Theranos Faces New Challenges and Increasing Federal Scrutiny

Theranos continues to face challenges concerning its Newark, Calif., laboratory as its initial response to Centers for Medicare & Medicaid Services (CMS) failed to resolve inspection issues and the agency recommended the company’s CLIA certification be revoked for that California lab.

CMS recommended that Theranos lose its CLIA certification unless the lab provides evidence that the recommended sanctions shouldn’t be imposed. That was based on an inspection that took place late last year where the agency determined Theranos’ Newark, Calif., laboratory had condition level deficiencies and posed an immediate danger to patients in the area of hematology.

Theranos had provided corrective action in response to the initial letter regarding the inspection, but CMS concluded that the lab’s corrective actions were not credible, noting instances where Theranos plans were non-specific. Theranos can appeal the CLIA certificate revocation if it is imposed. CMS also recommended limitations on the lab’s performance of hematology assays that would take place almost immediately. Theranos faces a $10,000 daily fine for non-compliance. Additionally, CMS also requested a list of all providers who have used the lab since January to notify them of the ongoing issues at the facility.

CMS’ 147-page inspection report charted a number of omissions and failures in the operation of the laboratory (Theranos’ facility in Arizona was not included in this report or the sanction recommendations). Among them:

• Preanalytic systems and relevant documentation when specimens were referred to other labs for testing failed.
• Corrective actions for chemistry quality control were not in place.
• The proper calibration of equipment failed.
• The laboratory director failed to sign off on mandated procedures or changes to procedures.
• Appropriate temperature ranges were not maintained for freezers.
• Appropriate guidelines to maintain the integrity of quality control materials were not followed.
• The laboratory failed to notify a patient or patients of errors in their test results in a timely fashion.

There were some redactions to the report, including the annual test volume of the laboratory.

Meanwhile, as our sister publication Laboratory Industry Report reported, a group of researchers from one of the most prestigious teaching hospitals in the nation questioned the validity of Theranos’ testing platform in a study published in the Journal of Clinical Investigation. Researchers from the Icahn School of Medicine at Mt. Sinai Hospital New York had 60 patients undergo common testing via Theranos’ retail sites in Arizona last year, and compared the results against more traditional venipuncture testing at LabCorp and Quest Diagnostics. The study included more than 18,000 data points and flagged tests outside its normal range of results 1.6 times more often than Quest and LabCorp. Of the 22 lab measurements evaluated, 15 (68 percent) showed significant interservice variability. And 2.2 percent of Theranos’ data results were missing, compared to 0.2 percent for LabCorp and no missing results for Quest. Theranos criticized the test results and the integrity of the study and its researchers, who it claimed didn’t disclose participation in a company Theranos labeled a competitor.

Finally, Bloomberg and The Wall Street Journal reported that in a memo to Theranos partners the company revealed it is the subject of investigation by the U.S. Securities and Exchange Commission and the U.S. Attorney’s Office. Theranos Chief Executive Officer Elizabeth Holmes also appeared on NBC’s Today show in an interview with Maria Shriver and indicated she was “devastated” that her company didn’t catch problems earlier and she vowed to fix the problems and continue her company’s mission. Holmes will soon have another public forum in which to talk about her company’s mission. She is slated to present at the American Association for Clinical Chemistry’s 68th annual scientific meeting in Philadelphia on Aug. 1. “There is no better place to present Theranos’ technology than at the AACC Annual Scientific Meeting, where leaders in laboratory medicine can evaluate Ms. Holmes’ data and research,” said AACC CEO Janet B. Kreizman, in a statement.

Takeaway: As the number of federal agencies scrutinizing Theranos operations increases, CEO Elizabeth Holmes vows to continue the company’s mission.