Walgreens Files Suit Against Former Partner Theranos

Image courtesy of Mike Mozart

Theranos, the startup that shuttered its blood-testing business after losing its retail partnerships and facing stiff sanctions by federal regulators, is now facing another challenge, this time in the courtroom: Walgreens has reportedly filed a $140 million lawsuit against its one-time partner. 

The lawsuit, first revealed by Wall Street Journal reporter John Carreyrou on Twitter, was filed Tuesday in Delaware and sealed at the request of Walgreens.

According to court filings [PDF], Walgreens alleges that Theranos’ action in voiding two years’ worth of tests earlier this year constitutes a breach of contract between the two companies.

Walgreens claims in the filing that it entered into an agreement with Theranos in April 2010 that held both companies “in strict confidence and to maintain as confidential all” information between the two.

That partnership ended in June, two months after Theranos began facing issues with its blood-testing business. Walgreens initially began working with Theranos — even before testing the company’s technology — by opening 40 clinics in drugstores in Arizona.

Things began to crumble for Theranos earlier this year when reports surfaced that the company was basically faking their claims about their equipment and testing procedures. While the entire point of using Theranos was to use its own blood-testing tech, the company was performing a significant number of tests using other companies’ equipment… and the tests that it ran on its own proprietary Edison machine did not meet accuracy requirements. In May when the company voided two years’ worth of test results that may have been flawed.

And in July, federal regulators imposed stiff sanctions on the company: Theranos had its hematology certification curtailed and lost its ability to bill Medicaid and Medicare for providing blood-testing services. It also had to pay a fine to the feds.

[via The Verge]