Theranos reaches settlements with CMS, Arizona AG

Theranos, a troubled Palo Alto, Calif.-based blood testing startup, is starting to settle its differences regarding issues with its original finger-prick blood testing device.  

The company has been under fire since 2015, when a pair of investigative reports from The Wall Street Journal first questioned the validity of its proprietary technology. Since then it has faced federal and criminal investigations, botched deals with retail partners, lost top executives, recalled tens of thousands of tests and shuttered labs. Now, as the company shifts focus to its new miniLab, which is about the size of a desktop printer and can run a broad array of tests on disposable cartridges inserted into the machine, it appears to be making amends with regulatory agencies and customers — but won't be opening new labs anytime soon. 

The company resolved its legal and regulatory issues with CMS, according to a Monday announcement. The company was sanctioned after a CMS inspection found five categories of major infractions at the Newark, Calif.-based lab, and Theranos failed to adequately correct deficiencies. Theranos originally appealed the sanctions, but agreed to withdraw its appeal as part of the settlement. 

Also as part of the settlement, CMS reinstalled the startup's CLIA operating certificates and reduced the civil monetary penalty against Theranos to $30,000 so long as Theranos does not own or operate a clinical laboratory for two years. CLIA, which stands for Clinical Laboratory Improvement Amendments, is required of all labs that test U.S. residents outside of clinical trials and research. CMS moved to pull Theranos' CLIA certificate last April and banned founder Elizabeth Holmes from owning and operating a lab for two years.  

Theranos is also hoping to "amicably" resolve issues with customers and government officials. On Tuesday, the company announced an agreement with the Arizona attorney general to repay $4.65 million to all Arizona customers who used the company's tests. Theranos agreed to make the repayments regardless of whether the customer paid for the test or if the tests were voided or corrected. Last May, it voided tens of thousands of its finger-prick blood test results from 2014 and 2015 and issued some corrected test results.  

As part of the settlement with the Arizona attorney general's office, Theranos also agreed to pay $200,000 in civil penalties and $25,000 in legal fees. The company will not own or operate a CLIA-licensed lab in the state for two years, beginning March 28. 


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