/cloudfront-us-east-2.images.arcpublishing.com/reuters/OCR436K2G5IDNAVLK47U3V7CZI.jpg)
Oct 16 (Reuters) – Rite Aid (RAD.N), the U.S. drugstore chain burdened with debt, announced late on Sunday that it has filed for bankruptcy protection. As part of its restructuring efforts, the company plans to close underperforming stores, sell its pharmacy benefit company Elixir, and address lawsuits related to its sale of addictive opioid medications. Rite Aid, a prominent player in the pharmacy retail industry, has faced challenges such as high debt, declining revenue, increased competition, and ongoing litigation over opioids.
Established in 1962, Rite Aid currently employs 45,000 individuals across more than 2,000 retail locations in 17 states. Despite the bankruptcy filing, the company will continue to operate its business. In fiscal year 2023, Rite Aid generated $24 billion in revenue and filled 200 million prescriptions. However, it also experienced $750 million in losses during the same period due to mounting legal expenses.
The U.S. government has accused Rite Aid of disregarding warning signs while filling illegal opioid prescriptions. The company now faces approximately 1,600 opioid-related lawsuits brought forth by various entities, including state and local governments, hospitals, and individuals. While Rite Aid maintains its innocence, it aims to reach a fair settlement regarding the opioid litigation during the bankruptcy process.
Rite Aid joins a growing list of companies, including Mallinckrodt and Endo International, that have resorted to bankruptcy filings due to opioid-related lawsuits. Pharmaceutical manufacturers, distributors, and pharmacy chains have collectively agreed to pay more than $50 billion in settlements to address the ongoing opioid crisis, which has resulted in over a million overdose deaths in the United States since 1999.
To facilitate its restructuring, Rite Aid will rely on a $3.45 billion bankruptcy loan provided by its existing lenders. Additionally, the company has received a $575 million offer from pharmacy benefit company MedImpact Healthcare Systems for its subsidiary, Elixir. Rite Aid intends to explore higher offers for Elixir and consider the potential sale of some or all of its retail business.
The bankruptcy announcement has triggered a dispute with drug distributor McKesson (MCK.N), which supplies 98% of the prescription medicines sold by Rite Aid. Rite Aid has initiated legal action against McKesson to prevent the termination of their drug supply agreement over $700 million in debt owed by Rite Aid. As bankruptcy proceedings commence, McKesson continues to fulfill its shipment obligations to Rite Aid.
Prior to the bankruptcy filing, Rite Aid had already closed 200 stores. As the Chapter 11 case progresses, the company expects to shutter more locations. Jeffrey Stein has been appointed as Rite Aid’s CEO and chief restructuring officer, replacing interim CEO Elizabeth Burr.
Reporting by Leroy Leo, Abinaya Vijayaraghavan and Mariam Sunny in Bengaluru; Editing by Arun Koyyur, Marguerita Choy and Bill Berkrot
Our Standards: The Thomson Reuters Trust Principles.
Acquire Licensing Rights, opens new tab
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
