Walgreens severs some ties to Theranos amid CMS lab inspection fallout

Theranos' Palo Alto, CA, headquarters--Courtesy of Theranos

Cue the sad violin: It's more bad news for Theranos. A day after the Centers for Medicare and Medicaid Services (CMS) came down on the company for dangerous practices at its Newark, CA, facility, Walgreens Boots Alliance ($WAG), one of Theranos' main partners, is severing some of its ties to the controversial blood-testing lab.

Walgreens said in a statement that it would not send patient blood samples to Theranos' Newark lab until "all issues raised by CMS have been fully resolved." The drugstore giant will also temporarily close its Palo Alto, CA-based Theranos Wellness Center until the problems are cleared up. Theranos has Wellness Centers at 41 Walgreens pharmacies, one in Palo Alto and the others in Arizona.

Yesterday, the CMS published a letter citing Theranos for "deficient practices" at its Newark lab that "pose immediate jeopardy to patient health and safety." Regulators said that during a November inspection of the lab, they uncovered 5 major infractions that run afoul of federal law. The CMS described one infraction as a scenario "likely to cause, at any time, serious injury or harm, or death, to individuals served by the laboratory or to the health and safety of the general public." Regulators are giving Theranos 10 days to create a plan to fix the problems.

Unsurprisingly, Theranos is standing by its lab practices. The CMS' findings do "not reflect the current state of the lab," the company said in a statement, adding that its Newark facility now handles less than 10% of the tests done by Theranos. "We value engagement with our regulators, and are committed to ensuring that all our labs operate at the highest standards," Theranos said at the time.

The company is also putting on a brave face regarding its partnership with Walgreens. "We look forward to continuing to work with Walgreens to provide access to reliable, high quality, and low-cost lab testing services," Theranos spokeswoman Brooke Buchanan told FierceMedicalDevices in an email. The company's Arizona lab, which handles about 90% of Theranos' wellness center lab tests, "is not impacted" by the CMS' latest findings, Buchanan said. "We are open for business, confident in our technologies, and unwavering in our commitment to provide Arizonans with the care and service they deserve."

Still, Walgreens' move could spell more trouble for Theranos, as the drugstore chain takes a harder look at its relationship with the company. In October, Deerfield, IL-based Walgreens said that it wouldn't open any new Theranos blood-testing centers until the company answers questions regarding its technology. Since then, Walgreens has kept quiet about its work with Theranos, saying that the pair are "currently in discussions about the next phase of our relationship," but not revealing any details.

Backlash over Theranos' proprietary testing has already scared away one of the company's former partners. In November, grocery store giant Safeway ($SWY) called off its $350 million deal with Theranos after multiple reports pointed to problems with the company's proprietary testing. One story showed that Theranos' lab tool only handled a small fraction of tests sold to consumers, and another article said Theranos stopped collecting tiny vials of blood from finger pricks for all but one of its more than 200 tests after the FDA found that "nanotainers" used to collect samples were uncleared medical devices.

- read Walgreens' statement
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