Theranos faces another partnership gone awry after CMS lab inspection

Theranos' Palo Alto, CA, headquarters--Courtesy of Theranos

Problems keep piling up for Theranos, and the latest chapter in the company's ongoing testing saga isn't looking any better. Pennsylvania health insurer Capital BlueCross is scaling back its relationship with Theranos, days after the Centers for Medicare & Medicaid Services (CMS) came down on the company for serious issues at its California lab.

Capital BlueCross asked Theranos to suspend lab draws at its Harrisburg, PA, area retail store "until further notice," the insurer said in a statement to The Wall Street Journal. The move comes on the heels of results from a CMS inspection, which lambasted Theranos for "deficient practices" at its Newark, CA-based lab. One of the 5 major infractions cited by the agency posed "immediate jeopardy to patient health and safety," the CMS said in its letter.

"While we support Theranos' vision of providing greater transparency and reduced pricing for lab work, our highest priority at Capital BlueCross is ensuring quality of care for our customers," Capital BlueCross said in a statement last week, as quoted by the WSJ. "Capital has sought and received assurances from Theranos that it is actively remediating the issues noted in the CMS report."

Theranos is not wavering in its partnership with Capital BlueCross, though. "Patient health and access to relable information is paramount to Theranos and Capital BlueCross. We're currently working on fixing all the issues raised by the CMS for our Newark, CA, lab, and the partnership will continue through this process," Theranos spokeswoman Brooke Buchanan told FierceMedicalDevices.

In the meantime, Theranos will "work closely with Capital BlueCross on next steps," Buchanan said. Theranos is "currently in the process of building a lab in Pennsylvania" but "it's not ready yet," she said. If/when the lab opens, the company will no longer send Capital BlueCross samples to its Newark facility, Buchanan said.

Capital BlueCross' decision also comes after one of Theranos' key partners, Walgreens Boots Alliance ($WAG), cut some ties with the company amid the lab inspection fallout. The retail giant said last week that it would not send patient blood samples to Theranos' Newark lab until "all issues raised by the CMS have been fully resolved." Walgreens will also temporarily shutter its Palo Alto, CA-based Theranos Wellness Center until the problems are cleared up. Theranos has a lab in Arizona, but the CMS report only applies to its Newark facility, the company said last week.

Unsurprisingly, Theranos is standing by its Newark lab. The CMS' findings "do not reflect the current state" of its Newark facility, and the lab handles less than 10% of the tests done by Theranos, the company said last week. "We value engagement with our regulators, and are committed to ensuring that all our labs operate at the highest standards," the company said.

Theranos is also remaining stoic about its partnership with Walgreens. "We look forward to continuing to work with Walgreens to provide access to reliable, high quality and low-cost lab testing services," Buchanan told FierceMedicalDevices in an email last week. "We are open for business, confident in our technologies, and unwavering in our commitment to provide Arizonans with the care and service they deserve."

But more troubles could lie ahead for Theranos as it continues to deal with pushback for its proprietary testing. Back in October, a report showed that the company stopped collecting tiny vials of blood for all but one of its more than 200 tests after the FDA found that the "nanotainers" used to collect the samples were uncleared medical devices. Another report said that Theranos' lab tool only handled a small fraction of tests sold to consumers.

- read the WSJ story (sub. req.)

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