Burning through investor money and seemingly desperate for cash, the once high-flying, billion-dollar, blood-testing start-up Theranos is facing yet another hurdle at the conclusion of a turbulent year: it is issuing refund checks to tens of thousands of Arizona customers following a $4.65 million settlement the company reached with state attorney general Mark Brnovich earlier this year. All residents of the state who used Theranos’s blood-testing services will now receive a full refund from the attorney general's office, regardless of the accuracy of their tests; the average customer will be paid $60.92, but at least one outlier will receive more than $3,000.
Brnovich’s office alleges that the company’s ads “misrepresented, omitted, and concealed” information about its accuracy and testing methodology. As part of the agreement, Theranos is no longer allowed to own or operate any Arizona lab for another two years. “We were not going to settle with Theranos until we got a full refund for every Arizonan who paid for a blood test,” Brnovich said in a statement. “Our office is proactive and aggressive in protecting Arizona consumers and these refund checks are proof that we are going to go after companies that violate Arizona consumer protection laws.” Of the thousands of blood tests sold in Arizona between 2013 and 2016, the company says 10 percent were voided after the fact, and it denies unlawful wrongdoing.
Theranos’s sparkling veneer began to crack in 2015, when The Wall Street Journal published a series of investigative reports that suggested Theranos was not using a proprietary blood-testing device, as investors believed, but rather standard industry equipment to analyze samples. The next year saw wunderkind founder Elizabeth Holmes’s net worth slashed from $4.5 billion to nothing as the onetime Silicon Valley darling’s house of cards came tumbling down. The company’s situation did not improve in 2017; unsealed depositions showed that former board members, some of whom had no medical background, made no inquiries following the Journal’s damning reports. As of March 20, the company still “hadn’t commissioned any independent investigation of allegations the company produced inaccurate test results and misled investors, or Ms. Holmes’s culpability for them.”
Its $900 million in investor and partner capital, which it raised between 2004 and 2015, has steadily dwindled as its legal fees have mounted. In April, Theranos was sued by Partner Fund Management, a hedge fund that says it received misleading information about the company’s technology and financial projections. (Theranos settled with the fund, saying in a statement at the time that the settlement “brings to a close the burden and expense of litigation and preserves resources to bring the miniLab platform to market.”) But if Holmes’s miniLab pivot, which one bioethicist characterized as “more like buffing a very dirty magical lantern than it is the proper way to reclaim scientific standing,” fails to pan out, at least she has some premium office space to fall back on.
