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Now That's a Disruption

Federal regulators have proposed banning Elizabeth Holmes, the CEO of the embattled blood testing firm Theranos, and Sunny Balwani, the company's president, from owning or operating any lab for two years, the Wall Street Journal reports.

A Centers for Medicare & Medicaid Services inspection of Theranos's California lab uncovered a number of issues there, including one related to warfarin testing that presented "immediate jeopardy to patient health and safety," as the agency said in its letter to the company. That letter also instructed Theranos to devise and submit to CMS a plan of corrective action.

In its latest letter, dated March 18, CMS says that the submission it received from Theranos "does not constitute a credible allegation of compliance and acceptable evidence of correction for the deficiencies cited." In particular, CMS said the statements submitted didn't adequately address the deficient practices; are incomplete; don't ensure sustained compliance; and reflect a lack of understanding of CLIA requirements. CMS also says Theranos did not provide enough information to support its claim that no patients were affected by the deficiencies uncovered through the inspection.

In addition to barring Holmes and Balwani from owning or operating a lab for two years — a sanction that would affect the company's Arizona operation — CMS has also proposed revoking the California lab's CLIA certificate as well as fining the lab $10,000 a day for each day of non-compliance. It has also asked for the names of the company's physician and patient customers so they can be informed regarding the lab's non-compliance and any sanctions placed on it.

"They're in a lot of trouble," Barbara Cammarata, a lawyer at Sidley Austin who advises clinical labs on regulatory issues, tells the Journal.

Theranos was given 10 days to respond to the letter. According to the New York Times, the company responded to CMS on April 1, and said that it has hired new leadership for the lab and "would be able to ensure the deficient practices will not recur" through "robust new quality systems" and "intense oversight." Theranos also said it stopped running some tests that inspectors has found problems with.

Spokesperson Brooke Buchanan tells the Times that Theranos has made changes to address these concerns. Buchanan also says that the regulators' questions are part of the "ordinary process" and that that company has been in daily contact with regulators.

"Due to the comprehensive nature of the corrective measures we've taken over the past several months, which has been affirmed by several experts, we are hopeful that CMS won't impose sanctions," she adds at the Journal. "But if they do, we will work with CMS to address all of their concerns."

The Journal reports that CMS is reviewing Theranos's response, but if it doesn't find it satisfactory, some of the proposed sanctions may go into effect within eight days, while others would take 60 days to be implemented. Theranos, it adds, could also appeal to an administrative law judge and a departmental appeals board, though it says that process can take months and often doesn't succeed.