Theranos agrees to pay $4.65 million in Arizona refunds

Embattled blood testing company Theranos, Inc. has agreed to pay $4.65 million to cover full refunds for every Arizona customer who used the company's testing services, Arizona Attorney General Mark Brnovich announced Tuesday.

The settlement with the Palo Alto, California-based company covers more than 175,000 Arizonans who paid for blood tests between 2013 and the suspension of Theranos services last year, Brnovich said.

Theranos was sued by Brnovich's office under the state's Consumer Fraud Act. The company also agreed to pay $200,000 in civil penalties and $25,000 in attorney fees and will be subject to civil penalties for future violations.

"I wanted to make sure that every single Arizonan who purchased a blood test received a refund, period," Brnovich said in an interview. "Because there was a big question about how many results were accurate, how many were inaccurate.

"They said approximately 10½% were inaccurate, and it didn't matter," he added. "To me, on behalf of consumers, I know that I would be worried 'how do I know if my test was accurate or it wasn't.'"

Theranos said in a statement that it also agreed not to run any licensed laboratories in Arizona for the next two years.

Theranos shut down its clinical labs in several states and wellness centers inside Arizona Walgreens stores in October and laid off a large part of its workforce. The move came after federal regulators barred company founder and CEO Elizabeth Holmes from owning or running a medical laboratory for two years.

Theranos had appealed the ban, but announced Monday it had reached a settlement with the CMS to resolve the issues.

The company said the federal agency withdrew the revocation of its lab operating certificates and reduced a civil penalty to $30,000. The company agreed not to operate any labs nationwide for two years.

The federal probe into Theranos followed reports by The Wall Street Journal in which former employees said the company's tests were unreliable. After the reports, the company voided or revised many of its test results. In Arizona alone, 10% of 1.5 million blood tests were voided or corrected.

The company Holmes founded in 2003 withdrew from its clinical lab and retail business last year to focus on its miniaturized, automated blood testing machines.

Holmes personally lobbied the Arizona Legislature and Gov. Doug Ducey in 2015 to pass a bill allowing people to get a blood test without a doctor's order and its struggles have been a setback for Ducey.

He had touted the law as a way to open the state up to new and innovative businesses — and he signed the legislation with Holmes standing directly behind him. Ducey has prioritized luring companies and jobs to Arizona by passing business-friendly legislation and eliminating regulations.

Brnovich said he pushed hard for full restitution, in part to ensure there was a tough penalty.

"I wanted to make sure that the civil penalty was steep enough to send a message not only to Theranos but to other companies that if they are going to violate Arizona consumer protection law we're going to go after them, we're going to hit them hard," he said. "And I think we did in this case."