Walgreens Ordered to Pay Nearly $1 Bn to Virtual Care Provider in COVID-19 Test Dispute

The decision upholds an arbitration award previously determined in favor of Everly Health, which alleged Walgreens breached their agreement by diverting COVID-19 tests from their agreed-upon workflow.

A US federal judge recently ruled that Walgreens has been ordered to pay over $987 million to virtual care provider Everly Health Solutions following a contract dispute over COVID-19 test ordering services.

The decision upholds an arbitration award previously determined in favor of Everly Health, which alleged Walgreens breached their agreement by diverting COVID-19 tests from their agreed-upon workflow.

US District Judge Richard Andrews in Delaware ruled in favor of Everly Health, formerly PWNHealth, rejecting Walgreens' challenge against the arbitration award. The case centers around Walgreens’ contract with PWNHealth during the pandemic to use its physician network for ordering COVID-19 tests requested on Walgreens’ website.

In early 2020, regulatory requirements mandated physician involvement in COVID-19 test orders. Walgreens partnered with PWNHealth to facilitate these orders through a jointly created website.

However, after regulatory changes allowed in-house pharmacists to authorize tests, Walgreens shifted to using its staff while allegedly continuing to display PWNHealth’s trademark on the website.

According to Everly Health’s court filings, Walgreens failed to remove PWNHealth’s branding while diverting tests from the agreed-upon workflow. The company alleged this misrepresented the service and breached their contract.

Judge Andrews’ memorandum opinion stated that Walgreens continued using the website without updating it, despite changing its testing process in mid-2021. "Everly Health claims Walgreens misused its branding and diverted services without consent, leading to financial damages," according to the filings.

Walgreens Challenges Ruling, Plans to Appeal

Walgreens has maintained that the arbitration award is excessive, claiming that the damages far exceed the contractual cap. In its legal filing, the company argued that the arbitrator’s decision was "egregious and improper," stating that the $987 million sum is twelve times higher than the maximum $79 million allowed under their agreement.

A Walgreens spokesperson expressed disappointment over the court’s decision, stating, "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. We vigorously intend to seek review of this decision on appeal."

Everly Health, in contrast, welcomed the ruling, with a company spokesperson stating, "We are pleased with the Court's well-reasoned decision confirming the arbitration award, which resulted from a thorough, multi-year arbitration process."

Walgreens has confirmed that it is evaluating legal options to challenge both the ruling and damages in the US Court of Appeals for the Third Circuit. The appeal process is expected to take at least two years.

Contract Dispute Over COVID-19 Test Ordering