By Aaron Pan
Rite Aid filed for Chapter 11 bankruptcy protection as the company has struggled with slowing sales, mounting debt, and multiple lawsuits alleging the pharmacy chain’s responsibility for the opioid crisis across the United States.
The Philadelphia-based company, which filed for bankruptcy protection on Oct. 15, announced that it would begin a restructuring plan that speeds up its “transformation and long-term success.”
In a court filing with the U.S. Bankruptcy Court for the District of New Jersey, Rite Aid listed estimated assets and liabilities from $1 billion to $10 billion, according to Reuters.
The company said it reached a deal with lenders for a restructuring plan that significantly reduces its debts, helping its financial flexibility.
Under the agreement secured with creditors, the drug store chain will get $3.45 billion, providing sufficient liquidity for its restructuring initiative. In exchange, Rite Aid will close unprofitable stores and resolve lawsuits, among other measures.
“Rite Aid is continuing to deliver leading health care products and services across its retail and online platforms for the nearly one million customers it serves daily,” the company said in a statement, adding that it “remains committed to improving health outcomes and delivering on its purpose to help people achieve whole health for life.”
The company filed a notice to the U.S. Securities and Exchange Commission on Oct. 12, saying it failed to file a quarterly report as it “reviewed strategic alternatives” to optimize its capital structure.
In its second quarter, revenue fell to $5.6 billion from $6.1 billion in the first quarter. Net losses rose to $307 million, from $241 million in the first quarter.
Rite Aid, one of the country’s biggest drugstore chains, operates more than 2,000 retail stores with 6,100 pharmacists across 17 states in the United States.
On Oct. 15, Rite Aid said Jeffrey S. Stein will officially take over for Elizabeth Burr as CEO. He will also serve as chief restructuring officer and a member of the company’s board of directors. Burr is expected to “continue in her role as a Director on the Company’s Board,” the company said.
“Jeff is a proven leader with a strong track record of guiding companies through financial restructurings,” Bruce Bodaken, Rite Aid chairman, said in a statement. “We look forward to benefiting from his contributions and leveraging his expertise as we strengthen Rite Aid’s foundation and position the business for long-term success.”
Mr. Stein said he prioritized enhancing Rite Aid’s financial position with “tremendous confidence in this business and the turnaround strategy that has been developed in recent months.”
Rite Aid has faced tough competition from rivals such as CVS, Walgreens, and Amazon as those companies switched to focus on the health care business.
In 2017, Walgreens abandoned its effort to acquire Rite Air due to antitrust concerns from the Federal Trade Commission, as the commission feared that combining the country’s two biggest pharmacy chains could lead to a monopoly.
Earlier this year, the Justice Department filed a lawsuit against the company, alleging the drugstore chain “knowingly filled at least hundreds of thousands of unlawful prescriptions for controlled substances,” which violates the False Claims Act and Controlled Substances Act.
Walgreens and CVS have also faced similar lawsuits in recent years. The two drugstore chains reached settlements for $10.7 billion with multiple states late last year.
About 71,000 people died in the United States in 2021 from overdoses involving synthetic opioids, an overdose death rate that was nearly 22 times higher than in 2013, according to the Centers for Disease Control and Prevention.
From 1999–2021, the number of opioid overdose deaths, which include both prescription and illicit opioids, reached nearly 645,000. An analysis found that the opioid epidemic cost the United States nearly $1.5 trillion in 2020.