Theranos CEO Elizabeth Holmes is banned from running medical labs

Theranos founder Elizabeth Holmes, shown in November, has been banned from owning or operating a medical laboratory for two years. (Jeff Chiu/Associated Press)

SAN FRANCISCO (Diya TV) — The blood-testing start-up Theranos has been dealt a crushing blow: Federal regulators banned its founder and Chief Executive Elizabeth Holmes from owning or running a medical laboratory for two years.

The sanctions, announced Thursday by the company, followed an investigation by government testing regulators which lasted months at the Centers for Medicare and Medicaid Services. Theranos, which was reportedly worth $9 billion just two years ago, is the latest much-hyped Silicon Valley firm to stumble while trying to enter the healthcare field.

Medicare officials first proposed the sanctions in March, which include revoking the license of the company’s Newark, Calif., laboratory and barring Holmes from owning or operating a similar facility for at least two years.

Government inspectors uncovered a multitude of violations of federal testing standards at the company’s site. The investigation ultimately began after a series of articles in the Wall Street Journal, reports in which former employees said the company’s tests were unreliable.

Holmes said in a statement that she’s disappointed with the decision by regulators, but that the company accepts “full responsibility for the issues.” The 32-year-old Holmes started Theranos in 2003, pitching the company’s technology as a cheaper and more efficient way to run dozens of blood tests. The company plans on continuing to offer its services through its second lab in Scottsdale, Ariz.

Holmes, once considered to be the nation’s youngest female billionaire, said she was inspired to start the company in response to her personal fear of needles. Theranos raised millions in start-up funding by promoting its tests as costing a “fraction” of what other labs charge.

However, in April, Theranos disclosed it was under investigation or inspection by multiple government regulators, including the Securities Exchange Commission and the U.S. attorney’s office for the Northern District of California. Last month, the nation’s largest drugstore chain, Walgreens, cut ties with the company, closing all 40 of its Theranos wellness centers.

In the company’s statement, Theranos said the sanctions from Medicare would not take effect for 60 days, but testing has already been suspended at its Newark facility. The government further revoked the company’s ability to receive Medicare and Medicaid payments related to blood work.

It’s not the first time a Silicon Valley start-up has run afoul with Washington regulators.

Previously, 23andMe Inc., a Google-backed DNA testing company, was forced to stop selling its personalized health reports after the Food and Drug Administration said the tests fell under federal testing laws. The company had promoted more than 250 test reports that purported to tell users if they were likely to develop diseases such as Alzheimer’s and Parkinson’s.