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Theranos Is Now Facing a Class Action Lawsuit Accusing It of Consumer Fraud

May 26, 2016, 10:22 AM UTC
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A common refrain came true again Wednesday: the problems at Theranos have gotten even worse.

The embattled blood-testing startup that’s facing intense regulatory scrutiny is now the subject of a consumer fraud class action lawsuit.

A plaintiff identified only as M.P.B., who’s an Arizona resident, filed the lawsuit in the Northern District of California on Wednesday accusing Theranos of fraud since its proprietary technology—a device advertised as capable of conducting hundreds of blood tests with just a few drops of blood—did not work and produced inaccurate results.

“Theranos assured its customers that these tests were highly accurate, industry leading in quality, and developed and validated under, and compliant with, federal guidelines,” the complaint says. “Thousands of people, including Plaintiff M.P.B., believed the Company’s representations and paid for Theranos’s tests.” Theranos sold its blood tests at Wellness Centers at Walgreens (WAG) Pharmacies.

It became evident that the testing machine, known as Edison, did not work and that Theranos’s tests were not accurate on May 19 when Theranos conceded that it had told regulators that it had voided blood-testing results from Edison, according to the lawsuit. “As a result, tens of thousands of patients may have been given incorrect blood-test results, been subject to unnecessary or potentially harmful treatments, and/or been denied the opportunity to seek treatment for a treatable condition,” it claims. The complaint is seeking damages that include reimbursement of the tests’ purchase price, and it wants Theranos banned from “engaging in further deceptive advertisements.”

Theranos spokeswoman Brooke Buchanan told Fortune that the lawsuit is without merit. “The company will vigorously defend itself against these claims,” she said.

Theranos’s disclosure earlier this month that it had voided two years of results from its Edison blood-testing devices added to the growing consensus that the onetime health technology darling is not all it was cracked up to be. Those allegations began to build in October 2015 when The Wall Street Journal published a damning report that the startup wasn’t actually using its much-touted Edison technology to carry out most of its tests.

Then in March, the Journal reported on findings by the U.S. Centers for Medicare and Medicaid Services (CMS) that a Theranos laboratory in California employed under-qualified personnel and was failing to implement quality safeguards for a number of tests, which posed an “immediate jeopardy” to patient health.

The CMS threatened to revoke the company’s federal license for its California lab and ban CEO Elizabeth Holmes and president Ramesh “Sunny” Balwani, who left the company earlier this month, from the industry for at least two years. Federal prosecutors and the Securities and Exchange Commission are also probing the company, reportedly looking for possible misleading statements to investors or regulators about its technology or operations.

The complaint filed Wednesday claims that “at the very time that Theranos was advertising compliance with federal regulations, it had been repeatedly sanctioned by federal authorities.” The lawsuit says that Theranos performed approximately 6.1 million tests and that there could be thousands of members in its potential class.

This story has been updated to reflect a comment from Theranos.