Theranos Lab Poses 'Immediate Jeopardy' to Patients, CMS Says

January 29, 2016

Substandard practices involving hematology at a laboratory operated by Theranos "pose immediate jeopardy to patient health and safety," the Centers for Medicare and Medicaid Services (CMS) told the clinical lab company in a letter dated January 25.

CMS gave Theranos 10 calendar days to show that it has eliminated the danger and has taken action to correct other violations. Without adequate action, the lab could lose its certification and be disqualified for Medicare payments, according to CMS. The outcome also could spoil a partnership with the Walgreens pharmacy chain, which sends some lab tests to Theranos.

The warning represents the latest setback for Theranos, which had promised to transform its industry with low-cost finger-prick tests but instead has found itself in hot water with government regulators.

CMS said it uncovered violations of a federal regulation known as CLIA (Clinical Laboratory Improvement Amendments) during an onsite survey of a company lab in Newark, California, on November 20, 2015. The survey technically concluded when Theranos supplied follow-up information on December 23.

In addition to the hematology deficiency, CMS determined that the lab's analytics and staffing — in particular, its testing personnel, technical supervisor, and laboratory director — did not meet CLIA conditions of certification. Only the hematology problem, though, rose to the level of an "immediate jeopardy."

The violations were spelled out in detail in a separate report that accompanied the letter. Neither CMS nor Theranos is making the report public at this time.

In a statement issued January 28, Theranos said that it has already addressed many of the observations in the CMS survey and that it is continuing to take corrective action. The company noted that the survey "is not a reflection of the current state of our lab in Newark." Furthermore, "none of the findings relate to our Arizona lab, where we process over 90% of our tests."

Striking a more contrite note, the company said it has named a new director for its California lab and has made other personnel changes.

Tightening Regulatory Vise

Founded in 2003 by CEO Elizabeth Holmes, Theranos collects blood with a finger prick and then stores it in its proprietary "Nanotainer" for testing in its in-house analytics system. The business strategy is that Theranos can conduct hundreds of tests using just a few drops of blood without the fuss and higher cost of venous draws and collection tubes.

The new technology helped make Theranos a darling of the healthcare industry. However, the tinsel started to tarnish last fall when the Wall Street Journal began publishing stories questioning the accuracy of Theranos testing. At the same time, the US Food and Drug Administration (FDA) warned the company that the Nanotainer was an "uncleared medical device" and cited it for potential infractions uncovered during an inspection of its Newark, California, lab in the late summer of 2015.

Under FDA pressure, Theranos said last fall that it would voluntarily limit the use of its Nanotainer to only one assay — for herpes simplex virus–1 immunoglobin G — that the FDA had cleared in July 2015.

Other tests will rely on venous draws and collection tubes until the FDA has approved the Nanotainer for them as well.

The FDA crackdown on Theranos is part of an effort to more tightly regulate laboratory developed tests (LDTs), which are designed, manufactured, and used in house, as opposed to tests that are sold to other users. Traditionally, the FDA did not require LDTs to get market approval because they were generally simple and not widely available.

However, LDTs have gained a broader reach through companies such as Theranos and have evolved to diagnose more complex and serious conditions, such as cancer and Alzheimer's disease. Accordingly, the FDA says it wants higher-risk LDTs to undergo regulatory review. Theranos blood tests represent one prime example. Another are genetic tests from 23andMe, which also has undergone FDA scrutiny.

For its part, Theranos has said that it welcomes stricter FDA oversight of its tests, a point reiterated in yesterday's news release.

In the statement, Theranos used the CMS warning letter to defend itself against charges of wrongdoing that have appeared in news coverage. It said that CMS did not report any evidence of allegations that, for example, the company "manipulated data to make its proprietary machines seem more accurate," or that it had instructed lab employees to keep testing patients "despite indications of purported problems."

Newark, CA, Lab Off-limits for Walgreens

The reassurances Theranos has offered in response to the CMS warning apparently haven't satisfied Walgreens, which hosts Theranos Wellness Centers in 40 pharmacies in Arizona and one in California. Today, Walgreens announced that all blood samples taken at Theranos Wellness Centers inside its stores must not be sent to the Newark lab "until all issues raised by CMS have been fully resolved." Tests collected in the Arizona Walgreens stores must be sent to the Theranos lab in Phoenix or an accredited third-party lab.

In addition, Walgreens said it has suspended Theranos lab services at its store in Palo Alto, California.

Theranos did not respond to a request for a comment on the Walgreens announcement.

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