has agreed to pay $3.1 billion to settle opioid-crisis lawsuits brought by several U.S. states and municipalities, adding to a landmark settlement with rival pharmacy chains.
The agreement resolves a collection of lawsuits brought by states, cities and Native American tribes. Earlier this month,
CVS Health Corp.
CVS 1.08%
and
Walgreens
WBA 1.75%
Boots Alliance Inc. agreed to pay roughly $5 billion apiece to settle the lawsuits. The companies didn’t admit wrongdoing in their deals.
The Walmart agreement was announced the same morning that the retail giant reported its latest quarterly results. The company said it took $3.3 billion in charges in the last quarter related to opioid settlements.
Walmart reported stronger-than-expected sales in the October-ended quarter and raised sales and profit goals for the year, signs the big discount chain is drawing in shoppers despite high inflation. Walmart shares rose over 8% in midmorning trading.
Newsletter Sign-up
What’s News
Catch up on the headlines, understand the news and make better decisions, free in your inbox every day.
Each state, local government and tribe will need to decide whether to participate in the settlement. Plaintiff’s attorneys that lead negotiations are encouraging them to do so, saying the payments hold the pharmacies accountable for their alleged roles in the opioid abuse.
Walmart said that it strongly disputes allegations made in the lawsuits and that the settlement isn’t an admission of liability. The company said its settlement payments will reach communities faster than other deals. CVS is paying out over 10 years, and Walgreens over 15 years.
Walmart has roughly half as many locations as either CVS or Walgreens, which combined have roughly 19,000 U.S. drugstores. Walmart has faced scrutiny from the federal government related to how it prescribed opioids.
The Justice Department filed a lawsuit in December 2020 over its alleged role in the opioid crisis, claiming Walmart sought to boost profits by understaffing its pharmacies and pressuring employees to fill prescriptions quickly. The settlement with the states doesn’t cover the federal case, which Walmart has sought to have dismissed.
The Justice Department sued Walmart a few months after the company had pre-emptively sued the federal government, saying the Justice Department and Drug Enforcement Administration were attempting to scapegoat the company for their failings. Walmart’s suit was dismissed in February 2021. Walmart appealed the dismissal, but lost that case late last year.
Opioid abuse has claimed more than half a million lives and triggered more than 3,000 lawsuits by governments, hospitals and others against players in the pharmaceutical industry, including manufacturers, distributors and drugstores.
The fact that Walmart will pay out funds almost immediately rather than over a decade or more “is particularly noteworthy considering that Walmart dispensed fewer opioids, and at lower dosages, than the other pharmacy defendants,” said lawyer
Paul Geller,
of Robbins Geller, a who is representing local communities.
Write to Sharon Terlep at sharon.terlep@wsj.com and Sarah Nassauer at Sarah.Nassauer@wsj.com
is nearing a deal to combine with a big owner of medical practices and urgent-care centers in a transaction worth roughly $9 billion including debt, according to people familiar with the matter, the latest in a string of acquisitions by big consumer-focused companies aiming to delve deeper into medical care.
The drugstore giant’s primary-care-center subsidiary, Village Practice Management, would combine with Summit Health, the parent company of CityMD urgent-care centers, in an agreement that could be reached as early as Monday, the people said.
Health insurer
Cigna Corp.
CI 0.73%
is expected to invest in the combined company, the people said.
There is no guarantee the parties will reach a deal, the people cautioned, noting that they are still hammering out details of an agreement.
Summit Health, which is backed by private-equity firm Warburg Pincus LLC, has more than 370 locations in New York, New Jersey, Connecticut, Pennsylvania and Central Oregon, according to the company’s website. Current and former physicians also own a large interest in the business.
Village Practice Management, which does business as VillageMD, provides care for patients at free-standing practices as well as at Walgreens locations, virtually and in the home. In 2021, Walgreens announced it had made a $5.2 billion investment in VillageMD, boosting its stake to 63%. At the time, Walgreens said the investment would help accelerate the opening of at least 600 Village Medical at Walgreens primary-care practices across the country by 2025 and 1,000 by 2027.
The expected deal follows a string of mergers involving companies like VillageMD and CityMD as big healthcare providers seek more direct connections with patients.
