The penalties CMS imposed on Theranos include revoking the blood-testing company’s license to operate the Newark, California lab and barring founder and CEO Elizabeth Holmes from owning, operating or directing a lab for at least two years. CMS also canceled the Newark lab’s approval to receive payments from Medicare and Medicaid.
When the penalties were announced in July, laboratory medicine experts called them unusually harsh.
Dr. Norman Paradis, a professor of medicine at Dartmouth, who has consulted for both diagnostic startups and biomed investors, said the magnitude of the penalties could be one-of-a-kind.
“I’ve never heard of a penalty this severe,” he said. “I’m surprised that they could not have avoided this in light of the new involvement of experienced people and renowned attorneys.”
In April, Theranos hired a number of experts for its medical advisory board. High-powered lawyer David Boies represents the company and also serves on its board.
Earlier this month, Holmes attempted a fresh start by giving a much-anticipated presentation at the annual meeting of the American Association for Clinical Chemistry. That was a gathering of the very sort of experts who had expressed skepticism about the company's central claim -- that it could perform dozens of tests by collecting just a few drops of the patient's blood from a finger prick. The FDA has approved only one of those assays, for the herpes simplex virus.
But rather than using the presentation to produce data verifying its technology, Holmes unveiled a new portable testing device called a miniLab, which was underwhelming to those present.
The Wall Street Journal has reported the company is facing at least eight lawsuits related to that original, controversial and mysterious technology, called "Edison," which Theranos says is now obsolete. In May, the company voided or corrected tens of thousands of blood tests from 2014-15.
Per federal regulations, if Theranos loses its appeal, which will go to an administrative law judge, it can file a request for review by an appeals board. If it loses that one, it will have 60 days to request judicial review with the U.S. Court of Appeals.
Experts who have commented on the case have said if no settlement can be reached, companies almost never win these things.
In the meantime, Theranos is still operating its remaining lab, in Arizona. But how brisk can business be? Walgreens withdrew from its partnership with the company, shutting down dozens of Theranos blood-draw centers in the pharmacy chain's Arizona stores. That leaves just a handful of collection sites for customers to patronize.