JUL 09, 2016

Holmes Banned From Operating Any Lab

WRITTEN BY: Brenda Kelley Kim
On Thursday July 7, 2016 the Centers for Medicare and Medicaid Services (CMS) issued a letter to embattled lab testing company Theranos that they were revoking the company’s license to operate as a lab. While the revocation will take 60 days, the decision by the CMS is essentially the end for the company, as well as for its founder, Elizabeth Holmes who was banned from operating a medical lab for two years.
 
Holmes founded Theranos in 2003 when she was only 19. While she had attended Stanford, she dropped out to form the company. Theranos was built on the premise of using tiny drops of blood and proprietary technology in tests to detect diseases at very early stages. In 2010 they reported to the SEC that they had raised $45 million in funding from a single unnamed investor. By 2013 the company had formed a partnership with Walgreens Pharmacy offering in-store self service blood tests for patients The company continued to gain national attention for its board of directors chock full of heavy hitters like two former Secretaries of State Henry Kissinger and Charles P. Shultz as well as for their ability to raise venture capital, which reports in 2014 show had risen to $400 million.
 
The technology that Theranos was betting on consisted of a device they dubbed the “Edison” device. The company claimed that just a tiny microliter of blood could be loaded on to a small disposable cartridge, similar to testing strips that diabetics use, and then that sample could be tested for various diseases using Edison’s reader technology. The problem was that the device wasn’t properly tested or approved by the FDA. Any device that is to meant to be used for a medical purpose must be approved by the FDA and Theranos never got the required approval for their device.
 
In October of 2015, an expose in the Wall Street Journal began a cascade of events that has led to the most recent action of the lab’s license revocation. The Journal reported that many of the lab tests and technology used by the company were questionable in their accuracy and development. Regulators from the CMS conducted an inspection of the Theranos lab in Newark, CA and released their report in early 2016 that the lab had violated several clinical standards. At the time Theranos management, including Holmes, vowed to correct the problems at the lab within days, but no such action was taken. The problems found by the inspection were related to Clinical Laboratory Improvement Amendments, a federal set of regulations that set standards for lab tests, procedures and personnel. To round out the controversy surrounding the lab, the Department of Justice announced they would ask the Securities and Exchange Commission to investigate the financial situation at Theranos.
 
The recent revocation of the CLIA license of Theranos, in addition to the agency’s banning of Holmes from operating or working in a medical lab for a period of two years can be appealed, but the process is lengthy and unlikely to work. Holmes issued a statement saying, “While we are disappointed by CMS’ decision, we take these matters very seriously and are committed to fully resolving all outstanding issues with CMS and to demonstrating our dedication to the highest standards of quality and compliance.” Take a look at the video below for more information the latest development in the Theranos saga.

 
Sources: New York Times, Fortune, CMS