Amazon.com Inc.
in July agreed to purchase primary-care operator
1Life Healthcare Inc.,
which operates under the name One Medical, for about $4 billion. In September,
CVS Health Corp.
struck a deal to acquire home-healthcare company Signify Healthcare Inc. for $8 billion.
Cano Health Inc.,
which operates primary-care centers, has attracted interest from both CVS and insurer
Humana Inc.
in recent months, The Wall Street Journal has reported.
Bloomberg a week ago reported VillageMD’s interest in Summit Health.
Walgreens appears to have pre-empted a sale process for Summit Health that was set to kick off next year, according to the people, who said the company was about to interview banks before it received interest from VillageMD.
Summit Health has been backed by Warburg Pincus since 2017, when it took a stake in CityMD, a large chain of New York City urgent-care centers.
Since that time, Warburg has helped the company complete multiple transformative acquisitions, including the 2019 merger of CityMD and multi-speciality medical-practice group, Summit Medical Group.
New York-based Warburg, which has more than $85 billion in assets under management, is no stranger to healthcare. The firm counts healthcare-IT business Modernizing Medicine Inc. and Ensemble Health Partners, a revenue-cycle management business for hospitals, among its portfolio companies.
is in advanced talks to acquire the home-healthcare company
Signify Health Inc.
SGFY 1.34%
for around $8 billion, according to people familiar with the matter.
CVS appears to have beat out other heavy hitters including
Amazon.com Inc.
and
UnitedHealth Group Inc.,
which had been circling Signify for a deal that could be announced soon. UnitedHealth never submitted an official bid, one of the people said.
There is still no guarantee that CVS will reach a deal for Signify, which has been exploring strategic alternatives since earlier this summer.
Bids for the company were due Sept. 6, but people familiar with the matter have said that an eager buyer could make a move before then.
Signify’s valuation has ballooned since The Wall Street Journal reported in August that it was for sale. Shares of the company closed at $28.77 on Friday, giving it a market capitalization of roughly $6.7 billion.
Signify works with a large group of doctors to facilitate house calls. It uses analytics and technology to help physician groups, health plans, employers and health systems with in-home care. It offers health evaluations for Medicare Advantage and other plans.
Newsletter Sign-up
Alert
Deals
Major news in the world of deals and deal-makers.
At the close of its deal this year to buy Caravan Health, Signify said that it supported roughly $10 billion in total medical spending.
The company went public in February 2021, raising more than $500 million as a result of the offering. On the day of its initial public offering, shares of the company priced above its expected range, at $24.
New York-based New Mountain Capital has backed Signify since 2017. The firm—which had more than $37 billion in assets under management as of early August—has steadily expanded Signify through a series of mergers and acquisitions since its initial investment.
New Mountain is well-versed in the healthcare sector. It previously sold the healthcare payments firm Equian LLC to UnitedHealth for roughly $3.2 billion in 2019.
For CVS, the deal builds on an effort years in the making to transform itself into a major provider of healthcare services through acquisitions and expanded medical services. The company had been struggling to counter slowing revenue from prescription drugs, which drive the bulk of its sales, and to ward off competition from
Amazon
AMZN -0.24%
for retail dollars.
CVS, the nation’s largest drugstore chain by stores and revenue, acquired Aetna in 2018, arguing that melding the insurance company’s patient data with its network of nearly 10,000 bricks-and-mortar sites would squeeze out costs while improving care and convenience.
The strategy has paid off, buoyed by a surge in demand for Covid-19 vaccines and tests at the height of the pandemic. CVS’s market capitalization has grown to more than $130 billion from around $75 billion since the Aetna deal.
The line between Amazon and Walmart is becoming increasingly blurred, as the two companies seek to maintain their slice of the estimated $5 trillion retail market while chipping away at each other’s share, often by borrowing ideas. Photos: Amazon/Walmart
The company is outperforming
Walgreens Boots Alliance Inc.,
which opted against major acquisitions, in the years since. Walgreens, also racing to expand into healthcare, focused largely on partnerships rather than deals. But last year it bought a controlling stake in the primary-care network Village MD, giving it doctors’ offices that CVS had said it could do without.
