Pharmacy chain Rite Aid has filed for Chapter 11 bankruptcy protection. While aiming to restructure its business amidst losses and opioid-related legal issues, the company has also made plans to sell part of its operations.
Despite the bankruptcy filing, Rite Aid stores will remain operational, continuing to fill prescriptions and serve online customers. However, this move is likely to speed up the closure of underperforming stores. The company expressed that the Chapter 11 process will help reduce debt and address litigation claims more effectively.
Currently running over 2,000 stores mainly on the East and West Coasts, Rite Aid has faced financial challenges over the years. Annual losses have been reported for several years, with an anticipated net loss of up to $680 million by next spring. Along with its competitors, Rite Aid faces potential financial liabilities due to lawsuits related to opioid prescriptions.
The U.S. Justice Department recently highlighted Rite Aid’s involvement in filling numerous illegal prescriptions, an allegation the company has contested.
Pharmacies, including Rite Aid, have grappled with challenges like drug shortages, staffing issues, and changing market dynamics, especially with the rise of online retailers like Amazon. Notably, Rite Aid’s competitors, CVS and Walgreens, have diversified their revenue sources by stepping into health care and opening clinics.
Rite Aid’s bankruptcy filing in New Jersey revealed debts totaling $8.6 billion against assets of $7.6 billion. To facilitate its restructuring, Rite Aid secured an agreement to reduce its debt and obtained $3.45 billion in financing from some lenders.
The company has also arranged to sell its pharmacy benefit manager, Elixir, to MedImpact Healthcare Systems. The sale will be supervised by the court.
Jeffrey Stein, an experienced financial advisor, has been appointed the new CEO, succeeding interim leader Elizabeth Burr. Rite Aid’s stock, which had been declining, is still listed and traded on the New York Stock Exchange.
In previous years, Walgreens attempted to buy Rite Aid but eventually only acquired part of it, about 1,900 stores, to navigate antitrust regulations.