Rite Aid files for bankruptcy amid opioid lawsuits, rising debt

Rite Aid filed for bankruptcy protection late Sunday, dragged down by falling sales, years of debt and a series of lawsuits alleging that the pharmacy chain helped fuel the nation’s opioid epidemic. by illegally prescribing painkillers.

The Philadelphia-based retailer is expected to close more stores as its Chapter 11 case unfolds in U.S. Bankruptcy Court in New Jersey. Lenders have agreed to provide $3.45 billion in new financing to support the company through its reorganization, according to a company statement.

The important actions we are taking today will help us move forward as Way to be a stronger company.

The long-awaited filing was the only reasonable option for Rite Aid, said Neil Saunders, chief executive officer of GlobalData. It is simply not a viable entity,” he wrote in an email.

Chapter 11 allows a company to continue doing business while restructuring its debts through a court-controlled process. Rite Aid has approx 3.3 billion USD in long-term debt since June. According to its most recent quarterly results, the company reported a net loss of $306.7 million, nearly triple the $110.1 million recorded in the same period a year ago.

It also faces a wave of litigation over allegations of deliberately circumventing regulatory requirements and over-supplying painkillers.

In 2017, more than 1,000 opioid cases were filed in the U.S. District Court for the Northern District of Ohio. In March, the Department of Justice, suing as part of a whistleblower lawsuit, filed a complaint against Rite Aid, alleging that it knowingly filled hundreds of thousands of illegal prescriptions for controlled substances . It also accused Rite Aid of intentionally deleting internal notes written by pharmacists about suspicious prescribers.

The company has called the government’s claims exaggerated in court documents and is asking a judge to dismiss the lawsuit.

Rite Aid said consolidated opioid cases will be handled under bankruptcy court oversight in the future. It was unclear Monday whether the bankruptcy would affect the up to $30 million opioid settlement Rite Aid reached in 2022 with the West Virginia Attorney General’s Office. Other retailers with pharmacy operations, including Walgreens, CVS and Kroger, settled the consolidated lawsuits in federal court in Cleveland.

United States sues Rite Aid, saying it ignored red flags in opioid prescriptions

Rite Aid has closed dozens of stores in the past two years. It’s unclear how many of the remaining 2,100 locations or the 45,000-member workforce will remain. Stein, the new CEO, said the bankruptcy process allows them to accelerate efforts to reduce their real estate footprint.

We look forward to working closely with landlords to determine the best path forward for each of our stores,” Stein said Sunday in a statement.

But it risks pharmacy deserts in some areas, Saunders said, unless other chains step in to acquire store assets.

Rite Aid has long struggled with rivals Walgreens and CVS, which benefit from health insurance and pharmacy mergers and acquisitions. Meanwhile, retail giants like Amazon and Walmart have increased their pharmacy and medical treatment offerings and offered more competitive prices in store aisles on essential items. household staples such as toothpaste and shower gel.

Inflationary pressures have also taken a toll. Consumers have reduced discretionary spending, causing same-store sales at Rite Aid to fall 4.4% in the latest quarter.

The increased focus on price in the marketplace doesn’t play to Rite Aids’ strengths, Saunders said, and the continued expansion of value-focused companies like Dollar General into rural areas is bringing giving people more opportunities to buy essentials elsewhere.

Like many retailers, Rite Aid has been hit hard by inventory depletion caused by something other than sales. Chief Financial Officer Matthew C. Schroeder told investors during the company’s most recent earnings call in late June that the loss from shrinkage was about $9 million higher than last year. . Rite Aid, like its competitors, has moved some products at certain stores behind lockers to reduce theft. But the move also creates another barrier for consumers and reduces the opportunity for impulse purchases.

As part of the bankruptcy proceedings, Rite Aid is looking to sell Elixir Solutions, a pharmacy benefits and services company it acquired in 2015 for about $2 billion, to a pharmacy benefits management company. MedImpact products.

Rite Aid joins the list of companies that have declared bankruptcy while facing a wave of lawsuits over allegations they helped fuel the opioid crisis. Cities and states have accused pharmacies of failing to flag or prevent suspicious orders of addictive prescription painkillers sold on the street, leading to an addiction crisis and deaths due to drug overdose in the US is a record.

Drugmaker Purdue Pharma, widely credited with starting the opioid crisis with the introduction and marketing of the painkiller OxyContin in the mid-1990s, declared bankruptcy in 2019. A proposed settlement A potentially $10 billion resolution is on hold as the U.S. Supreme Court. The court considered whether Sackler family members, who own the company, could be protected from future opioid lawsuits even though they themselves did not file for bankruptcy.

Last week, a bankruptcy court approved a restructuring plan for drugmaker Mallinckrodt, a deal that cuts the $1 billion it owes as part of an earlier opioid settlement with the states. The Ireland-based company, which entered bankruptcy for the second time in less than two years, had initially agreed to pay $1.7 billion. Another drugmaker, Endo International, has agreed to pay nearly $600 million to states as part of opioid litigation but is facing government opposition to a bankruptcy sale.

The retail sector also had multiple bankruptcy filings, including Davids Bridal, Christmas Tree Shops, Tuesday Morning and Party City. In April, Bed Bath & Beyond announced plans to lay off employees and close 360 ​​stores and 120 Buy Buy Baby locations. Even so, the home goods chain has since found new life online as a rebranded Overstock.com.

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