CVS Chief Executive
Karen Lynch
has since said that the company must have a foothold in primary care if it is to become a full-service medical provider.
CVS had previously been interested in a deal for the parent of One Medical, people familiar with the matter have said.
Amazon
AMZN -0.24%
agreed to purchase the primary-care clinic operator for about $3.9 billion in July.
The Federal Trade Commission is currently investigating the deal. The parent company of One Medical,
1Life Healthcare Inc.,
disclosed the investigation in a securities filing. The disclosure said One Medical and Amazon each received a request for additional information about the deal from the FTC.
While Wall Street has largely focused on CVS’s efforts to acquire primary-care practices, executives have also discussed ambitions to expand its in-home health presence.
A deal for Signify would represent a bright spot in an otherwise lackluster run for deals lately. Deal volumes globally are down roughly 30% this year after a flurry of activity last year, because of a drop in companies’ valuations, market volatility and other factors including Russia’s war in Ukraine.
Healthcare deal making in particular has slowed more than many other sectors. Over $200 billion of healthcare deals announced so far this year has compared with over $400 billion at this time last year, according to Dealogic. The largest healthcare deal to date this year in the U.S. is
Pfizer Inc.’s
$11.6 billion agreement in May to purchase the rest of
Biohaven Pharmaceutical Holding Co.
Write to Laura Cooper at laura.cooper@wsj.com, Sharon Terlep at sharon.terlep@wsj.com and Cara Lombardo at cara.lombardo@wsj.com
SAN JOSE, Calif.—Ramesh “Sunny” Balwani wasn’t in charge at Theranos Inc., and the blood-testing company was neither his idea nor his creation, his attorney told a jury Tuesday as the second criminal-fraud trial involving the defunct Silicon Valley startup got under way.
The responsibility for the rise and fall of Theranos rests on founder and Chief Executive
Elizabeth Holmes,
attorney Stephen Cazares said in opening statements as he outlined the main points of Mr. Balwani’s defense.
“Sunny Balwani did not start Theranos, he did not control Theranos,” said Mr. Cazares. “Elizabeth Holmes, not Sunny, founded Theranos and built Theranos.”
By the time Mr. Balwani joined Theranos in 2009 as president and chief operating officer, Ms. Holmes had spent six years building “a small but sophisticated company,” said Mr. Cazares. His knowledge of the company was largely based on what Ms. Holmes, who was also his girlfriend, and Theranos scientists told him, Mr. Cazares said.
Elizabeth Holmes’s former top deputy at Theranos, Ramesh ‘Sunny’ Balwani, faces charges of defrauding investors and patients about the startup’s blood-testing capabilities, which he denies. Photo: Getty Images
Mr. Balwani, 56 years old, faces a dozen counts of wire fraud and conspiracy to commit fraud for allegedly lying to investors and patients about the blood-testing startup’s technology. Mr. Balwani helped run the company from 2009 to 2016 alongside Ms. Holmes, and helped finance it by underwriting a $13 million loan and buying $5 million in stock. The two had a romantic relationship that spanned more than a decade and was intertwined with their co-leadership of the company, according to evidence in the case.
Ms. Holmes was found guilty of wire fraud and conspiracy in January in a separate criminal trial.
Ms. Holmes and Mr. Balwani were indicted together in June 2018, but U.S. District Judge
Edward Davila
agreed in March 2020 to Mr. Balwani’s request to sever the trials so they would have separate court appearances. Judge Davila presided over Ms. Holmes’s trial and is also overseeing Mr. Balwani’s proceedings; the same assistant U.S. attorneys who brought Ms. Holmes’s case are also prosecuting Mr. Balwani’s case.
Mr. Balwani’s trial had faced delays due to a prolonged jury selection and the Covid-19 pandemic, and because Ms. Holmes gave birth to a baby boy last year, which postponed her own trial.
The government has accused Mr. Balwani, like Ms. Holmes, of misleading investors, business partners and patients about the capabilities of Theranos’s technology and its finances. Theranos claimed it could test for more than 200 health conditions using just a few drops of blood from a finger prick. Prosecutors have alleged and witnesses in Ms. Holmes’s trial testified that the company used its proprietary device for just 12 types of patient tests, and those tests could be inaccurate. Theranos relied on commercial blood analyzers for the majority of its tests, lawyers for both sides have said.
