Walgreens, the US pharmacy giant, has reached a settlement of $44m (£35m) to address legal claims from consumers affected by the Theranos scandal.
Theranos, an American blood testing company, offered finger-prick tests to Walgreens customers in stores in Arizona and California, claiming that these tests could identify hundreds of illnesses.
However, Theranos’s “Edison” blood testing machines were not functioning properly.
The company maintained a veil of secrecy around its machines, keeping them hidden from purchasers while asserting the need to safeguard trade secrets. The limited number of tests it did conduct were performed on traditional machines acquired from medical companies, rather than its custom-made Edison devices.
Elizabeth Holmes, the founder and former CEO, was convicted of fraud last year and sentenced to 11 years in prison. Her former boyfriend and company president, Sunny Balwani, was also found guilty and faces 13 years behind bars.
In 2013, Walgreens entered into a partnership with Theranos to provide blood testing machines in its stores.
At one point, Theranos boasted a valuation exceeding $9bn, but it ultimately filed for bankruptcy after revelations by the Wall Street Journal regarding its faulty technology.
In court documents filed in Arizona on Wednesday, Walgreens announced its agreement to settle the class-action claims from customers for $44m. The papers state that Walgreens continues to deny any wrongdoing.
According to the documents, the settlement fund may receive an additional $1.3m from an agreement between the claimants and Balwani. The settlement still requires confirmation from a judge.
Lawyers representing the claimants hailed the settlement as an “outstanding result”.
The class-action lawsuit accused Walgreens of being “willfully blind” when it agreed to install Theranos machines at kiosks in thousands of its drugstores nationwide.
Approximately 40 testing stations were established at Walgreens shops in Arizona, providing tests for customers.
In their legal filings, the claimants’ lawyers stated that they believed the evidence demonstrated that Walgreens had exhibited “at least wilful ignorance” in its dealings with Theranos.
However, they acknowledged that Walgreens could argue that it too was a victim of the Theranos fraud and “did not know Theranos’s tests were not market-ready”.
Holmes founded Theranos at the age of 19 after leaving Stanford University. She was once hailed as “the next Steve Jobs”.
In May of this year, Holmes, now 39, began serving her 11-year prison sentence for defrauding millions of dollars from investors, including News Corp billionaire Rupert Murdoch. She has filed an appeal against her conviction.
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