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Theranos' Last Defense Crumbles

Burgess COMMENTARY

Peter Burgess

Theranos' Last Defense Crumbles

NBC News Special Anchor Maria Shriver and Theranos Founder and C.E.O. Elizabeth Holmes speak onstage at the Vanity Fair New Establishment Summit on October 6, 2015 in San Francisco. (Photo by Mike Windle/Getty Images for Vanity Fair)

Last night the Wall Street Journal’s John Carreyrou published the latest in a series of amazing investigative pieces that have single-handedly dismantled the hype around Theranos, the blood testing company that claimed it would disrupt larger rivals like Laboratory Corporation of America and Quest Diagnostics DGX -0.74%.

This article is important, because it is the moment when the Theranos’ last major defense of its image crumbled. Until now, Theranos and those close to the company could claim that its problems were limited to its laboratory in Newark, California, and that it had really done a fine job in Arizona, where most of its testing centers are.

That claim lies demolished. The Journal reports that, in order to comply with regulators at the Centers for Medicare & Medicaid Services, Theranos has notified thousands of patients that test results it sent out in 2014 and 2015 were invalid.

In the past, Theranos has vigorously contested the Journal’s reporting. This time, it acquiesced, saying in a statement that it has taken “comprehensive corrective measures to address the issues CMS raised in their observations.”

That the problems extended to so many people, and to Arizona, which Theranos had made its beachhead into the diagnostics market, leads to a simple conclusion:

Theranos just isn’t very good at running a diagnostic testing business.

There will be other shoes to drop. Theranos’ chief executive and founder, Elizabeth Holmes, is trying to do what she needs to do to hold on to her company. CMS has threatened to ban her from the lab industry for two years, among other sanctions.