Ban Theranos CEO From Test Business, Journal Says

Is Theranos Running Out of Time?

U.S. regulators have proposed sanctions that would ban Theranos Inc. founder and Chief Executive Officer Elizabeth Holmes from the diagnostics business and bar the blood-testing startup from receiving payments from Medicare, according to a report in the Wall Street Journal.

The proposed sanctions would prohibit Holmes or Theranos President Sunny Balwani from owning or running a lab for two years, according to a March 18 letter to the company from the Centers for Medicare and Medicaid Services, or CMS, posted by the Journal. The letter gives Theranos 10 days to respond.

Lauren Shaham, a CMS spokeswoman, declined to comment or confirm the authenticity of the letter.

“The whole thing is hypothetical; if sanctions are imposed, we could appeal and the process could take months,” Brooke Buchanan, a Theranos spokeswoman, said by phone. “The fact is we have not received sanctions.” She said that Theranos had responded to the agency and was in discussions with it.

The letter posted by the Journal contains a list of proposed sanctions, including fines, revocation of Theranos’s ability to take payments, and a threat to ban company executives from the industry for two years.

Lab Shortcomings

A redacted inspection report of Theranos released in March by CMS detailed a long list of shortcomings at the company’s Newark, California, laboratory, including failures to meet quality-control standards, such as not keeping freezers at the temperatures required by manufacturers; lack of proper documentation and missing signatures on paperwork; and unqualified personnel. CMS said in late January that faults at the lab were so severe that they jeopardized patients’ health.

The company’s Arizona lab wasn’t part of the CMS report and has continued to operate, with the majority of patients coming through its outlets at Walgreens Boots Alliance Inc. stores.

Walgreens spokesman Jim Cohn declined to comment.

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