Federal regulators have banned Theranos founder Elizabeth Holmes from owning or operating a medical laboratory for at least two years.
Theranos rose to startup stardom after promising accurate blood test results with just a prick of the finger, but a review of the company’s Newark, Calif., lab last year — following a steady drumbeat of investigative stories from the Wall Street Journal — called its technology into question.
The Centers for Medicare and Medicaid Services first threatened sanctions in March, after pointing out deficiencies that regulators said posed “immediate jeopardy to patient health and safety.”
Along with the ban on Holmes, CMS has pulled the operating license of the company’s Newark laboratory and will also levy a fine, Theranos announced in a statement. It’s not clear yet how much the company, once valued at $9 billion, will have to shell out.
“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,” Holmes said in the statement, adding that the company accepts “full responsibility for the issues” at the lab.
The CMS action isn’t Theranos’s only headache.
The Securities and Exchange Commission began an investigation in April to determine whether Theranos misled investors about the power of its technology. Federal prosecutors are also conducting a criminal probe. And multiple class action lawsuits allege that Theranos deceptively marketed its finger-prick blood tests.
Theranos said on Thursday that it would still conduct business at its lab in Arizona.
But its business partners are evaporating: Walgreens announced in June it would cut ties with the company and close 40 Theranos Wellness Centers set up in pharmacies across Arizona. The nearly three-year partnership helped push Theranos to a sky-high valuation and was a significant source of revenue for the company.
Holmes has scrambled in recent months to try to right the company, bringing on new medical advisers, talking of opening a new lab in Pennsylvania, and advertising open jobs for employees in several states. But an exodus of key personnel continues.
Holmes’s second-in-command, Sunny Balwani, announced in May that he was leaving the company. Theranos’s public relations chief announced late last month that she was leaving.
And even before the latest blow, Forbes announced it was adjusting its estimate of Holmes’ net worth — from $4.5 billion to zero.