Rite Aid files Chapter 11 bankruptcy
The retail store and pharmacy will continue operations, but will close underperforming stores, company says.
Photo; Courtesy of Rite Aid
Rite Aid Corporation has filed for Chapter 11 bankruptcy and has received a commitment for $3.45 billion in new financing to implement a financial restructuring plan.
The plan would significantly reduce the company's debt, Rite Aid said, including that from the more than 1,600 opioid lawsuits that have been a drain on its resources.
The drugstore chain on Sunday became the first large company facing mass opioid liabilities to file Chapter 11 without any agreement with opioid plaintiffs, who may end up getting very little from Rite Aid, according to The Wall Street Journal.
Rite Aid is in the process of closing 164 of its 2,100 stores and is seeking permission to close more, according to Seeking Alpha.
Rite Aid said it is assessing its footprint and would close additional underperforming stores to reduce the company's rent expense and strengthen its overall financial
performance.
The restructuring process includes implementing a proposed transaction for pharmacy benefit solutions company MedImpact Healthcare Systems to acquire Rite Aid's pharmacy benefits manager, Elixir Solutions, which is not part of the bankruptcy.
Rite Aid has also announced the appointment of Jeffrey S. Stein as chief executive officer, chief restructuring officer and a member of the company's board of directors, effective immediately. He succeeds Elizabeth "Busy" Burr, who has served as interim CEO since January. Burr will continue in her role as a director on the company's board.
WHY THIS MATTERS
Rite Aid maintains it would continue to deliver healthcare products and services across its retail and online platforms for the nearly one million customers it serves daily.
However, McKesson on Saturday afternoon reportedly terminated its drug-supply agreement with Rite Aid, asserting the company was insolvent, according to Seeking Alpha. If McKesson does not continue to supply Rite Aid, the retailer is in serious trouble in trying to operate its pharmacies, the report said.
McKesson refuted that report, saying it is continuing to ship to Rite Aid as bankruptcy proceedings commence.
The Chapter 11 filing late Sunday was expected, according to the Seeking Alpha report. Rite Aid shareholders are being wiped out and get no recovery, the report said.
WSJ said Rite Aid was too small and too poor to pay the costs of lawsuits related to the opioid epidemic. The filing puts these lawsuits on hold.
The company said it is making every effort to ensure customers of impacted stores have access to health services, whether at another Rite Aid or a nearby pharmacy, and will work to transfer prescriptions accordingly so that there is no disruption of services. The company will also transfer associates at impacted stores to other Rite Aid locations where possible.
THE LARGER TREND
Rite Aid is a full-service pharmacy employs more than 6,100 pharmacists and operates more than 2,100 retail pharmacy locations across 17 states.
In March, the Department of Justice filed a complaint in intervention in a whistleblower lawsuit brought under the False Claims Act against Rite Aid Corporation and various subsidiaries alleging that Rite Aid knowingly filled unlawful prescriptions for controlled substances. The government's complaint also alleges violations of the Controlled Substances Act.
Rite Aid has denied the allegations.
Other companies facing opioid litigation, including drugmakers Purdue Pharma, Mallinckrodt, Endo and Insys Therapeutics, had all lined up settlements with at least some opioid plaintiffs before filing for bankruptcy, the WSJ report said.
Last week, drug store giant Walgreens announced $1 billion in cuts and the closure of unprofitable clinics. Financial challenges in the coming year include lower volumes of COVID-19 vaccinations and testing, the company said.
ON THE RECORD
Stein said, "Rite Aid has served customers and communities across our country for more than 60 years, and the important actions we are taking today will enable us to move ahead as a stronger company. With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy. In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on – now and into the future."
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
