Blood-testing firm Theranos faces Justice Department and SEC investigations

Elizabeth Holmes, founder and CEO of Theranos, speaks with Fortune editor Alan Murray in San Francisco in November.

Elizabeth Holmes, founder and CEO of Theranos, speaks with Fortune editor Alan Murray in San Francisco in November.

(Jeff Chiu / Associated Press)

Theranos Inc. is being investigated by the Justice Department and Securities and Exchange Commission, another set of blows to the Silicon Valley blood-testing company as it faces increased scrutiny about the reliability and accuracy of its tests.

In a Monday memo to external partners including Walgreens Boots Alliance Inc., Theranos said the investigations by the SEC and the U.S. attorney’s office for the Northern District of California began after the publication of “certain news articles” and “are focused on requesting documents.”

“These are inquiries for document requests that those agencies initiated in wake of the wave of negative press attention over the past six months,” Theranos said in a statement. “The company continues to work closely with regulators and is cooperating fully with all investigations.”


See more of our top stories on Facebook >>

The Palo Alto-based company, founded in 2003, garnered attention for claiming that its technology could test for dozens of medical conditions with just a few drops of blood.

But after an investigation by the Wall Street Journal raised questions about the capabilities of Theranos’ Edison lab instrument, the business has been under increased scrutiny. Theranos told the Journal that it did not exaggerate its achievements.

The company is also under inspection by the federal Centers for Medicare and Medicaid Services.

Last week, the centers proposed revoking the federal license for Theranos’ Newark, Calif., laboratory and banning its two top executives — Chief Executive Elizabeth Holmes and President Sunny Balwani — from the blood-testing business for at least two years.

SIGN UP for the free California Inc. business newsletter >>

Investigations by the U.S. Food and Drug Administration and the state departments of health in Arizona and Pennsylvania have been “successfully closed out,” the company said.


The FDA would neither confirm nor deny that an investigation was underway, but it did provide information about inspections it conducted in August and September at Theranos’ Newark location.

In several pages of redacted documents, the FDA detailed observations that it said could be considered violations of the Food, Drug and Cosmetic Act, among other similar acts. This includes an instance in which complaints about a device potentially failing to meet specifications were not reviewed or investigated when they should have been, as well as a case of a device not being correctly classified and then shipped “uncleared” between states. The FDA said the “violative products” mentioned in these forms were removed from the market.

The FDA said it could not discuss the circumstances or causes of the inspections.

The Arizona Department of Health Services said it conducted a standard inspection in April 2015 of Theranos’ Scottsdale laboratory after that lab opened. Inspectors found four “standard deficiencies,” which are not unusual when labs are first getting started, department spokeswoman Holly Ward said. The department accepted the company’s plan of correction, granting it a certificate of compliance in May 2015 that is good for two years.

A representative of the Pennsylvania health department was not available to comment.

Representatives of the SEC and Walgreens declined to comment. Abraham Simmons, spokesman for the U.S. attorney’s office, said he could not confirm that an investigation was underway.

For more business news, follow @smasunaga.



Why sporting goods retailers are fumbling

Potential sale looms over Yahoo’s quarterly earnings report

Drugstore chain CVS pushes convenience with curbside pickups