Walgreens Boots Alliance of Deerfield, Ill., has all but said good bye to its $50 million stake in Palo Alto, Calif.-based blood testing startup Theranos, according to an article in The Wall Street Journal based on interviews with 20 current and former Walgreens officials and advisers, former Theranos employees and government records. The article suggests Walgreens was so eager to strike a partnership with a potentially huge industry disrupter, it never validated the technology.
It all started when Jay Rosan, MD, vice president of health innovation for Walgreens, met Theranos CEO and founder Elizabeth Holmes at a health technology conference in 2010, according to the report. Soon after, the companies began exploring a potential partnership. Walgreens enlisted Baltimore-based Johns Hopkins University in helping evaluate the partnership and Theranos' technology, according to the report. Though Ms. Holmes and former Theranos President Sunny Balwani agreed to send Johns Hopkins one of its testing devices, they never did, according to the report. Eventually Dr. Rosan obtained a prototype with test kits. The prototype produced qualitative results, like "high" or "low," rather than quantitative results, which made it difficult to compare to other commercial options, according to the report.
Walgreens went ahead with an initial agreement for fear Theranos would strike a deal with one of its competitors, according to the report. In the summer of 2011, Walgreens executives and consultants visited Theranos' headquarters to tour the labs. They were escorted throughout the visit, even to the restrooms, and the consultants were not given access to the labs, according to the report.
However, grocery chain Safeway was entering a deal with Theranos and CMS granted the startup a CLIA certificate, indicating they met standards to test human blood samples, according to the report. Walgreens decided to move forward.
But now they may be regretting that decision, after Theranos has weathered a storm of bad press since a pair of investigative reports in The Wall Street Journal alleged Theranos overstated the capabilities of its technology. Walgreens has not terminated its contract due to concerns Theranos might sue, according to the report. It has threatened to end the agreement if the startup cannot fix deficiencies found by CMS.
Walgreens declined to comment, but Theranos spokeswoman Brooke Buchanan told WSJ,"We value our partnership with Walgreens and look forward to continuing to work together."
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