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Walgreens Goes After Theranos for $140 Million

By Casey C. Sullivan, Esq. on November 14, 2016 | Last updated on March 21, 2019

Things keep going from bad to worse for Theranos, the disgraced medical technology startup. The company raised millions of dollars and earned a $9 billion valuation based on promises that its technology could detect a host of ailments through a simple, low-cost blood test that required no more than a prick of the finger. Three years ago, Walgreens entered in to an agreement with Theranos, to bring Theranos' blood tests to the chain's pharmacies throughout the country.

Now, Theranos' technology has been questioned, two years of test results have been voided, its founder has been barred from operating a medical lab, and the company has been reduced to only a fraction of its previous value. Things haven't gone too well with the Walgreens partnership, either. The drugstore chain ended its relationship with Theranos this summer and filed a $140 million breach of contract claim against the startup last week.

Theranos's Fall From Grace

Walgreens' lawsuit was filed under seal in federal court in Delaware, so details of the company's specific claims against Theranos are sparse. The Wall Street Journal, however, reports that the breach of contract suit alleges that Theranos mislead Walgreens about the state of its technology when the two entered into their partnership.

Theranos's Edison blood testing devises were once considered revolutionary, promising that a multitude of tests could be run off of just a small sample of blood, collected in a so-called "nanotainer." For a while, Theranos was viewed as a significant threat to traditional medical testing companies, like Quest Diagnostics. But following questions about the tests' accuracy, Theranos stopped using Edison and eventually voided thousands of test results.

Walgreens ran Theranos blood testing centers in 40 of its stores, mostly in the Phoenix area. The drugstore once hoped to put Theranos centers in thousands of locations, but Walgreens terminated its relationship with Theranos in June, as the company came under increasing government scrutiny.

A Partnership Turned Sour

Walgreens' blood-draw centers were Theranos' primary source of income, according to the Wall Street Journal.

"Over the years, Walgreens consistently failed to meet its commitments to Theranos," Theranos said in a statement on its website. "Through its mishandling of our partnership and now this lawsuit, Walgreens has caused Theranos and its investors significant harm."

No longer running any blood tests, Theranos has laid off 340 employees, or about 40 percent of its workforce, and plans to refocus on "miniaturized, automated laboratories."

In addition to the lawsuit from Walgreens, Theranos investor Partner Fund Management LP is suing the company for $100 million, alleging that Theranos misrepresented its technology in order to secure funding. The company is also facing at least eight lawsuits from consumers.

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