Mr. Cazares said that Theranos used investor money as it promised—to build the company. When Mr. Balwani left in May 2016, Theranos had hundreds of millions of dollars in the bank, patents and hundreds of blood tests developed by Theranos scientists, Mr. Cazares said.
“The money was there, the business was there,” said Mr. Cazares. And Mr. Balwani, whose stake in Theranos was worth as much as $500 million on paper, walked away from Theranos without selling any stock.
By the time Mr. Balwani left in 2016, Theranos was struggling with unreliable and inaccurate blood tests, deteriorating retail partnerships, unhappy investors and regulatory scrutiny, The Wall Street Journal has reported. Regulators had uncovered major deficiencies in the lab he oversaw. The company dissolved in 2018 following civil lawsuits, a settlement with the Securities and Exchange Commission over fraud charges in which Theranos didn’t admit or deny wrongdoing but paid a penalty, and the federal indictment.
The government’s indictment alleges fraud spanning from 2010 to 2016, during which Mr. Balwani was at the company. In Ms. Holmes’s trial, she described Mr. Balwani as her closest business mentor who had influence over how she ran the business—though he wasn’t the ultimate decision maker.
The government’s opening statements gave a preview of a case that echoed the one against Ms. Holmes.
“This is a case about fraud. About lying and cheating to obtain money and property,” said Assistant U.S. Attorney
Robert Leach.
Mr. Balwani “did this to get money from investors, and he did this to get money and business from paying patients who were counting on Theranos to deliver accurate and reliable blood tests so that they could make important medical decisions.”
Mr. Leach said Mr. Balwani was responsible for what he described as false financial projections that were given to investors. Mr. Leach said Mr. Balwani told investors to expect Theranos would have $990 million in revenue in 2015, when in fact the company had less than $2 million in sales, among other projections Mr. Leach said were misleading.
Mr. Cazares countered that allegation, saying Mr. Balwani accurately portrayed the company’s expected revenue growth based on an agreement from
Walgreens Boots Alliance Inc.
to put Theranos blood-testing devices in thousands of retail pharmacies.
Mr. Balwani is an entrepreneur and immigrant from a family of farmers, who became wealthy from his own success in tech startups before going to work at Theranos, Mr. Cazares said. Mr. Balwani had worked as a software engineer and had a business degree when he went to the blood-testing company, where he was put in charge of the lab despite having no medical or laboratory experience.
SHARE YOUR THOUGHTS
What do you think will be the outcome of the Balwani trial, and why? Join the conversation below.
Mr. Cazares took issue with the government for charging Mr. Balwani without reviewing a database that contained all of Theranos’s lab testing data, including 9 million patient test results.
The database is a thorny issue. The government subpoenaed a copy of Theranos’s proprietary lab-result database, but in August 2018, just days after the government received a copy on an external hard drive, Theranos officials destroyed the entire database, the Journal has reported. The government later learned that a passcode needed to make use of their hard drives was missing.
Before Mr. Balwani’s lawyers outlined the broad strokes of his defense, prosecutors on Tuesday described Mr. Balwani as one-half of a business duo that lied to cheat investors and patients out of money. “They were partners in everything, including their crimes,” said Mr. Leach.
Mr. Balwani was a full participant in the lies Theranos spread, Mr. Leach said, driven by its dwindling cash reserves and unreliable technology. The company went years without revenue and its cash had diminished to $6.9 million by 2013, he said.
For a time, said Mr. Leach, their fraud scheme was enormously successful: They raised hundreds of millions of dollars from investors, and it “brought them fame and adoration.”
Mr. Leach told the jury that they would soon see text message exchanges Mr. Balwani and Ms. Holmes shared during their yearslong personal relationship, which was largely hidden from Theranos investors, employees and board directors. Prosecutors also introduced hundreds of these messages during Ms. Holmes’s trial, showing the two worked in tandem as the top officers of a multibillion-dollar company and as romantic partners.
“They candidly explained to each other how bad things were inside Theranos at the time they were touting Theranos as a revolution in healthcare,” said Mr. Leach.
