Walgreens Is Reportedly Taking Steps to Dump Theranos

Feb 29, 2016

Walgreens (wba) is reportedly looking into ways to definitely end its relationship with troubled blood-testing start up Theranos.

According to the Financial Times, citing people familiar with the matter, Walgreens has asked lawyers to comb through its contract with Theranos to see if it can force the once high-flying Silicon Valley "unicorn" led by Elizabeth Holmes to close 40+plus blood-testing wellness centers it operates within Walgreens' drugstores in Arizona (and one in California.) If successful, Walgreens' move would be a devastating blow to Theranos, which operates all but one of its centers within the drugstore chain’s stores.

A representative for Walgreens declined to comment to Fortune, while a spokeswoman for Theranos did not immediately respond to a request for comment.

This latest report marks a continued deterioration between the two companies. A few weeks ago, Walgreens told Theranos to immediately stop sending any lab tests provided through Theranos Wellness Centers at Walgreens to its lab in Newark, Calif. for analysis. The day before, the U.S. government’s Centers for Medicare & Medicaid Services (CMS) said Theranos’ deficient practices at the Newark lab posed “immediate jeopardy to patient health and safety."

Walgreens, which operates an 8,000-drugstore chain, doesn't see how Theranos can quickly fix its regulatory problems, prompting it to looking into simply ending the companies' arrangement, which has proven to be a big PR headache for Walgreens, the FT report said. Recent reports in the Wall Street Journal have suggested that its blood-testing devices were flawed and had problems with accuracy.

At the same time, the FT reported that Theranos believes Walgreens has little legal basis for terminating the partnership because it has submitted an improvement plan to CMS among other steps.

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