Walgreens sues Theranos after failed blood-testing deal
Walgreens sued Theranos on Tuesday claiming that the once high-flying blood-testing start-up had breached its contract with the national pharmacy chain.
The drugstore chain filed the lawsuit under seal in U.S. District Court in Delaware. Walgreens’ lawyers said details of the suit’s allegations had to remain confidential because of terms in the contract the company signed with Theranos in 2009.
In a statement, Theranos called Walgreens’ allegations “unfounded.”
“Over the years, Walgreens consistently failed to meet its commitments to Theranos,” the statement said. “Through its mishandling of our partnership and now this lawsuit, Walgreens has caused Theranos and its investors significant harm.”
The lawsuit is only the most recent in a wave of bad news descending on the Silicon Valley start-up and its 32-year-old founder, Elizabeth Holmes. The company’s downfall began about year ago with a series of stories in the Wall Street Journal that showed how the company’s much-hyped blood-testing technology was flawed.
Under the two companies’ partnership, Theranos had built blood-testing stations, which it called wellness centers, in 40 Walgreens pharmacies in Arizona, as well as one in Palo Alto.
The pharmacy chain had been drawn in by Holmes’ claims that she had found a way for consumers to access “less invasive and more affordable” blood testing. Holmes had said that her blood-testing device, called Edison, could perform multiple tests with just a few drops of blood “taken from a tiny finger stick.”
Based on those claims and its deal with Walgreens, Silicon Valley venture capitalists once valued Theranos at $9 billion. And last year, Holmes appeared at the top of Forbes magazine’s list of America’s richest self-made women.
But all that wealth was just on paper, and it is now gone as the company battles myriad lawsuits and federal investigations.
In May, Theranos announced that it was retracting the results of tens of thousands of blood tests that doctors had depended on to care for patients over the last two years.
The next month, Walgreens said it was terminating its relationship with Theranos and closing all the blood-draw sites in its stores. The pharmacy chain has now been named as a defendant in lawsuits brought by patients against Theranos.
Phil Caruso, a Walgreens spokesman, confirmed the drugstore chain had filed the lawsuit. “We aren’t commenting beyond that,” he said.
The Journal said Walgreens was asking for $140 million in the lawsuit.
Last month, Theranos said it was shutting its labs and laying off 340 employees, or more than 40% of its workforce.
The company said it was changing its focus to developing a portable blood-testing device called the MiniLab.
Holmes had little choice but to stop operating the blood-testing laboratories. In July, after finding a number of violations at Theranos’ Northern California lab in Newark, federal regulators banned Holmes from owning or running a medical lab for two years.
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UPDATES:
4:40 p.m.: This article was updated to include a statement from Theranos.
This article was originally published at 4:05 p.m.
