Billion-dollar blood-test unicorn biz Theranos 'putting lives at risk'

US federal agency threatens to shut down Silicon Valley upstart's testing facility

Controversial blood-testing upstart Theranos has been told to take immediate action at one of its testing facilities – or lose its certification.

A letter [PDF] sent from federal health inspectors the company said the company's California testing facility presented "immediate jeopardy to patient safety".

Its hematology lab, lab director, technical director and testing staffing were all cited, and the Palo Alto company has just 10 days to prove its compliance or it will be effectively shut down.

The news is the latest blow to the company that until recently was hailed as one of Silicon Valley's shining unicorns: VC-funded tech companies valued at over $1bn.

The startup seeks to revolutionize the blood testing industry by making tests easier, cheaper and faster. It became the focus of enormous attention – and funding – when its founder declared that the business had developed new testing machines that could run a wide range of tests with just a few drops of blood.

As a result of those claims, Theranos has received around $750m in funding with a valuation of $9bn.

However an investigation by the Wall Street Journal published in October raised significant questions over those claims, most damagingly arguing that Theranos' proprietary "Edison" technology does not actually work, and that the biz was using traditional blood-testing machines for almost all of its testing.

Soon after, the company stopped performing all tests but one (for herpes) using its technology. Then its "nanotainers" used for collecting tiny amounts of blood were determined to be an "uncleared medical device" by the FDA.

Theranos still runs blood tests – often at prices far lower than competing facilities – and makes a point of posting the costs of each test online: something that comes in stark contrast to the traditional medical market. Critics have questioned however whether the company is actually making a loss on some of those tests.

Response

The startup has aggressively pushed back on claims that is misleading consumers and the industry, but details have continued to emerge that raise questions over its business. This letter from the Centers for Medicare and Medicaid Services (CMS) will add to those concerns.

In response to this latest controversy, Theranos has put together a typically detailed reply. "This survey of our Newark, CA lab began months ago and does not reflect the current state of the lab," says an emailed response. "As the survey took place we were simultaneously conducting a comprehensive review of our laboratory’s systems, processes and procedures to ensure that we have best-in-class quality systems."

Theranos claims to have already fixed many of the issues raised by the CMS, including having replaced its lab director. It will complete the rest and file a report back to the CMS claiming compliance in a few days, the company said.

It also notes that the findings do not refer to Theranos' sister lab in Arizona which it says are where "over 90 percent of our tests" are carried out.

Interestingly that 90 per cent figure was also quoted with respect to a previous inspection of Theranos' lab to explain why inspectors had not entered the part of the building containing the Edison machines. They had visited only those parts containing industry standard testing machines in "the room that processed over 90 percent of the samples at the time."

Theranos also stressed in its response that the CMS letter makes no determination about controversial elements of the company's business and allegations about why it was cited, which it then handily lists:

• An allegation of proficiency testing "cheating"
• An allegation that management "instructed lab employees to keep testing patients" despite indications of purported problems
• An alleged complaint to CMS in which an R&D employee allegedly "deleted" QC data
• An allegation that Theranos improperly hid the existence of its lab holding its proprietary technologies
• An allegation that Theranos manipulated data to make its proprietary machines seem more accurate
• An allegation of a "dilution" protocol causing inaccurate results
• An allegation regarding the handling of a purported "proficiency-testing sample" in February 2014

The CMS letter does indeed not tackle any of those reported issues. ®