Report: Federal Regulators Find 'Serious Deficiencies' at Theranos' California Lab Facility

Report: Federal Regulators Find 'Serious Deficiencies' at Theranos' California Lab Facility
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Jan. 25, 5:30 p.m. ET: This story has been updated throughout with comments from Theranos and Walgreens.

An audit by the Centers for Medicare and Medicaid Services (CMS), a federal health agency, has reportedly uncovered “serious deficiencies” at Theranos’s lab facility in Newark, Calif.

The details of the audit were not disclosed but are expected to be released soon -- and could result in Theranos tests being suspended from the Medicare program if not promptly redressed, according to The Wall Street Journal.

CMS told the Journal that it “can’t confirm any survey conclusions or results at this time.”

Theranos spokeswoman Brooke Buchanan told Entrepreneur that the company hadn’t received a copy of the final routine audit report, which was conducted last fall. “Unfortunately, the blind sources that The Wall Street Journal used didn’t tell us where they were from or who they are or what level of access that they have,” she said. “It’s all allegations at this time.”

Theranos’s partnership with Walgreens is also hanging ever more in the balance, according to the Journal. Walgreens, which houses 41 Theranos testing facilities in locations throughout Arizona and California, has already suspended expansion of the program until questions about Theranos’s technology are resolved, but the facilities face an even greater risk of being shuttered pending the results from CMS’s latest inspection.

Buchanan said that these reports are also incorrect. “We are actually looking to expand,” she said of Theranos’s partnership with Walgreens.

Related: Health Regulators Are Investigating Theranos's Blood Test Technology

A Walgreens spokesman reiterated a former statement to Entrepreneur that it made last October when the retailer initially halted expansion. “We are currently in discussions about the next phase of our relationship,” that statement read. “Plans to open more Theranos Wellness Centers are dependent upon both companies’ ability to reach a mutually beneficial arrangement.”

Previously, CMS had cited problems following an inspection of Theranos’ Newark lab in 2013, which the company said it resolved, as well as infractions last year at another Theranos lab facility in Arizona. But the latest findings are “far more severe,” according to the Journal.

Theranos was founded in 2003 by 31-year-old Stanford dropout Elizabeth Holmes and says it can conduct a multitude of blood tests using a tiny sample pricked from a fingertip. The company was last valued at $9 billion.

Currently, Theranos has only received FDA approval to conduct one test using its proprietary technology, for herpes. (As the only lab seeking FDA approval, Buchanan told Entrepreneur, “that’s one more test than anyone else.” She added that Theranos is seeking FDA approval to “create a best-in-class lab.”)  

Today, Theranos is conducting the rest of its tests with traditional machines, with some outsourced to outside labs -- for which it is suffering financial losses, according to the Journal. As for these claims, Buchanan told Entrepreneur that the company isn’t losing any money and is instead experiencing a record-breaking volume of tests in its labs and traffic in its stores.

“If The Wall Street Journal actually understood the laboratory industry a little bit better, they would know that it’s very common practice for labs to send out certain tests to reference labs,” she said.

Related: Safeway Seeks to Dissolve Secret $350 Million Deal With Beleaguered Blood Startup Theranos

Edition: November 2016

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