Dive Brief:

• Walgreens announced Sunday that it is terminating its relationship with blood-testing company Theranos and shuttering operations at all 40 Theranos Wellness Centers in its stores in Arizona, effective immediately. 

• Walgreens in January halted Theranos laboratory testing services at its Palo Alto, CA, location. Sunday’s announcement means that the drugstore chain will no longer offer Theranos services at any of its stores.

• Theranos spokesperson Brooke Buchanan told Retail Dive in an email that the company is disappointed about Walgreens’ move and that it will continue to run its stand-alone operations.

Dive Insight:

The Theranos debacle presents a significant challenge for Walgreens, which—like rivals CVS Health and Rite Aid (which it plans to acquire pending federal approval)—has expanded its lucrative medical services in a changing post-Affordable Care Act healthcare market. 

Walgreens was an early adopter of Theranos' innovative blood-testing solutions, which once seemed poised to disrupt lab testing Silicon Valley-style by providing quick and cheap testing conducted via finger prick.

But the method developed by Theranos has proven to be highly problematic, and the startup is now facing intense scrutiny from both federal health agencies and the Securities and Exchange Commission, amid reports that the tests are inaccurate and fail to ensure a level of quality required by law. Many of the problems were first detailed last year by the Wall Street Journal.

"In light of the voiding of a number of test results, and as the Centers for Medicare and Medicaid Services has rejected Theranos’ plan of correction and considers sanctions, we have carefully considered our relationship with Theranos and believe it is in our customers’ best interests to terminate our partnership,” Brad Fluegel, Walgreens SVP and chief health care commercial market development officer, said in a statement. 

Walgreens also informed Theranos that tests collected at Walgreens Wellness Centers in its Arizona stores must be sent only to Theranos’ certified lab in Phoenix or to an accredited third-party lab, according to a Walgreens press release. No patient samples are to be sent to the Palo Alto lab until all issues raised by the federal government’s Medicare and Medicaid services agency have been fully resolved, Walgreens said.

Walgreens Boots Alliance Inc. last week promoted Alex Gourlay and Ornella Barra, two executives closely allied with CEO Stefano Pessina, to the position of co-chief operating officers. Simon Roberts, EVP of Walgreens Boots Alliance and president of Boots, will leave next month to pursue new opportunities.