Did Walgreens Fail to Do Its Theranos Homework?

Nancy Crotti

May 26, 2016

3 Min Read
Did Walgreens Fail to Do Its Theranos Homework?

The drugstore chain feared the blood-testing startup would choose a retail partner if it pushed too hard, according to the Wall Street Journal.

Nancy Crotti

Walgreens didn't vet Theranos enough before making a deal to have the blood-testing startup set up shop in its stores, the Wall Street Journal reported.

Now the drugstore chain may have given up on recouping at least $50 million it invested in deeply troubled Theranos, which promised to perform multiple tests from a single drop of blood, the newspaper said.

Also, a disgruntled consumer has sued Theranos in California for alleged fraud in a filing that could become a class action, according to a report by The Verge.

Walgreens' queasiness centers around findings of unreliability in Theranos' proprietary Edison technology, which federal regulators said in January may even put patients' health in "immediate jeopardy," the Journal reported. Officials of the drugstore chain are concerned about its reputation and the possibility that Theranos might sue for breach of contract, leaving it vulnerable to billions of dollars in damages, the newspaper added.

Walgreens, which had been Theranos' biggest customer, wants to dump the company and hopes close its 40 or so blood clinics mostly based at in retail locations in Arizona, the Financial Times reported in February.

Theranos today reiterated its commitment to the relationship. "We value our partnership with Walgreens and look forward to continuing to work together," said Theranos spokesperson Brooke Buchanan in an email.

Walgreens did not immediately respond to a request for comment.

Walgreens Boots Alliance Inc. (Deerfield, IL), entered the deal with Theranos in 2013 despite the startup's failure to divulge information typically sought in such deals, according to the Journal. Walgreens officials had never even set foot inside Theranos' lab, so jealously did the startup guard its secrets.

A retired Quest Diagnostics Corp. executive who visited Theranos on Walgreens' behalf told the Journal he was not allowed to enter the lab, but was led to believe the results of tests he reviewed were run on Edison equipment.

Former Theranos employees told the newspaper that the company used the Edison technology on "just a fraction its tests." The newspaper also reported that the company recently told CMS that it performed only 12 types of tests on the Edison and the rest on conventional laboratory equipment, according to an unnamed source cited by the newspaper.

The consumer lawsuit, filed in U.S. District Court for the Northern District of California, focuses on the frequency of Theranos' use of Edison for blood testing, CMS reports questioning the company's testing practices, and on allegations of false advertising.

Theranos believes the lawsuit is without merit and pledged to vigorously defend itself, Buchanan said.

The U.S. Justice Department is investigating Theranos for alleged fraud. CMS threatened to ban CEO Elizabeth Holmes and company president Sunny Balwani from the business. Balwani subsequently retired. The Silicon Valley startup became well-known for its blood-testing technology, which promised to perform multiple diagnostic tests with a single drop of blood.

Nancy Crotti is a contributor to Qmed.

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About the Author(s)

Nancy Crotti

Nancy Crotti is a frequent contributor to MD+DI. Reach her at [email protected].

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