Theranos and the ‘Sunny’ Balwani Trial
Write to Heather Somerville at Heather.Somerville@wsj.com
Prices are going up for some of the cheapest and most popular at-home Covid-19 test kits in the U.S.
Walmart Inc.
WMT -1.83%
and
Kroger Co.
KR 2.17%
are raising their prices for BinaxNOW at-home rapid tests, after the expiration of a deal with the White House to sell the test kits at cost for $14.
The two U.S. retail giants and
Amazon.com Inc.
agreed with the Biden administration last summer to discount the tests, which are made by
Abbott Laboratories
ABT -2.35%
and generally cost $24 or more for a box with two tests.
Abbott Laboratories’ FDA-approved BinaxNOW kit is among the most commonly used rapid Covid-19 antigen tests in the U.S.
Photo:
Paul Hennessy/Zuma Press
BinaxNOW, approved by the U.S. Food and Drug Administration, is among the most commonly used over-the-counter, rapid antigen tests, which have been in high demand as the highly contagious Omicron variant spreads across the U.S.
The deal with the White House expired in December, and Walmart said this week that it is raising the kits’ price to $19.98 a box. Kroger now sells them for $23.99. The BinaxNOW tests aren’t currently available on Amazon.
Representatives for Walmart and Kroger said they fulfilled their commitment to sell tests at cost for three months and are taking steps to make tests more available. The White House didn’t respond to a request for comment.
An Amazon spokeswoman said the company is working with suppliers to alleviate shortages. She said Amazon made a large investment to develop its own FDA approved PCR test, which sells for $39.99, lower than most similar tests. The effort, she said, involved setting up an in-house laboratory to process results.
Pharmacy chains
CVS Health Corp.
and Walgreens Boots-Alliance Inc., along with other big retailers, have been selling the tests for $23.99 a box. Other retailers already are charging even more.
To help combat Omicron, the Biden administration is opening up more Covid testing sites and delivering 500 million Covid tests to Americans. WSJ’s Daniela Hernandez breaks down why testing is still a pain point in the U.S., two years into the pandemic. Photo Illustration: David Fang
Even at the higher prices, tests are difficult to find. BinaxNOW is sold out on many major retailers’ websites or takes more than a week to arrive. A Walmart spokeswoman said the BinaxNOW tests are more readily available in physical stores.
Abbott said it is running plants around the clock, seven days a week to pump out 70 million tests a month. “Despite rising U.S. material and labor costs, we have not passed along any of these costs to our customers and the price at retail has not changed since we launched the test,” the company said.
Covid-19 tests—both at-home kits and those done on location in clinics or at drugstores—remain costly and difficult to find in many places as the Omicron-driven surge pushes many Americans to seek out the diagnostic tools. The Biden administration has said it is working to expand access to free testing and has pledged to distribute 500 million free at-home tests. Some cities and states have established similar programs.
The White House said last month that it would begin delivering at-home tests in January and that they would be available to the public free by mail through a new website. Officials haven’t provided details of the plans to mail out tests or to cover the costs of testing.
Kroger now sells BinaxNOW Covid-19 test kits for $23.99 a box.
The cost and availability of tests varies widely. BinaxNOW tests are hard to find online for $24 but can be purchased for twice the price. At-home PCR tests are more readily available but generally cost close to $100 for a single test. Other rapid tests approved by the FDA for home use include the Ellume Covid-19 Home Test and the QuickVue test made by
Quidel.
Free testing is generally offered at medical and community clinics and at retail pharmacies. In places where demand for testing is especially high, people face hours-long lines or scarce appointment slots. How much people pay for in-person tests varies based on a number of factors including whether a person is insured, if they are symptomatic and how quickly they want results.
“When the prices are that high, people will rationalize not using a kit. They’ll wait until they’re sick or need it for school or something,” said Eric Feigl-Ding, an epidemiologist and health economist and a senior fellow at the Washington, D.C.-based Federation of American Scientists. “The problem with this pricing, besides creating a lack of access, is that it creates a perverse incentive for people not to use them.”
Newsletter Sign-up
Coronavirus Briefing and Health Weekly
Get a morning briefing about the coronavirus pandemic three times a week and a weekly Health newsletter when the crisis abates.
