Feds Conducting Criminal Investigation of Theranos

April 19, 2016

The Department of Justice (DOJ) and the Securities Exchange Commission (SEC) have opened investigations of Theranos, the embattled blood laboratory company told its business partners in a memo released to Medscape Medical News.

The admission came after the Wall Street Journal (WSJ) reported that federal prosecutors were conducting a criminal probe into whether the company had misled investors "about the state of its technology and operations," attributing the information to unnamed sources. That is supposedly the same line of inquiry for the SEC. The DOJ also was looking into whether Theranos had misled government officials, another crime, according to the WSJ.

The Walgreens Boots Alliance, which offers Theranos blood tests at 40 drugstores in Arizona, and the New York State Department of Health have received subpoenas requesting documents and testimony about what the laboratory company has communicated to them, the WSJ reported. It noted that the investigation was in an early stage, and that the subpoenas did not mean that prosecutors were "actively seeking an indictment."

Theranos has had regulatory difficulties recently with both the US Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS). The latter agency has threatened to revoke the company's federal lab license and ban Elizabeth Holmes, its founder and CEO, from owning any other lab for at least 2 years on account of uncorrected deficiencies at its lab in Newark, California, the WSJ reported earlier this month.

A spokesperson for CMS told Medscape Medical News that the agency has yet to impose the sanctions.

In a series of articles dating back to October 2015, the WSJ has reported that the company performed the vast majority of its 200-plus blood tests using traditional off-the-shelf laboratory machines as opposed to its own proprietary machine called Edison. Furthermore, some former employees of Theranos questioned Edison's accuracy.

Theranos Lab Revolution Hits Government Speedbumps

The Edison test instrument is part of what Theranos calls its revolutionary, low-cost technology for blood tests. The centerpiece is a proprietary miniature vial called a Nanotainer that stores a tiny amount of blood from a finger prick. Theranos says it can perform hundreds of tests using a few drops of blood without the hassle and higher cost of venous draws and collection tubes.

Last year, the FDA approved the use of the Nanotainer for a single assay — herpes simplex virus-1 immunoglobulin G. But later that year, it warned that the mini vial was an unapproved medical device in regard to the other tests. The FDA also cited potential infractions uncovered during an inspection of the company's California lab.

In response, Theranos voluntarily limited the use of the Nanotainer to just the herpes simplex test, switching to venous draws and collection tubes for the rest until the FDA approved the vial for more widespread use.

More regulatory trouble arose in January when CMS informed the lab that, based on its inspections, substandard practices involving hematology at its California lab jeopardized patient health and safety. The agency also faulted Theranos for, among other things, relying on unqualified lab personnel, lacking written policies and procedures for chores such as labeling patient specimens, and failing to maintain freezers at required temperatures.

Theranos submitted a correction plan, noting that many problems had already been fixed. The response apparently was not enough to dissuade CMS in April from threatening to sanction the company unless it provided adequate evidence of a turnaround.

VIPs on Company Advisory Board

Asked to comment on the investigations reported by the WSJ, Theranos released a memo to Medscape Medical News that it had sent to its business partners on April 18.

"The investigations by the SEC and the US Attorney's Office, which began following the publication of certain news articles, are focused on requesting documents and ongoing, in addition to the CMS inspection," Theranos stated in the memo. "The company continues to work closely with regulators and is cooperating fully with all investigations."

Theranos noted that three other inquiries — by the FDA and the health departments of Pennsylvania and Arizona — "have been successfully closed."

In an oft-repeated claim, the company said it welcomes review of its "technologies, performance, and data" by not only the FDA, but also the scientific community. In that spirit, it hosted three scientific review sessions with "leading laboratory and medical experts, many of whom joined our Scientific and Medical Advisory Board as a result," the company said in the memo.

Theranos announced six additions to the advisory board (cochaired by Holmes) on April 7, 6 days before the news broke that CMS intended to withdraw the lab's federal license, which would render it ineligible for Medicare reimbursement. The new members are:

  • Susan Evans, PhD, a past president, secretary, and member of the board of directors for the American Association for Clinical Chemistry (AACC). Dr Evans also has been president and a board member of the National Academy of Clinical Biochemistry, now the Academy of the AACC.

  • Ann Gronowski, PhD, a professor in the department of pathology and immunology and the department of obstetrics and gynecology at the Washington University School of Medicine in St. Louis. She is a past president of both the AACC and the American Board of Clinical Chemistry.

  • Larry Kricka, DPhil, a professor of pathology and laboratory medicine at the University of Pennsylvania and a past AACC president.

  • Jack Ladenson, PhD, a professor of clinical chemistry at Washington University School of Medicine, a past AACC president, and a past chair of the editorial board of the journal Clinical Chemistry.

  • Andy Miller, MD, an assistant attending physician in infectious diseases at the Hospital for Special Surgery and New York-Presbyterian Hospital, and an assistant professor of clinical medicine at Weill Cornell Medicine.

  • Steven Spitalnik, MD, a professor of pathology and cell biology and the vice-chairman of laboratory medicine at Columbia University Medical Center. He is also the past president of the Academy of Clinical Laboratory Physicians and Scientists.

These individuals joined two physicians already on the advisory board:

  • William Foege, MD, an epidemiologist, former director of the Centers for Disease Control and Prevention, and member of the Theranos Board of Counselors.

  • David Helfet, MD (cochairman), the director of the orthopedic trauma service at the Hospital for Special Surgery and New York-Presbyterian Hospital. He is also a professor of orthopedic surgery at Weill Cornell Medicine.

"Theranos…Literally Took the Lid Off the Box"

In a news release, Theranos said the new members of the advisory board were among the experts who had free access to company technology and data at recent scientific review sessions. "Theranos…literally took the lid off the box," Dr Helfet was quoted as saying.

"It is clear that Theranos has done what people thought was impossible," he said. "Theranos' technology is a groundbreaking feat of science and engineering, making it possible to accurately analyze micro amounts of blood for the same tests routinely done today with traditional venipuncture."

The company said the advisory board members will lend a hand on many fronts, including the integration of Theranos technology into everyday clinical practice, publication in scientific journals, and development of future test systems. Board members who run laboratories at their own institutions will help inspect Theranos clinical laboratories and implement best procedures and processes.

Follow Robert Lowes on Twitter @LowesRobert.


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