Elizabeth Holmes, founder and chief executive officer of Theranos Inc. (David Paul Morris/Bloomberg)

This story has been updated.

Federal regulators have proposed a series of harsh sanctions against Theranos, including potentially banning the founder of the high-profile blood-testing company from owning or operating a laboratory for two years and revoking the license for its California laboratory, according to the Wall Street Journal.

In January, federal regulators warned Theranos that an inspection late last year had revealed deficiencies in its Newark, Calif. lab, including one that posed "immediate jeopardy to patient health and safety." The company replied to the Centers for Medicare and Medicaid Services, describing how it had addressed the deficiencies in February, but the new letter reveals regulators found those explanations wanting.

"After careful review, we have determined that the laboratory's submission does not constitute a credible allegation of compliance and acceptable evidence of correction for the deficiencies cited," the letter posted by the Journal and dated March 18, states.

The agency proposes a series of sanctions, including:

  • Revoking the license for Theranos's Newark, Calif. laboratory, a certification known as CLIA. That would mean that the lab could not perform any testing, according to the letter.
  • The laboratory owner, operator and laboratory director -- including founder Elizabeth Holmes, according to the Journal -- would be prohibited "from owning or operating (or directing) a laboratory for at least two years."
  • Suspending and cancelling the lab's ability to receive payments from Medicare for hematology and laboratory services.
  • A fine of $10,000 per day for every day of non-compliance.

"The laboratory is advised that the above sanctions cannot be avoided by the closure of the laboratory, discontinuation of testing, voluntary withdrawal from the CLIA program, or changes in certificate to a lower level of testing," the letter states.

Theranos was given 10 days to respond to the March letter and did so, according to company spokeswoman Brooke Buchanan. She added that the company has not received any sanctions from the agency in the intervening weeks and emphasized that the proposed actions are all hypothetical. The letter from CMS states that if Theranos "does not successfully rebut the bases for the proposed sanctions, we will proceed to impose the above-referenced sanctions." Theranos did not release its response to the regulator's criticism.

If the sanctions are imposed, the company will be allowed to appeal the process.

Aaron Albright, a CMS spokesman, said the agency could not release the letter at this time or make any comment on the situation.

The letter critiques Theranos for submitting a response to its allegations of deficiencies that did not detail why the laboratory came to particular conclusions. For example, Theranos said in its response to regulators that "no patient impact is expected" or there was "no evidence of systemic errors," but regulators said there wasn't information about to support the statements.

The company has not demonstrated that the "immediate jeopardy" that regulators warned about in January has been abated, and the evidence the company provided it had fixed the problems was insufficient, regulators said. The problems with the company's response included a range of problems, including "a lack of understanding" of the regulatory requirements.

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