Deerfield-based Walgreen Co. must pay a $987 million arbitration award to a company it contracted with to help order COVID-19 tests for patients, a federal judge ruled Monday.
At the beginning of the COVID-19 pandemic, ordering a COVID-19 test required a physician’s involvement, so Walgreens contracted with virtual care company PWNHealth so that PWN’s network of physicians could order tests for customers who scheduled appointments using Walgreens’ website, according to a court document. But when regulatory requirements changed, Walgreens began having its own pharmacists order tests using the website created by Walgreens and PWN without notifying PWN, according to the judge’s memorandum opinion. PWN said in court documents that for part of this time, Walgreens kept PWN’s mark on its website.
In 2022, PWN filed a demand for arbitration alleging breach of contract, among other claims. The arbitrator sided with PWN, and Walgreens challenged that decision in federal court in Delaware, arguing in part that damages should have been limited to $79 million per a contractual agreement.
On Monday, a federal judge upheld the original arbitration award.
“We are very disappointed that the court declined to set aside an arbitration award that clearly far exceeded the contractual cap on damages — and also, importantly, the arbitrator’s authority,” a Walgreens spokesperson said in a statement Tuesday. “We vigorously intend to seek review of this decision on appeal.”
The appeals process would likely take at least two years, Walgreens said in a filing with the Securities and Exchange Commission on Tuesday.
PWNHealth does business as Everly Health, and an Everly Health spokesperson said in a statement Tuesday that the company is “pleased with the Court’s well-reasoned decision confirming the arbitration award, which resulted from a thorough, multi-year arbitration process.”
On top of the award amount, Walgreens has already been facing a number of financial challenges in recent years. Walgreens recently said that it would suspend quarterly dividends for shareholders for the first time in 92 years, and, last year, announced plans to close 1,200 stores over the next three years, including in Chicago. Walgreens has been cutting costs for years, including through layoffs in Illinois and other locations.
It’s struggles have been related to medication reimbursements, changing consumer habits and a previous plan to turn Walgreens into more of a health care destination that didn’t find success.
Walgreens CEO Tim Wentworth has said he is focused on turning around the company, going back to its historic roots as a retail pharmacy-led business.
Walgreens must pay $987 million arbitration award to Everly Health