The tests need to be free or cost closer to $1, as is the case in much of Europe, to be an effective tool, Dr. Feigl-Ding said. That is because people who have few or no symptoms can still spread the virus.
Here’s what we’re watching ahead of Wednesday’s opening bell.
—U.S. stock futures slipped, as investors awaited a bumper day of major earnings reports and a meeting of the Federal Reserve.
S&P 500 futures were down 1.1%, while futures tied to the technology-heavy Nasdaq-100 edged down 0.7%. Dow Jones Industrial Average futures fell 1.1%.
What’s Coming Up
—Earnings updates expected:
Tesla,
TSLA -0.71%
Apple
AAPL -0.22%
and
Facebook
FB -2.39%
are due after the close. The electric-car maker is expected to record its first full-year profit.
The Federal Reserve releases a policy statement at 2 p.m. and Chairman Jerome Powell holds a press conference at 2:30 p.m.
Market Movers to Watch
—And then there’s GameStop. Its stock popped again ahead of the bell, soaring 73% in wildly volatile trading. CNBC reported that Melvin Capital, a hedge fund that has posted big losses so far this year in part because of a wager against the videogame retailer’s stock, had closed out its short position on Tuesday afternoon. The report caused a stir on the online platform Reddit—popular among day traders waging a battle against hedge-fund short-sellers—where some members wrote that it was an attempt to pull
GameStop
GME 109.79%
‘s share price back down. And
Elon Musk
weighed in on the stock again last night with a tweet, “Gamestonk!!“
—The show must go on: Another heavily shorted stock, movie-theater operator
AMC Entertainment Holdings,
AMC 133.87%
saw its shares vault more than 350% higher premarket.
—Headphone maker
Koss
KOSS 72.20%
has also joined the party, and its shares jumped 109% premarket.
—
Bed Bath & Beyond
BBBY 28.21%
resumed its upward trajectory, up 20% ahead of the bell. Online traders point to an early 2020 change in management and the fact that the company is buying back shares as signs that the share price will continue to increase.
—
Microsoft
MSFT 1.44%
shares are up 2.1% premarket. The software giant’s profit and sales jumped, propelled by pandemic-fueled demand for videogaming and accelerated adoption of its cloud-computing services.
—
Boeing
BA -4.46%
shares fell 3.3% premarket after the plane maker reported its biggest-ever annual loss and took a huge financial hit on its new 777X jetliner, reflecting the pandemic’s worsening toll.
—
Abbott Laboratories
ABT 1.12%
shares added 1.5% premarket after it logged hearty profit growth in the latest quarter as a surge in demand for its Covid-19 diagnostics services contributed to higher revenue.
—
Starbucks
SBUX -5.30%
slipped 3% premarket after the coffee chain reported that sales fell during the holiday quarter but showed signs of recovery, particularly in China. Its operating chief
Roz Brewer
is leaving to become CEO of
Walgreens
WBA 6.21%
Boots Alliance, where she’ll be the only Black woman leading a Fortune 500 company. Walgreens shares climbed 5%.
A Walgreens store in Tomball, Texas, Jan. 16, 2021.
Photo:
Jeff Lautenberger for The Wall Street Journal
—
AT&T
T -1.11%
shares slipped 1.3% premarket after it reported a fourth-quarter loss as it booked a $15.5 billion charge on its pay-TV business.
—Chip maker
Texas Instruments
TXN -2.81%
‘s shares slipped 1.7% premarket even though quarterly results and outlook both topped Wall Street estimates after Tuesday’s close.
Market Fact
Retail order flows have reached 20% of the U.S. stock market’s total, according to
UBS
research, twice what they were in 2010.
Chart of the Day
GameStop shares have become a favorite of online traders who are seeking to make money from buying options.
Must Reads Since You Went to Bed
Online Traders Helped Some Unlikely Stocks Soar
Jack Ma’s Ant Plans Major Revamp in Response to Chinese Pressure
Renewed Demand for Treasurys Quells Fears of Rising Rates—for Now
Goldman CEO David Solomon Takes $10 Million Pay Cut for 1MDB Scandal
Biden’s Candidate for SEC Chairman Is Expected to Be Tough
