Rite Aid, one of the largest pharmacy chains in the United States, filed for Chapter 11 bankruptcy on Sunday, announcing additional store closures and a change in management. The pharmacy’s financial restructuring comes as an effort to offset the cost of numerous government lawsuits alleging that the company helped to fuel the nation’s opioid epidemic.
According to a news release published by the company, Rite Aid has initiated a voluntary, court-supervised bankruptcy process to reduce debt, increase financial flexibility, and “focus on key initiatives.” As the third-largest standalone pharmacy chain in the country, it hopes to continue focusing on “improving health outcomes and delivering on its purpose to help people achieve whole health for life.”
Today, we initiated a voluntary court-supervised process to make Rite Aid a stronger company. We are continuing to serve our customers in our stores and pharmacies and on our online platforms. More information: https://t.co/A9PXpvsDEk
— Rite Aid (@riteaid) October 16, 2023
In hopes of resolving litigation claims in an “equitable manner,” Rite Aid has secured a $3.35 billion financing commitment from some of its lenders to retain liquidity. The company is also considering selling off subsidiary Elixir Solutions to MedImpact, a pharmacy benefit management firm, for an additional $575 million.
Learn the benefits of becoming a Valuetainment Member and subscribe today!
A separate news release announced that Rite Aid’s board of directors has appointed financial advisor Jeffrey Stein as the new Chief Executive Officer and Chief Restructuring Officer, replacing interim CEO Elizabeth Burr, who has held the position since January. “As CEO, CRO, and a member of the Board of Directors, my priorities will include overseeing the actions now underway to strengthen the Company’s financial position and further advance its journey to reach its full potential as a modern neighborhood pharmacy,” Stein said. “I have tremendous confidence in this business and the turnaround strategy that has been developed in recent months.”
Rite Aid’s financial woes stem in large part from ongoing lawsuits accusing the pharmacy chain of participating in the opioid epidemic by unlawfully filling prescriptions for addictive painkillers. A Department of Justice lawsuit filed in March came as the latest in a series of claims against the company. According to the DOJ, Rite Aid violated the False Claims Act and the Controlled Substances Act by knowingly overprescribing controlled medications and ignoring red flags in customers.
Roughly 500,000 people died from drug overdoses between 1999 and 2020, according to the US Centers for Disease Control and Prevention, and prescription painkillers were severely overrepresented in those statistics. Similar government lawsuits have been brought against Walgreens, Walmart, and CVS in recent years, costing the companies a combined $13 billion.
However, unlike its competitors, Rite Aid’s struggles with financial solvency have left it unable to offset the costs of fighting the litigation. Competition with big box stores and online retailers has led to more than $2 billion in net losses in the last five years, with $307 million lost between March and May 2023.
According to the most recent filings with the Securities and Exchange Commission, the pharmacy chain had only $135.5 million in cash on hand across its 2,100 locations. The company’s long-term debt totaled $3.3 billion, roughly $1 billion more than its total asset value.
Rite Aid stock fell by 16.8% on Friday ahead of the bankruptcy declaration, down more than 80% since the start of the year.
Though the Sunday press releases did not raise the subject, Rite Aid locations have also been frequent targets of organized theft and looting operations for the past several years, driving up costs for the struggling company.
Add comment