Walgreens ordered to pay $987 million in COVID-19 test contract case

By Mike Scarcella

Feb 10 (Reuters) - Retail pharmacy giant Walgreen Co WBA.O must pay more than $987 million to satisfy an arbitration award won by telemedicine provider PWNHealth, a federal judge in Delaware ruled on Monday.

U.S. District Judge Richard Andrews rejected Walgreens' argument that the arbitrator's decision in a contract dispute over COVID-19 testing was “egregious and improper.” Andrews sided with PWNHealth and affirmed the award, finding no evidence that the arbitrator exceeded his authority or showed bias.

A spokesperson for Deerfield, Illinois-based Walgreens in a statement said it will appeal.

"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," Walgreens said.

PWNHealth did not immediately respond to a request for comment.

PWNHealth, which does business as Everly Health Solutions, initiated the arbitration in 2022, claiming that Walgreens broke the terms of a 2020 business contract during the pandemic.

Walgreens had used Everly’s physician network to order COVID-19 tests that customers requested on Walgreens’ website, according to its court filings. Walgreens said the relationship deteriorated after it started using its own in-house pharmacist to order tests.

Everly told the judge that “without PWN, Walgreens would have been unable to do nationwide COVID-19 testing." Everly said Walgreens on its website continued to display PWN's trademark and also displayed that tests would be sent to PWN and its network, despite "diverting tests from the agreed workflow."

Walgreens argued that the $987 million award was 12 times the maximum of $79 million in damages allowed under the contract between the two companies. It said the award would be the largest-ever under a federal false advertising law that protects trademarks.

Andrews said in his ruling that the arbitrator had authority to interpret the relevant contractual language and determine damages. The arbitrator “did not exhibit manifest disregard for the law” in his calculations, Andrews wrote.

The cases are Walgreen Co v. PWNHealth, U.S. District Court for the District of Delaware, 1:24-cv-00356; and PWNHealth v. Walgreen Co, U.S. District Court for the District of Delaware, No. 1:24-cv-00357.

For Walgreens: Reed Brodsky and Howard Hogan of Gibson, Dunn & Crutcher

For PWN: Shawn Rabin and Krysta Pachman of Susman Godfrey

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