Walgreens Entered a Controversial $50 million Theranos Deal Without Accurately Testing Its Technology

Walgreens made a controversial deal with Theranos Inc. to market a blood testing machine that could identify various diseases.

When Elizabeth Holmes, Theranos Chief Executive Officer and Founder, arrived in John Hopkins University, in the Spring of 2011, she brought with her a blood testing machine and a data reporting its accuracy in identifying different disease condition.

Theranos is a Wellness Testing Center that specializes in providing accessible health testing kits. Several of its laboratory testing kits receives an FDA approval.

However, the scientist in John Hopkins laboratory told her to put the device on the Baltimore laboratory to verify the authenticity of the machine. Holmes agreed to provide one prototype for testing.  But it never happened.

The Controversial $50 Million Dollar Deal

Walgreens then made a deal with the Theranos Inc. and they plan to put the blood testing centers in various drugstores across the US. The problem is they are going to back up a technology without having a confirmatory report from the trusted authorities that supposed to evaluate its accuracy.

Theranos did provide a prototype of Edison and the sample testing kits to Walgreen’s executive.  When they tried it the machine provided a test result mentioning “low” and “high” so Walgreens have no means of comparing the result to the standard blood testing equipment.

Despite this incomplete test result, Walgreens move forward with the deal.  The company was anxious that Theranos may partner with their competitor and they will lose a potential market.

Based from the federal regulators reports, Edison devices were used to run 12 tests but the results failed to provide an accurate and confirmatory data. Theranos then decided not to continue with Edison’s test result to avoid having sanctions from Federal regulators.

The controversy lies on the fact that they are going to distribute a blood testing machine in thousands of drugstores in US with no any verified study of its accuracy.

Walgreens is said to be a good candidate for a case study of a well-established company that  gamble on new and unproven startup machine hoping to generate more sales but in the expense of the consumers.

The accuracy problems with Edison Testing Device have become a potential embarrassment and legal liability for Walgreens Boots Alliance Inc.  This controversy was first reported by The Wall Street Journal last October.

There are reports that Regulators have some issues with Therano’s testing devices.  They are anxious considering that the testing devices may bring harm than good to the consumer.

When the accuracy problems spread out, Walgreen officials considered turning down the partnership.  But they will have to face a breach of contract against Theranos, so they hesitated. Walgreens has already invested $50 million for this deal.

Theranos Face Lawsuit

Amid the possibilities of getting criminal charges and federal sanction, Theranos is now facing two lawsuits from patients who felt deceived by their blood testing service.  Apparently, Walgreens also felt duped into this supposedly new technology.

In response to the lawsuits, Theranos spokesperson said that they will strongly defend themselves against these false claims.

The Possible Outcome of Accuracy Failures

Investing on a start-up testing facilities has its own benefits and risks.  Newer technologies provide a potential to fill in the gap in the health market.  This may provide a new market that would eventually allow the stable companies who invested to it to earn more.

On the other hand, this new technology should be a subject of strict verification studies to confirm their validity and authenticity.  There is a need for a statistically significant clinical trial results that will confirm its authenticity. Putting an untested device in various drugstores in the US is risky and may jeopardize the health of the consumer. But if the blood testing kit is able to provide a solid evidence of its effectiveness in diagnosing various health condition, then this could be a profitable business.

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