Dive Brief:
- The Wall Street Journal reported on Wednesday evening that U.S. pharmacy giant Walgreens allegedly threatened to break off its arrangement with the blood testing upstart Theranos unless the company makes fast changes to address several concerns raised by federal regulators in recent months.
- Walgreens sent a "warning letter" to Theranos in late January giving the firm 30 days to fix serious issues cited by agencies such as the Centers for Medicare and Medicaid Services (CMS), according to the Journal.
- In a CMS letter dated January 25, the agency said that it had found serious deficiencies that presented "an immediate jeopardy to patient health and safety" at a Theranos lab in Newark, CA. The company originally had 10 days to resolve the issues but received a CMS extension to February 12 for a correction plan. Theranos has said that it has been working promptly to fix the issues.
- Spokespeople from Walgreens and Theranos declined to comment on the matter to the Journal. Theranos did not respond to a BioPharma Dive request for comment as of press time.
Dive Insight:
It's possible that Theranos can salvage its relationship with Walgreens at the end of the day if it can quickly resolve the problems that have been dragging it down in recent months. The company has consistently pushed back on the Journal's reporting, asserting that the paper's claims are overblown and too reliant on anonymous sources who may be offering a skewed and incomplete perspective.
But the fact remains that Theranos has been playing defense for nearly four months now, whether it be against allegations of impropriety from former employees or allegations that the company tried to shield regulators from scrutinizing its technology (both claims that Theranos has vehemently denied).
Furthermore, the FDA warned the company last year that its "nanoprick" blood testing technology counted as an unapproved medical device, and that Theranos could only use the tech to conduct its FDA-cleared herpes test.
The cascade of potential issues has reportedly strained Walgreens' relationship with Theranos. The pharmacy retailer has 41 "Wellness Centers" in California and Arizona which provide Theranos' blood testing services and provide the bulk of the blood lab's revenue stream and temporarily shut one of them down after the release of CMS' critical report on the Newark lab.
Walgreens has publicly said that it's assessing "the next phase" of its relationship with Theranos but has not elaborated on just what that may entail. The two companies are still talking through their issues, according to the Journal, and the Walgreens warning may be a tactic for conveying the seriousness of the issue to Theranos.
One thing is clear: If the Walgreens deal does eventually derail, Theranos will find itself in a tough spot. Without a presence in a major pharmacy retailer, the company would have limited avenues for administering its tests and rehabilitating its image.