Elizabeth Holmes, the Stanford dropout who founded blood-testing startup Theranos Inc. in 2003, faces temporary banishment from the health diagnostics business after federal authorities determined her company didn’t fix problems at a California laboratory.
The Centers for Medicare and Medicaid Services said a in March 18 letter that it plans to revoke the California center’s federal license and block its owners, including Holmes and Theranos’s president, Sunny Balwani, from owning or running any other lab for at least two years,
according to The Wall Street Journal. The newspaper reviewed of a copy of the letter, which hasn’t been made public.
The threat of suspension marks another possible setback for Holmes, who once enjoyed a
honeymoon period with the financial media for being a blossom-lipped woman entrepreneur among Silicon Valley’s frat house of nerds and venture capitalists. She said she got the idea for starting the company after coping with a fear of the big needles used for blood testing.
Theranos claimed it could perform more than 240 tests on a small drop of blood using its proprietary “nanocontainer” technology. Cracks started to appear in Holmes’s
image as a twentysomething genius as The Wall Street Journal last year started questioning the efficacy of the company’s testing equipment.
The newspaper said Theranos had 10 days to give CMS evidence of why sanctions shouldn’t be imposed, in according with federal law. The company has responded, and CMS is reviewing the response, according to an unnamed source cited by the WSJ. CMS will impose the sanctions if Theranos doesn’t provide a satisfactory response.