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Theranos' Problems Get Even Worse

Walgreens ends relationship with troubled blood-testing company, will shutter Theranos operations in stores.

Nancy Crotti

Elizabeth Holmes Theranos
Theranos and its founder Elizabeth Holmes were once Silicon Valley stars, touting a technology supposedly able to find disease in a single drop of blood. (Image courtesy of Theranos)

Walgreens is severing ties with Theranos and booting the struggling blood-testing company out of 40 of its Arizona drugstores.

The announcement by Walgreens comes after a recent report by the Wall Street Journal that the unusually secretive Theranos wouldn't even allow Walgreens representatives see inside its laboratory or view its proprietary Edison blood-testing technology before making the pact in 2013. 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 reported.

Walgreens said it will be working over the next several days to help transition customers.

"In light of the voiding of a number of test results, and as the Centers for Medicare and Medicaid Services (CMS) has rejected Theranos' plan of correction and considers sanctions, we have carefully considered our relationship with Theranos and believe it is in our customers' best interests to terminate our partnership," said Brad Fluegel, Walgreens' chief health care commercial market development officer, in the company statement.

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The breakup delivers yet another major blow to the Silicon Valley startup.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 change of fortunes for Theranos are dramatic enough that a Hollywood movie is reportedly in the works, with Jennifer Lawrence attaching herself to the project in order to play the 32-year-old Holmes, according to Deadline Hollywood.

Walgreens decided in January to end its partnership with Theranos after regulators declared that Theranos' practices could jeopardize patient health and safety. The drugstore chain said it had ordered Theranos to stop sending clinical laboratory tests provided through its Wellness Centers at Walgreens to the Theranos lab in Newark, CA, which has been the subject of the ongoing CMS review.

Walgreens waited until now to sever the relationship because it feared a lawsuit from Theranos, the Journal reported.

Losing Walgreens means Theranos will no longer be competing with major labs, according to the Journal. It would have to attract a new retail partner, offer its testing services to doctor's offices or open stand-alone blood-draw sites to regain access to consumers, the newspaper said. Theranos is working on opening a blood-testing center in Arizona and has been looking into making a deal with another pharmacy or supermarket to offer its testing services, the Journal report added.

Theranos said in a statement that it is working to comply with regulatory requirements.

"We are disappointed that Walgreens has chosen to terminate our relationship and remain fully committed to our mission to provide patients access to affordable health information and look forward to continuing to serve customers in Arizona and California through our independent retail locations," the statement said.

Nancy Crotti is a contributor to Qmed.

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