Introduction
The Walgreens-Theranos partnership was initiated in 2013, with the aim to offer low-cost blood tests to Walgreens’ customers. The partnership involved opening blood testing centers in Walgreens stores across the US, with the promise of providing accurate test results without the need for large blood samples. At the time, Theranos was considered a breakthrough in the healthcare industry, and the partnership was expected to be a massive success.
However, in 2015, The Wall Street Journal published an investigative report, revealing that the technology developed by Theranos was not as competent as advertised. This led to an investigation by the Securities and Exchange Commission, and criminal charges were filed against Elizabeth Holmes, the founder of Theranos. Walgreens was also affected by the scandal, leading to significant financial losses.
Investigative Journalism Approach
The investigation by The Wall Street Journal was one of the early indications of the problems with the Theranos-Walgreens partnership. The report exposed several inconsistencies in the technology, questioning the accuracy of the test results. The Journal’s investigation revealed that Theranos was using traditional lab equipment for most of its testing, while also manipulating the results it gave to its customers. This led to further investigations and the eventual collapse of the partnership.
The role played by investigative journalism in exposing the fraudulent practices of Theranos, and the role of Walgreens in the partnership cannot be overstated.
Financial Analysis Approach
The financial losses Walgreens incurred from the partnership with Theranos were substantial. The partnership was significant to Walgreens’ business, as it increased the number of customers visiting their stores for lab tests. The partnership also led to Walgreens investing in Theranos, further exposing them to significant losses. After the scandal broke out, Walgreens terminated the partnership in 2017, leading to an estimated loss of $140 million. This figure included Walgreens’ initial investment in Theranos and the $50 million lawsuit settlement that followed.
The fallout from the partnership also impacted Walgreens’ financial statements. The company’s revenues were affected, as customers questioned the quality of their lab testing services. It also led to a decline in the Walgreens stock price, further impacting their financial performance.
Legal Approach
The Theranos-Walgreens partnership had legal implications for both parties. Following the scandal, Walgreens sought legal recourse, which led to a $50 million settlement with Theranos. The settlement aimed to compensate Walgreens for the losses incurred due to the partnership. The scandal also brought into question the ethical considerations of entering into a partnership with startups, particularly in highly regulated industries such as healthcare.
Public Relations Approach
The collapse of the Theranos-Walgreens partnership also had significant implications for Walgreens’ public relations. The scandal brought negative publicity to Walgreens, with customers questioning the quality of their lab testing services. To mitigate the damage caused, Walgreens implemented a public relations strategy, including issuing a public statement dissociating themselves from Theranos. The company also established a program to ensure quality control of lab testing services, in an effort to regain customers’ trust.
Lessons Learned Approach
The Theranos-Walgreens partnership, and the resulting scandal, offered several lessons for companies to learn from. Walgreens acknowledged the mistakes made in entering into a partnership with Theranos and took steps to prevent future similar collaborations. The company established strict guidelines for entering into partnerships, conducted thorough due diligence before signing contracts, and implemented quality control measures to ensure the excellence of services offered. The lessons learned from the scandal were not only applicable to Walgreens but to other companies considering entering into regional partnerships.
Industry Impact Approach
The Theranos scandal had a significant impact on the industry’s view of Walgreens. The scandal brought negative publicity to Walgreens, and customers were hesitant to use their lab testing services. The scandal also impacted Walgreens’ competitive position within the industry, with competitors taking advantage of the negative publicity. The industry also realized the need for stringent regulations around healthcare startups and the importance of due diligence before entering into partnerships.
Conclusion
The Walgreens-Theranos partnership was a partnership with a lot of promise that ultimately led to significant financial losses for Walgreens. Various approaches were used to understand the financial implications of the partnership’s collapse, including investigative journalism, financial analysis, legal implications, and public relations approaches. In the end, the lessons learned from the scandal were helpful pointers for other companies to avoid similar missteps.
It is crucial for companies to take caution while entering partnerships and ensure that there is a thorough understanding of the value offered by a startup before signing contracts. Companies must also carry out due diligence and establish quality control measures to guarantee the services offered comply with industry standards.
