Drugstore giant Walgreens, which exited its ill-considered partnership with Theranos this summer, sued the blood-testing company for breach of contract to the tune of $140 million.
On Tuesday, Walgreens filed the suit under seal in Delaware district court. It is seeking $140 million in damages, matching its investment in Theranos, The Wall Street Journal reported. Walgreens is claiming that Theranos misrepresented its technology when the companies inked the deal, said people familiar with the matter, as quoted by the WSJ.
Under the partnership, Walgreens ran 40 Theranos “Wellness Centers,” or blood-testing clinics, in its stores in Arizona and once had plans to take them nationwide. But it put those plans on hold and stopped sending blood samples to Theranos’ Newark, CA, laboratory after the Centers for Medicare & Medicaid Services flagged the lab for questionable practices.
In a statement on Tuesday, Theranos hit back at its former partner. “We are disappointed that Walgreens filed this lawsuit,” Theranos said. “Over the years, Walgreens has consistently failed to meet its commitments to Theranos. Through its mishandling of our partnership and now this lawsuit, Walgreens has caused Theranos and its investors significant harm.”
The drugstore giant was an early validator for Theranos’ fingerprick blood testing tech. Despite its misgivings, it forged ahead with the partnership for fear of losing it to another pharmacy chain. The Theranos Wellness Centers it operated were Theranos’ primary revenue source. Since the pair teamed up, Theranos has dumped two years’ worth of blood test results and corrected or voided tens of thousands in a bid to appease CMS. It has also been under a federal investigation into whether it misrepresented its tech and operations to investors since April. In July, CMS slammed the company with sanctions for not addressing major infractions at its Newark lab that posed “immediate jeopardy to patient health and safety.” These included the suspension of the lab and the barring of CEO Elizabeth Holmes from owning or operating a lab for two years.
Walgreens had been trying to terminate the partnership since February, when it asked its lawyers to examine its contract with Theranos for a way to force the closure of the deal. And while Walgreens considered pulling the plug on the tie-up earlier this year, it held off, concerned that Theranos may sue for breach of contract.