Reuters

(Reuters)

Walgreens Pulls Back From Theranos

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Theranos Inc.'s main retail partner is suspending some ties to the blood-testing laboratory in the wake of a critical regulatory inspection report.

Walgreens Boots Alliance Inc. said it is temporarily closing its Theranos Wellness Center in Palo Alto, Calif., after federal inspectors found "deficient practices" at Theranos's Newark, Calif., lab that "pose immediate jeopardy to patient health and safety."

The nation's largest drugstore chain also said it would suspend sending patient blood samples to Theranos's Newark lab. Theranos operates Wellness Centers at 41 Walgreens pharmacies, one in Palo Alto and the remainder in Arizona.

Theranos couldn't be reached immediately for comment.

Walgreens said no patient samples will be sent to the Newark lab until "all issues raised by (regulators) have been fully resolved." Theranos has 10 days from the receipt of a notification letter from regulators, dated Jan. 25., to come up with a plan to fix the problems.

The tie-up is important for Theranos. The long-term pact, announced with fanfare in late 2013, envisioned opening Theranos Wellness Centers around the nation in many of Walgreens' nearly 8,200 stores. The Walgreens partnership is Theranos's main access point to consumers, providing the bulk of Theranos's sales to the public.

As reported, Walgreens in October suspended plans to roll out more Wellness Centers after The Wall Street Journal published articles noting that the proprietary lab instrument developed by Theranos as the anchor of its growth strategy handled just a fraction of the tests sold to customers at the end of 2014 and that the company has stopped collecting tiny vials of blood drawn from finger pricks for all but one of its more than 240 tests.

Walgreens in recent weeks has debated whether to close the 41 Theranos centers amid what Walgreens found to be unsatisfactory answers from Theranos, according to people familiar with the matter.

On Sunday, Walgreens spokesman Michael Polzin said he wouldn't comment on the Theranos contract or relationship beyond a previous statement that Walgreens is "currently in discussions about the next phase of our relationship."

On Wednesday, the Centers for Medicare and Medicaid Services said an inspection completed in November uncovered five major infractions at Theranos's Newark lab that violate federal law governing clinical labs.

The agency defined one infraction by the blood-testing company, based in Palo Alto, Calif., as a situation "likely to cause, at any time, serious injury or harm, or death, to individuals served by the laboratory or to the health and safety of the general public."

Theranos said Wednesday that the inspection outcome, as summarized in the letter, "does not reflect the current state of the lab." The company said the lab now processes less than 10% of the tests done by Theranos.

"We value engagement with our regulators, and are committed to ensuring that all our labs operate at the highest standards," Theranos said.

"We are still reviewing the report, but we addressed many of the observations during the survey and are actively continuing to take corrective action," Theranos added. "A full plan of correction will be submitted to CMS within days."

Theranos said none of the findings are related to its lab in the Phoenix area.

By Michael Siconolfi

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