Deerfield-based Walgreens Boots Alliance has agreed to pay a $595 million settlement to a virtual care company over a dispute involving COVID-19 testing — dodging a $987 million arbitration award that a federal judge recently said Walgreens had to pay.
The settlement comes just weeks after a federal judge upheld a $987 million arbitration award that Walgreens and virtual care company PWNHealth, now doing business as Everly Health, had been sparring over in court. A Walgreens spokesperson said in a statement at the time that Walgreens would appeal the judge’s decision to uphold the award. But the settlement agreement, which was announced late Tuesday, would put an end to the matter.
Walgreens “entered into the Settlement Agreement to avoid the continued accrual of post-award interest on the Arbitration Award and the cost and uncertainty of continued litigation,” Walgreens said in a filing with the Securities and Exchange Commission Tuesday. Walgreens noted that the settlement agreement includes no admission of wrongdoing or liability by Walgreens.
Everly did not immediately respond to a request for comment Tuesday afternoon.
Walgreens had contracted with PWNHealth early in the COVID-19 pandemic when ordering a COVID-19 test required a physician’s involvement. Walgreens used PWNHealth’s network of physicians to order tests for customers who scheduled appointments using Walgreens’ website, according to a court document. But in 2022, PWNHealth initiated arbitration, alleging that Walgreens breached the agreement between the two companies when Walgreens began using its own pharmacists, after regulatory requirements changed, to order tests using the website created by Walgreens and PWNHealth without notifying PWNHealth. PWNHealth said in court documents that for part of that time, Walgreens kept PWNHealth’s mark on its website.
The arbitrator sided with PWNHealth, 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. The judge, however, sided with the arbitrator’s original decision.
Had Walgreens appealed the judge’s decision, the appeals process would have likely taken at least two years, Walgreens previously said.
The settlement agreement comes amid a number of other financial challenges for the retail pharmacy giant related to medication reimbursements, changing consumer habits and a partnership with primary care provider VillageMD that wasn’t successful. Walgreens CEO Tim Wentworth has said he plans to turn around the company partly by refocusing on its historic work as a retail pharmacy-led business.
Earlier this year, Walgreens said that it would suspend quarterly dividends for shareholders for the first time in 92 years. Last year, Walgreens 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.
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