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October 29, 2015

Theranos and the FDA: A Cautionary Tale on the Need for Regulatory Strategy

A flurry of recent reports in the Wall Street Journal, New York Times, Forbes and Reuters regarding Theranos states it is using an unapproved medical device, not adequately following up on customer complaints and suffers from other quality control deficiencies. Theranos, which has a $9 billion private valuation, finds its recent problems stemming from FDA inspections of Theranos facilities that occurred in August and September of this year.

These inspections resulted in Form 483 letters regarding Theranos’ Newark, California and Palo Alto facilities. While the Form 483s were heavily redacted, as is allowable to protect proprietary secrets, what was made public may shine some light on how Theranos may have misinterpreted how FDA regulations may have applied to them and their products.

It is clear in reviewing the Form 483s that Theranos, at least at the time of the inspections, was still in the process of implementing a quality management system that is compliant with FDA regulations. The FDA inspections observed, among other things, that the Theranos Capillary Tube Nanotainers (CTN) should be classified as a Class II medical device (which would require a 510(k) clearance by the FDA to bring to market), not a Class I exempt medical device as Theranos claimed, which resulted in the FDA stating that “you are currently shipping an uncleared medical device in interstate commerce between California, Arizona and Pennsylvania“. This observation of the CTN being a Class II vs. a Class I medical device was still “under consideration” by FDA, so it is possible that the CTN could remain a Class I device.

However, Theranos’ lack of a fully implemented quality management system could stem from their own misunderstanding of the regulatory obligations required for their classification of device. The contention that their CTN is a class I exempt medical device only would exempt them from the requirement to get a 510(k) clearance to bring to market, not the full quality management requirements of a regulated medical device. In reviewing the FDA classification database, the Theranos’ blood collection tube is indeed registered as a class I device which is 510(k) exempt, but it does still require the general controls necessary to be compliant with FDA regulations, which include a quality management system and associated documentation.

There are other types of medical devices which are class I 510(k) exempt, but are also exempt from Good Manufacturing Processes (GMP) regulation and require little regulation other than general records and complaint files, such as a limb brace. But this difference between a class I 510(k) exempt and class I 510(k) exempt and GMP exempt is identified in the FDA classification database of devices, and just because a device is class I doesn’t mean it is automatically GMP exempt. Theranos used this classification database to classify and register their CTN with the FDA as a class I 510(k) exempt device, which is still required to have a quality management system and associated documentation to meet FDA regulations, but it may be they misinterpreted these requirements. To their credit, Theranos appears to be realizing their regulatory and quality shortfalls, as they are actively posting for new hires as of last week for positions in QA, regulatory, verification and validation (V&V), all of which were noted as deficiencies in the Form 483s.

The bottom line, whether you’re privately valued as a $9 billion dollar company or an out-of-the blocks startup, is you need to understand what your product is from a regulatory perspective and from that build a regulatory strategy before you market product to ensure you don’t run afoul of the FDA.  In some cases a product can be steered with a very light regulatory touch (or almost none at all), while some products by the nature of the device and claims will require a greater degree of regulatory and quality planning and execution. But these are complicated issues that best serve the companies developing new products, and the investor dollars backing them, by identifying skilled regulatory experts to help navigate an appropriate path and execute accordingly.