Dive Brief:
- The blood-testing company Theranos is reportedly facing new federal investigations into whether the company misled investors, including a criminal probe by the Department of Justice, reports The Wall Street Journal.
- Prosecutors from the U.S. Attorney's Office for the Northern District of California are examining if the company misrepresented its technology and business operations to investors and government officials, The Journal said.
- The Centers for Medicare and Medicaid Services (CMS) last month found Theranos' efforts to fix compliance deficiencies at its Newark, CA lab to be insufficient and proposed banning company founder Elizabeth Holmes from the business for two years. CMS could also revoke the California lab's certification and impose fines.
Dive Insight:
In addition to the criminal investigation by the US Attorney's office, the Securities and Exchange Commission has also opened an investigation reportedly looking into statements the company made to investors as it raised funding.
The federal investigations further ratchet up the pressure on Theranos as it seeks to answer doubts about the accuracy and reliability of its proprietary finger-prick blood-testing technology.
In a memo to partners that Theranos shared with BioPharma Dive, the company confirmed that investigations had been opened by the U.S. Attorney's Office and the SEC. Separate investigations by the State Departments of Health in Pennsylvania and Arizona, along with one by the FDA, have been successfully closed out, the company said in the memo.
"These are inquiries for document requests that those agencies initiated in wake of the wave of negative press attention over the past 6 months. The company continues to work closely with regulators and is cooperating fully with all investigations," said a Theranos spokeswoman.
CMS had previously flagged serious deficiencies at Theranos' California lab in several inspections last fall, including some violations which posed "immediate jeopardy to patient health and safety." In response, Theranos submitted a correction plan on February 12.
But the regulatory found this steps to be insufficient and last month proposed a wide range of potential penalties unless the company could adequately explain why the sanctions should not be imposed.
Heading the list of possible penalties is a devastating two-year ban from the business of Elizabeth Holmes, Theranos president Sunny Balwani, and the former Newark, CA lab director. CMS could also revoke the lab's certification, which would halt testing and cancel the lab's ability to collect Medicare payments.
A Theranos spokeswoman confirmed the company had sent a response to CMS, which is currently under review. No sanctions have been imposed yet and the company currently conducts 90% of its testing at a separate Arizona lab.
In an interview with the Today show on Monday, Holmes said "I feel devastated that we did not catch and fix these issues faster...We have taken the approach of saying let's rebuild this entire laboratory [the Newark, CA one] from scratch so we can ensure it never happens again."
As for the federal investigations, the subpoenas are said to ask for information on how the company represented the state of its technology and its development, according to the Journal. The investigations appear to be in early stages and would not necessarily lead to an indictment.
But they substantially increase the amount of scrutiny on the company's business and technology—at the same time as the company tries to prove its methodology to CMS.