Walgreens’ Mound of Misery grows ever higher in two more ways. The US District Court for the District of Delaware ruled yesterday that last year’s arbitration award of $987 million to PWNHealth stands.
Walgreens originally contracted exclusively with PWNHealth’s Everly Health Solutions’ telehealth physician network in April 2020 to order Covid-19 tests that consumers requested through the Walgreens website. PWN/Everly had, with its network, the ability to administer nationwide Covid-19 testing including labs and follow-up. However, Walgreens in 2021 started to divert tests to their own pharmacists, while continuing to use the Everly trademarked logo and displaying that testing would be done by PWN/Everly’s network. This breached the exclusive Master Services Agreement (MSA) with PWN/Everly. Walgreens terminated the MSA effective 1 June 2022. PWN/Everly on 10 June 2022 then initiated the arbitration with the American Arbitration Association alleging breach of contract, a violation of the Latham Act on trademarks, plus additional breaches and violations. In March 2024, the arbitrator awarded PWN/Everly $987 million. This was 12 times the contractually specified $79 million in damages. Arbitration text and decision in Jus Mundi
Immediately after the arbitration, Walgreens filed suit in Delaware to vacate the ruling on the grounds that it contravened the contract’s cap on damages and that the arbitrator’s decision was “egregious and improper”.
The Federal judge in yesterday’s decision upheld the arbitration decision, finding that the arbitrator had the authority to interpret the contractual language and determine damages. The judge found no evidence that the arbitrator exceeded his authority or showed bias. Walgreens is, of course, appealing the decision in the US Court of Appeals for the Third Circuit. In its Securities and Exchange Commission (SEC) filing, Walgreens stated that it disagrees with the court ruling but that the appeal may take another two years. “There can be no assurances as to the outcome”. PWNHealth, of course, is “pleased with the court’s well-reasoned decision confirming the arbitration award.” Reuters, Crain’s Chicago Business, FierceHealthcare
Walgreens needs some fast cash. One investment that they have been gradually cashing out is their interest in Cencora, a drug distributor originally called Amerisource Bergen. Last Thursday’s drawdown involved Cencora repurchasing about $50 million worth of its stock from Walgreens, with Walgreens selling about $265 million worth of additional shares. Deducting $20 million in early settlement fees, the net proceeds were $295 million. Walgreens (WBA) states that it will be used primarily for debt paydown and general corporate purposes. WBA’s stake in Cencora has been reduced to 6% from the earlier 10%. Walgreens has been steadily cashing out its Cencora interest with three sales in 2024 totaling 5% of shares [TTA 7 July 2024]. Release, Healthcare Dive, Crain’s Chicago Business
Given January’s Department of Justice (DOJ) civil suit over improper dispensing of opioids and and other unlawful medications over more than a decade, with possible penalties in the billions, Walgreens’ Mound of Misery is approaching Chicago’s Willis Tower (the former Sears Tower) heights.
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