CMS may ban Theranos founder Elizabeth Holmes for 2 years, sanction company, WSJ says

The Centers for Medicare and Medicaid Services has proposed banning Theranos founder Elizabeth Holmes from the blood testing business for at least two years, claiming her company failed to fix multiple problems at its California-based blood testing lab, according to a story first reported in The Wall Street Journal.

In March, a study in the Journal of Clinical Investigation found that cholesterol test results obtained through Theranos were substantially different than those from large laboratory companies, implying that doctors' medical decisions could be thrown off by Theranos-acquired results.

In all, Theranos' results for total cholesterol were found to be an average 9.3 percent lower than those obtained through clinical laboratories Quest and LabCorp, according to the March study. This has lead researchers to surmise that in some instances, doctors may inappropriately begin, or fail to begin, statin therapy, a drug-based regimen that aims to prevent heart disease.

CMS, in a letter dated March 18, said that "the seriousness of the deficiencies … resulted in the finding of immediate jeopardy to patient health and safety."

The federal agency gave Theranos an opportunity last month to submit a "credible allegation of compliance," along with evidence that it had a detailed plan to correct its deficiencies. But in the March 18 letter, CMS said that Theranos' submission failed to meet the criteria, and did not demonstrate that the laboratory had come into compliance.

Theranos "failed to adequately address the deficient practice cited," CMS said.

In addition to suggesting that Holmes be temporarily banned from the industry, CMS has proposed a number of other sanctions, including revocation of Theranos' Clinical Laboratory Improvement Amendments of 1988 certificate - or alternatively, a civil monetary penalty of $10,000 per day for each day of non-compliance.

CMS also proposed suspending the laboratory's approval to receive Medicare payments. The agency also proposed a two-year ban for Theranos President Sunny Balwani, the Wall Street Journal reported.

If the company doesn't respond to the satisfaction of the regulators, CMS will impose the sanctions. Some would take eight days, while others, such as the suspension of its license, would occur within 60 days.

If Theranos appeals, the Wall Street Journal reported it would delay the effective date of some of the sanctions, and the lab would keep its license pending the outcome of the appeals process.

Earlier this year, Walgreens shut down one of Theranos' clinics, and the drugstore is now reportedly trying to terminate its agreement with the startup, which has been valued at around $9 billion.

In a March 24 letter to the Journal of Clinical Investigation, representatives of Theranos, who had read a draft copy of the study, claimed it contained "false and misleading statements."

In the letter, Theranos claimed "the authors are making false claims to the media to inappropriately bolster their credibility and that of their study."