US regulators have banned Theranos founder and CEO Elizabeth Holmes from owning and running a medical laboratory for two years, the company announced on Thursday. The Center for Medicare and Medical Services also revoked regulatory approval for Theranos’ California Lab.
The announcement comes months after the company admitted to being investigated by several regulators following a series of reports from the Wall Street Journal. Theranos claimed that its technology enabled it to perform blood tests with just a pinprick, instead of a traditional blood draw. In October 2015, Theranos employees interviewed by the Wall Street Journal cast doubt over those claims and the accuracy of the company’s tests.
The Center for Medicare and Medical Services report on Theranos’s laboratory in March was scathing: its 45-page warning letter to Theranos cited the company for “immediate jeopardy to patient health and safety”.
Last month the company’s largest corporate agreement, with drug store chain Walgreens, ended unceremoniously when the retailer announced it would be shutting down all 40 of its Theranos Wellness Centers in Arizona and ending the company’s lab testing services in Palo Alto, California. Walgreens cited “our customers’ best interests” in a public announcement.
According to the statement from Theranos, the US regulators have suspended the lab’s approval to receive Medicare and Medicaid payments related to blood work and canceled its approval to receive payments for “all laboratory services”. Theranos will also be required to pay a yet unspecified monetary penalty.
“We accept full responsibility for the issues at our laboratory in Newark, California, and have already worked to undertake comprehensive remedial actions. Those actions include shutting down and subsequently rebuilding the Newark lab from the ground up, rebuilding quality systems, adding highly experienced leadership, personnel and experts, and implementing enhanced quality and training procedures,” Holmes said in a statement on Thursday.
Holmes said that while she is disappointed by the decision, Theranos is committed to resolving all outstanding issues.
The 32-year-old Holmes started Palo Alto-based Theranos in 2003 and had raised $800m in investment. At its peak in 2014, the firm was valued at $9bn. Last year, Forbes named Holmes as America’s richest self-made woman with net worth of $4.5bn. This year, the magazine revised her net worth down to zero and cut the company’s valuation to $800m.
The scandal has been seen as a referendum on the sometimes extreme valuations of tech companies based on those companies’ unverified claims.
Last month it was also announced that Jennifer Lawrence has signed on to play Holmes in a movie about Theranos. The film will be produced by Adam McKay, who was behind the The Big Short, a film about the 2008 financial crisis .
