Introduction
In 2013, the drugstore chain Walgreens announced its partnership with the health technology startup Theranos, which claimed to have a revolutionary blood-testing technology that required only a single drop of blood from a fingerstick. However, in 2015, the Wall Street Journal published an investigative report that questioned the accuracy and reliability of Theranos’ technology. An unraveling of the company ensued, with Theranos eventually shutting down in 2018. This article aims to explore how much money Walgreens lost with Theranos and the broader implications of this controversy for businesses.
Investigative Report
According to a 2018 report by Forbes, Walgreens had invested $140 million in Theranos by the time the company shut down. This figure includes a $40 million investment in convertible notes and a $100 million deal to open Theranos testing centers in Walgreens stores. The contract for the testing centers was terminated in 2016, and Walgreens lost the entire amount of their investment.
Theranos’ technology was proven to be inaccurate and unreliable, and Walgreens found itself in the midst of a scandal that hurt its reputation. Though Walgreens was able to recover some of its losses from the deal, the overall impact of the loss was significant and affected the company’s financial standing.
Legal Angle
Theranos faced lawsuits and investigations from several parties, including consumers, investors, and regulators. Walgreens was also sued for fraud by some former shareholders of Theranos, who claimed the company had misled them about the accuracy of its technology. Walgreens eventually settled for an undisclosed amount, in order to avoid a costly legal battle.
Walgreens’ decision to partner with Theranos despite its legal and regulatory troubles was unusual, as other companies had declined to work with the startup. However, part of the reason for Walgreens’ partnership was to increase its own revenue and market share, which may have been a motivating factor for the company.
Regulatory Angle
The Theranos scandal brought to light the issue of inadequate regulation in the health technology industry. The company was able to operate without proper oversight due to lenient regulations, and the FDA eventually had to intervene to shut down the company’s operations.
Walgreens, on the other hand, had trusted the regulatory approval of Theranos’ technology and had not done enough research on the company’s claims. The FDA ultimately found that the technology was not accurate and that Theranos had misled consumers and partners like Walgreens.
Business Strategy
Walgreens’ partnership with Theranos was part of a larger business strategy to expand its customer base and stay ahead of its competitors. However, the company neglected to carry out due diligence in its partnership with Theranos, leading to significant losses and damage to its reputation.
The scandal also highlighted the importance of proper risk assessment in business partnerships and the risks of investing in a company without thoroughly checking its claims and accuracy. Walgreens’ decision to partner with Theranos was a costly mistake that could have been avoided with more due diligence and scrutiny.
Lessons Learned
The Walgreens-Theranos controversy provides lessons for businesses on the importance of proper due diligence, transparency, and risk assessment. When partnering with a startup, it’s crucial to verify their claims and ensure that their technology and business practices are legal and accurate. Companies also need to be aware of the regulatory landscape and how it affects their partnerships and investments.
The Walgreens-Theranos controversy also highlights the importance of transparency and open communication between companies and regulatory bodies. If there had been more transparency and communication in the Theranos case, Walgreens may have been able to avoid the costly mistakes it made.
Conclusion
Walgreens lost a significant amount of money in its partnership with Theranos, but the broader implications of this controversy are far-reaching. The need for proper due diligence, accurate claims, and transparency in business partnerships has been underscored, as well as the importance of regulatory oversight and communication. Walgreens’ experience with Theranos serves as a cautionary tale for businesses and highlights the risks of investing in a company without thorough evaluation.
As the health technology industry continues to grow, it’s essential that businesses prioritize accuracy, transparency, and regulatory compliance, to avoid potentially devastating losses.
