Walgreens Ends Relationship with Theranos

Walgreens said it is ending its relationship with Theranos and will no longer offer the company’s services following a planned shutdown of operations at all 40 Theranos Wellness Centers in its Arizona stores.

The pharmacy chain’s decision represents a serious financial blow to the blood-based diagnostics developer because Walgreens has been Theranos’ primary source of revenue.

Walgreens’ action comes as the Centers for Medicare and Medicaid Services considers penalties against Theranos, which had claimed that its diagnostic technology could run scores of tests using drops of blood.

“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,” Brad Fluegel, Walgreens svp and chief health care commercial market development officer, said in a company statement.

Walgreens noted that back in January, it told Theranos that it must immediately cease sending clinical laboratory tests provided through its Wellness Centers at Walgreens to the Theranos lab in Newark, CA, the subject of ongoing review by CMS.

Walgreens added that it also told Theranos that tests collected at its Wellness Centers at Walgreens stores in Arizona must be sent only to Theranos’ certified lab in the Phoenix area or to an accredited third-party lab for analysis. No patient samples were to be sent to the Newark lab until all issues raised by CMS have been fully resolved, the pharmacy chain added.

The Wall Street Journal cited unnamed “people familiar with the partnership” in reporting that Walgreens’ action came after officials at the Walgreens Boots Alliance unit became frustrated at not getting more details and documentation from Theranos after learning that the diagnostics developer had corrected tens of thousands of blood tests—including many performed on samples collected from patients at Walgreens pharmacies.

Theranos’ business model and diagnostic tests have come under withering scrutiny from the newspaper starting last year when it was one of 2015’s most important biopharma stories, followed by investigations by the U.S. Attorney’s Office in San Francisco, the U.S. Securities and Exchange Commission, and other federal as well as state agencies.

One Wall Street Journal report found the company’s Edison lab testing instrument was used for only 15 of its 240 tests as of December 2014 according to four former employees. Another report said Theranos stopped collecting tiny vials of blood drawn from finger pricks for all but one of its tests, following an unannounced FDA inspection. The disclosures contrasted with Theranos’ since-withdrawn website claim that its “breakthrough advancements have made it possible to quickly process the full range of laboratory tests from a few drops of blood.”

Theranos CEO Elizabeth Holmes responded at the time by promising to increase her company’s transparency, including publishing testing data submitted to the FDA in a medical journal.

Today, Theranos responded to Walgreens’ action with a one-paragraph statement in which vp of communications Brooke Buchanan said: “Quality and safety are our top priorities and we are working closely with government officials to ensure that we not only comply with all federal regulations but exceed them.”

“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,” Buchanan added.