Walgreens terminates Theranos deal, closes all 40 AZ Wellness Centers

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

Walgreens ($WBA) is pulling the plug on its relationship with Theranos, closing all 40 Theranos Wellness Centers at Walgreens stores in Arizona, the company announced Sunday. The change will be effective immediately, though Walgreens will help transition customers over the next several days.

The drugstore giant has been seeking an exit from the partnership for months, asking its lawyers in February to examine its contract with Theranos for a way to force it to shutter the blood-testing clinics in Walgreens' Arizona stores. At the time, Walgreens suspended operations at its Palo Alto-based Theranos Wellness Center while Theranos addressed CMS-flagged deficiencies at its Newark, CA, lab. It also ordered Theranos to stop sending tests from its Arizona centers to the lab in question until it resolved the issues.

Federal prosecutors launched an investigation in April, looking into whether Theranos misrepresented its technology and operations to investors. And last month, Theranos dumped two years' worth of Edison blood test results and corrected or voided tens of thousands of tests. But barely three weeks later, the company reversed itself, saying only 1% of those tests were actually incorrect. 

"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," said Brad Fluegel, Walgreens senior vice president and chief health care commercial market development officer in a statement.

Despite early misgivings about a partnership with Theranos, Walgreens Boots Alliance pursued the tie-up for fear of losing it to another pharmacy chain. And while it considered pulling out of the partnership earlier this year, the drugstore chain held off, worried Theranos might sue for breach of contract and claim billions in damages. As it stands, Walgreens has lost $50 million by investing in Theranos.

But Walgreens comes out better off than Theranos. The blood-testing outfit isn't just losing the validation of its tech that the high-profile partnership brought, but also its primary source of revenue. Without Walgreens, The Wall Street Journal reported, it must open its own blood-testing centers or bring its tests into more doctors' offices in order to reach customers.

"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," Theranos spokeswoman Brooke Buchanan said in a statement.

- here's the Walgreens statement
- here's the Theranos statement
- read more from the WSJ (sub. req.)

Read more on