Things are not looking good for the once-lauded blood testing startup Theranos. Following an investigation, US federal health regulators have imposed stiff penalties against the firm, including barring CEO Elizabeth Holmes from owning a lab for two years, withdrawing regulatory approval for the company’s California lab, and an unspecified monetary fine.
The story of Theranos has been considerably more juicy and dramatic than anything the stodgy blood testing industry has ever seen (so of course there’s going to be a movie). CEO and founder Holmes left college in 2003 at the age of 19 to start Theranos, keeping the company in stealth mode until a few years ago. When it emerged, Theranos claimed it could test for a multitude of health metrics and diseases using a tiny vial of blood thanks to microfluidic technology used in its Edison platform.
Questions were raised late last year about the accuracy of the company’s testing, which was offered in a number of Walgreens stores. The US Centers for Medicare and Medicaid Services (CMS) conducted an inspection of the Theranos facility in California, finding extensive issues that led to the company canceling or revising the results of many tests. Walgreens recently ended its relationship with Theranos as the seriousness of the investigation became clear.
The statement issued late on Thursday details the outcome of that investigation. Holmes herself seems to be targeted by the penalties as she personally owns half of Theranos, and won’t be able to own, operate, or supervise a lab for the next two years. That makes it hard to see how she can continue at the company in a leadership role. Theranos is also barred from receiving Medicare or Medicaid payments for its lab services. The list of corrective measures provided for its California facility means the entire operation will have to be scrapped and rebuilt. Theranos says it will do that, but it’s not clear the money is available to make it happen (especially considering the unspecified fines).
Can Theranos even continue to operate going forward? It has no meaningful income after the fallout with Walgreens, the founder can’t operate a lab, and it can’t even accept Medicare patients as a company. It’s a big collapse for Theranos, which was once valued at $ 9 billion. It’s now worth less than $ 1 billion, and most of that has to do with its patent portfolio. Holmes was cited as a self-made billionaire until the investigation started, but now she’s reportedly worth nothing. The fast and loose approach to getting things done in Silicon Valley doesn’t apply in healthcare, as the CMS has made clear. Theranos put patients at risk, and still has to contend with a federal criminal investigation.
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