Diagnostics, Policy

Arizona AG prepares to sue Theranos for fraud

Theranos still has not been charged with any crimes, as this would be a civil lawsuit.

Arizona cactus

Embattled diagnostics company Theranos is about to be in more legal hot water.

Arizona Attorney General Mark Brnovich this month quietly announced his intention to sue Theranos for consumer fraud. This news came out in a solicitation for outside counsel posted on the state’s website.

The posting said that Brnovich would bring legal action “violations of the Arizona Consumer Fraud Act arising out of Theranos Inc.’s long-running scheme of deceptive acts and misrepresentations relating to the capabilities and operation of Theranos blood testing equipment, including but not limited to deceptive acts and misrepresentations made to Arizona consumers in connection with Theranos Wellness Centers in Arizona and California.”

Though Theranos is based in Palo Alto, California, it ran 40 of its 41 Wellness Centers out of Walgreens stores in the Phoenix area. Walgreens already has terminated its contract with Theranos and sued for $140 million.

Brnovich cited the investigative reporting of the Wall Street Journal since October 2015 for exposing problems with Theranos’ blood testing devices. (Many of those Journal stories are detailed in this MedCity News timeline.)

“These news reports were accompanied by notices and letters from federal regulators regarding the operations at Theranos, Inc. and the validity of its testing— in particular, a July 2016 letter from the Centers for Medicare and Medicaid Services detailing failings at the company and imposing a ban on certain senior leadership from owning or operating a medical laboratory for at least two years,” the solicitation said.

That ban mostly affects founder and CEO Elizabeth Holmes.

This action would be a civil suit, the Arizona AG’s office said. While the Wall Street Journal reported last April that federal prosecutors had opened a criminal investigation, no criminal charges have been filed at the federal or state level.

In addition to Walgreens, Theranos faces civil suits from a group of investors and from several groups of consumers. The company has denied all accusations, though it has laid off hundreds of workers and shifted its focus away from the novel blood testing devices in question in favor of a new “lab-in-a-box” product called miniLab.

Photo: Flickr user Daniel Spiess

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