Theranos Will Pay Millions to Arizonans, Settles With Feds

Embattled diagnostics startup Theranos said it will return $4.65 million to Arizona residents for the blood testing services they received between 2013 and 2016.

“Everyone who paid for a test will receive a full refund, period,” Arizona Attorney General Mark Brnovich said in a statement. Some 1.5 million blood tests were performed on 175,000 customers — and more than 10 percent were ultimately voided.

The deal, made with the Arizona attorney general’s office, is Theranos’s second for the week: The Silicon Valley company also told the Centers for Medicare and Medicaid Services that it wouldn’t conduct any blood testing for at least two years, in exchange for pared-down penalties from federal health authorities.

As part of the new deal, Theranos also agreed to not operate a CLIA-certified lab in Arizona for two years, starting March 28, 2017. It will pay the attorney general’s office $200,000 in civil penalties, and $25,000 in legal fees.

Theranos, launched in 2003 by CEO Elizabeth Holmes, once had grand plans to revolutionize the diagnostics industry. The company claimed that its technology could run hundreds of lab tests with a single drop of blood. It partnered with Walgreens to create a network of Wellness Centers across Arizona and California, aiming to expand the direct-to-consumer diagnostics market.

But a series of damning media reports, beginning in late 2015, reversed the course of the once-promising diagnostics startup — and last summer, CMS found that Theranos’s practices in its California lab led to “immediate jeopardy to patient health and safety.” Federal health authorities banned Holmes from owning or operating a lab for two years, and Walgreens ended its partnership with Theranos — closing down the 40 Wellness Centers in Arizona and California.

It has since switched gears, and is developing a “miniLab” device that it claims will miniaturize the entire diagnostics process into a small, table-top device.

In January, the Arizona attorney general’s office began gearing up to launch a lawsuit against Theranos and its subsidiaries, alleging consumer fraud. It claimed that Theranos violated the Arizona Consumer Fraud Act, thanks to a “long-running scheme of deceptive acts and misrepresentations relating to the capabilities of Theranos blood testing equipment.”

This story was originally published by STAT, an online publication of Boston Globe Media that covers health, medicine, and scientific discovery.