Editors note: This article has been updated with quotes from Walgreens and Everly Health Solutions to MobiHealthNews.

A federal judge in Delaware ruled that Walgreens must pay $987 million as part of an arbitration award won by telemedicine provider PWNHealth, which also does business as Everly Health Solutions. 

U.S. District Judge Richard Andrews dismissed 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.

The judge said he found no evidence that the arbitrator exceeded his authority or showed bias. 

"We are very disappointed that the court declined to set aside an arbitration award that clearly far exceeded the contractural cap on damages, and also, importantly, the arbitrator's authority. We vigorously intend to seek review of this decision on appeal," Fraser Engerman, senior director, media relations and issues management for Walgreens, told MobiHealthNews.

The company said it plans to appeal the decision. 

"We are pleased with the court's well-reasoned decision confirming the arbitration award, which resulted from a thorough, multi-year arbitration process," an Everly Health Solutions spokesperson told MobiHealthNews.

Everly started the arbitration in 2022, claiming Walgreens broke the terms of a 2020 business contract during the COVID-19 pandemic.

Walgreens used Everly’s physician network to order COVID-19 tests that customers requested on Walgreens’ website, according to its court filings. 

Customers requested COVID-19 tests on a jointly-developed website on a Walgreens owned website, according to a Everly Health Solutions spokesperson. 

Meanwhile, 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 not have been able to do nationwide COVID-19 testing." Everly said Walgreens, on its website, continued to display PWN's trademark and showed the tests would be sent to PWN and its network, despite "diverting tests from the agreed workflow."

For its part, Walgreens maintained 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.

In his ruling, Andrews said 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. 

THE LARGER TREND

In 2024, Walgreens announced it was closing 1,200 stores nationwide within three years, with 500 stores being closed in 2025. The move is part of cost-cutting initiatives by the company to close unprofitable stores. 

Walgreens is getting ready to close five stores in Los Angeles and Orange County, California. The closings might result in 93 job losses, including pharmacists, pharmacy technicians, cashiers, store managers and inventory specialists.

Last year, in a bid to increase profitability, Walgreens also closed roughly 60 VillageMD clinics that it deemed were underperforming. The company said the closures were part of a cost-saving strategy that will save the company $1 billion.  

Walgreens Chief Medical Officer Dr. Sashi Moodley sat down with MobiHealthNews for an in-person interview following the closures and discussed the state of Walgreens' work in healthcare and the closures of VillageMD clinics. 

"Virtual care is one modality out of many that we have. I think if you step back for a second, we've got, I think, 10 million interactions a day with consumers across the country, and those are through all of our different channels: digital, in-store, and even through our in-person care delivery companies. And so, we're trying to tailor our experience to the patients that we serve, because every patient is a little different, and care looks different," Moodley said.

In 2021, Everlywell, a leader in the at-home diagnostic testing space, acquired PWNHealth and its subsidiary Home Access Health to form a new parent company called Everly Health. 

Under the transaction, PWNHealth was rebranded as Everly Health Solutions and operates as an independent subsidiary of Everly Health.