Major U.S. pharmacy chain Rite Aid announced on Sunday that it has filed for bankruptcy and secured $3.45 billion in fresh funding. This comes as the company faces declining sales and lawsuits related to opioids.
In 2022, Rite Aid agreed to pay up to $30 million to settle lawsuits alleging its pharmacies contributed to the oversupply of prescription opioids. The company has now reached an agreement with its creditors on a financial restructuring plan to reduce its debt and position itself for future growth. The bankruptcy filing is part of this process, and it will allow Rite Aid to significantly reduce its debt and address litigation claims in a fair manner.
In its bankruptcy court documents, Rite Aid stated that it has been burdened with high costs for underperforming stores. The company has closed over 200 struggling locations in recent years. According to court documents, Rite Aid employs 45,000 people, including over 6,100 pharmacists who fill nearly 200 million prescriptions annually.
As of Sunday, Rite Aid had $134 million in cash and the ability to borrow up to $390 million. It also had $524 million in liquidity. However, the company has been facing financial difficulties, with approximately $2.9 billion in losses over the past six years and $3.3 billion in long-term debt.
In March, the Justice Department filed a complaint against Rite Aid, accusing the company of knowingly filling hundreds of thousands of unlawful prescriptions for controlled substances. The complaint also alleged that Rite Aid and its pharmacists ignored warning signs indicating the illegality of these prescriptions.
The complaint was filed after three whistleblowers who had worked at Rite Aid pharmacies came forward. On Sunday, Jeffrey Stein was appointed as Rite Aid’s CEO, replacing Elizabeth Burr. Stein will lead the company through its bankruptcy process.
Closure of 500 stores across the U.S.
Last September, Rite Aid announced plans to close 400 to 500 stores nationwide. The company currently operates more than 2,100 pharmacies in 17 states. Although Rite Aid has stated that it will close additional underperforming stores, it has not specified the number or timeline for these closures.
Neil Saunders, a retail analyst at GlobalData, expressed concern over the impact of the bankruptcy and potential store closures, stating that it could result in “pharmacy deserts” in certain locations. Rite Aid recently notified the New York Stock Exchange of its noncompliance with listing standards, but this does not affect its business operations or reporting requirements to the U.S. Securities and Exchange Commission.
Rite Aid reported a decline in revenue to $5.7 billion in the fiscal quarter ending June 3, compared to $6.0 billion in the previous year. The company also recorded a net loss of $306.7 million during this period.
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