HHS-OIG Excludes Theranos Founder and CEO from Federal Health Programs for 90 Years
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) has added the founder and CEO of the health technology firm Theranos, Inc. to the OIG exclusion list, which means Elizabeth Holmes is prohibited from participation in Federal health care programs for 90 years.
The Theranos Scandal
Theranos was a blood testing startup founded by Elizabeth Holmes in 2003. The company claimed to have developed revolutionary technology that could be used to perform hundreds of blood tests from a single blood sample. Instead of requiring a vial of blood, the technology could perform more than 200 blood tests using a single pinprick of blood. The company claimed its technology automated blood testing and that tests were inexpensive and fast. Holmes was able to raise $700 million in investment and the company was valued at around $9 billion at its peak, with Holmes owning more than half of the company’s shares.
The Wall Street Journal Pulitzer Prize-winning journalist John Carreyrou received a tip that the company’s technology was not what it claimed to be. Carreyrou spoke with members of the Theranos board who claimed they were lied to, there was a culture of intimidation and secrecy, and the company’s technology repeatedly failed quality assurance and sent incorrect test results to patients on which medical decisions were based.
Carreyrou published the story in 2015 that revealed the company was using third-party technology rather than its own, as its own technology was inefficient. The FDA launched an investigation into Theranos that found that the allegations in Carreyrou’s article were correct. The company was investigated by the Federal Bureau of Investigation and shut down.
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Theranos and Homes denied the allegations and threatened to sue Carreyrou; however, in 2018, Homes stepped down from her position as CEO, and following an FBI investigation the company was shut down. Holmes, along with former company president Ramesh Balwani, were charged with criminal fraud for making false claims about the company’s technology and misleading investors.
In her trial, prosecutors claimed that the company’s technology could only perform a handful of the advertised tests themselves and the few tests that the technology could perform did not provide accurate results. Holmes was also alleged to have destroyed evidence before the company was shut down. Holmes admitted to making mistakes but she continued to protest her innocence and claimed that she never knowingly defrauded investors or patients.
In January 2022, Holmes was found guilty on four charges of defrauding investors and was sentenced to more than 11 years in jail from where she is attempting to appeal the convictions. Holmes was also ordered to pay $452,047,200 in restitution. Balwani was convicted of conspiracy to commit wire fraud against Theranos’s patients and investors and was sentenced to 12 years and 11 months in prison.
HHS-OIG Issues Notice of Exclusion
HHS-OIG Inspector General Christi A. Grimm announced on January 19, 2023, that Holmes had been added to the exclusion list due to her January 2022 conviction for wire fraud and conspiracy to commit wire fraud against Theranos investors.
The HHS-OIG has the authority under 1128(a) of the Social Security Act to exclude individuals from participation in Medicare, Medicaid, and other Federal health care programs. The minimum exclusion period for convictions of this nature is 5 years; however, Grimm explained that there were several aggravating factors that warranted a lifelong exclusion, including the length of time that the criminal acts were committed, the incarceration, and the amount of restitution that was ordered to be paid. Balwani had previously been excluded for 90 years due to his convictions.
“Accurate and dependable diagnostic testing technology is imperative to our public health infrastructure. False statements related to the reliability of these medical products can endanger the health of patients and sow distrust in our health care system,” said Grimm. “As technology evolves, so do our efforts to safeguard the health and safety of patients, and HHS-OIG will continue to use its exclusion authority to protect the public from bad actors.”
