PHOENIX (CN) — Elizabeth Holmes tricked many when her company Theranos' blood-testing devices made their way onto Walgreens shelves thanks to false claims more than 200 different medical tests could be conducted using only a pinprick of blood. Eight years after the now-defunct medical tech company was revealed to be a fraud, Walgreens must prove that it too was duped and not part of a conspiracy to defraud investors and customers for profit.
Attorneys argued before U.S. District Judge David G Campbell Tuesday morning at a summary judgment hearing in a class action against Theranos and Walgreens. The suit claims that Walgreens, which entered an agreement with Theranos in 2013 to conduct pilot testing in 40 stores in the Phoenix area, knew or was willfully ignorant to the fact that Theranos products were inaccurate and unreliable.
Members of the class who received Theranos blood tests from Walgreens were “relying on life or death information,” class attorney Roger Heller said. “Important health decisions. What kind of medications they take. What treatments to take or not take.”
The plaintiffs sued Theranos and Walgreens in 2016, less than a year after a Wall Street Journal article accused Theranos of using technology other than its own to conduct the majority of its blood tests and suggested that Theranos cheated on proficiency tests to receive laboratory certification.
Walgreens claims it learned the truth about Theranos through the article. It filed a motion for summary judgment in February, arguing that no reasonable jury would suspect Walgreens knew of the massive fraud taking place under executives’ noses.
“From day one to the last day, Theranos staff insisted to Walgreens that its technology and devices worked,” Walgreens attorney Kristin Seeger argued.
Not only did Theranos trick enough people to receive Clinical Laboratory Improvement Amendments certification, which is the base certification required for a lab to accept human samples for diagnostic testing, but it gave Walgreens three reports from pharmaceutical companies GlaxoSmithKline, Pfizer and Schering-Plough. In its motion, Walgreens argues the reports appeared to show scientific validation of Theranos technology and a letter from an expert at Johns Hopkins School of Medicine also indicated that the technology was “novel and sound.”
Heller countered that the letter from Johns Hopkins was merely a two-page summary of a meeting between Walgreens executives and Johns Hopkins employees who didn’t even see the technology in person.
Theranos conducted blood tests on Walgreens executives to prove its efficacy, though it was later learned that the company used off-the-shelf technology for those blood tests rather than its own, according to court documents. It did the same to acquire CLIA certification.
But because no Theranos employees ever admitted to Walgreens executives that the technology didn’t work, Seeger argued there’s no way to prove anyone at Walgreens knew of the fraud or made an effort to ignore or suppress any information suggesting fraud.
“There’s truly no smoking gun here,” Seeger said. “None of it is direct evidence that shows Walgreens knew Theranos was a fraud.”
But Heller said the smoking gun is Kevin Hunter, the CEO of laboratory management firm Colaborate. Hunter was brought on by Walgreens in 2011 to evaluate its potential partnership with Theranos.
Heller said Hunter warned Walgreens that something was wrong and strongly encouraged Walgreens to investigate Theranos before making any deals.
Rather than following his advice, Heller said, Walgreens “pushed him aside” and instead “focused on putting on blinders and creating a legal defense.”
Seeger denied this, arguing Hunter never told anyone at Walgreens he thought Theranos was a fraud. And even if he did, she said, he was no longer working with Walgreens when the deal was made in 2013 and can’t testify to what Walgreens knew or believed at that time.
Heller added that because Walgreens knew Theranos wouldn’t receive FDA approval, it instead conspired with Theranos to fraudulently receive CLIA certification, which Heller characterized as the “bare minimum” required to run a laboratory.
Walgreens also tried to silence nurse practitioners who spoke out against the inaccurate and unreliable blood testing technology, Heller said, further proving the pharmacy giant knew more than it let on. Walgreens didn’t cut ties with Theranos until eight months after the Wall Street Journal article was published.
“There is an abundance of evidence that Walgreens put its own interests above its customers,” Heller said.
Seeger denied nurse practitioners had spoken out against the technology.
Judge Campbell said he would make a decision on summary judgment “in the near future.”
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