A Popular Drug Store Chain Is Filing for Bankruptcy Amid Opioid Lawsuits and Financial Woes The pharmacy chain Rite Aid first opened in Pennsylvania in 1962.
Key Takeaways
- Rite Aid officially filed for bankruptcy on Sunday.
- Rite Aid is facing over a thousand federal lawsuits, along with state court cases, accusing the company of contributing to the opioid crisis.
- Walmart, CVS, and Walgreens settled opioid-related lawsuits in 2022.
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Rite Aid filed for Chapter 11 bankruptcy on Sunday after billions of dollars in debt from lawsuits related to the opioid epidemic mounted.
The pharmacy secured $3.45 billion in funding to sustain operations in the bankruptcy phase and plans to maintain its store operations and customer service, The New York Times reported.
The chain has been closing stores over the last year and plans to close "hundreds more" in the wake of the bankruptcy filing, the outlet added.
Original story below:
Rite Aid is on the brink of filing for bankruptcy amid mounting federal and state lawsuits regarding opioid-related settlements, which have resulted in increasing debt, The Wall Street Journal reported.
The pending bankruptcy filing follows a period of difficulties for Rite Aid over the past five years, including store closures (145 last year alone) and unsuccessful attempts at mergers with competitors like Walgreens and Albertsons in 2017 and 2018, respectively.
Now, Rite Aid is facing over a thousand federal lawsuits, consolidated in Ohio, along with multiple state court cases that accuse the company of contributing to the opioid epidemic. Additionally, the Justice Department has filed a civil lawsuit, alleging negligence in handling opioid prescriptions and violations of the False Claims Act and Controlled Substances Act.
Rite Aid has denied the allegations and sought the dismissal of the department's lawsuit. Filing for bankruptcy would pause these legal actions and provide Rite Aid with a means to address them within a single framework, the WSJ added.
According to the drugstore chain's last earnings report released in June, Rite Aid's revenue declined by nearly 6% and experienced a net loss of $306.7 million — almost triple from $110.2 million for the same period a year prior.
Related: Purdue Pharma to Plead Guilty to Multiple Federal Charges
The potential Chapter 11 filing would encompass Rite Aid's $3.3 billion debt and ongoing legal claims surrounding the allegation that the chain contributed to an oversupply of prescription painkillers, the WSJ added.
Rite Aid is among a myriad of retailers (Walmart, CVS, Walgreens) that settled opioid-related lawsuits, paying over $13 billion collectively.
Meanwhile, drug manufacturers Purdue Pharma, Mallinckrodt, and Endo International, have also declared bankruptcy due to opioid-related litigation.
Mallinckrodt, having initially committed $1.7 billion to opioid plaintiffs during its Chapter 11 restructuring last year, is now on the path towards a subsequent bankruptcy, leaving about $1 billion of that commitment unpaid. Similarly, Endo is encountering government opposition to its proposal to gradually pay $450 million to state governments and $119 million to private plaintiffs.
Related: CVS, Walgreens Agree to $10 Billion Settlement Related to Opioid Crisis
At the center of the epidemic — and the subsequent lawsuits — is the Sackler family, founders and owners of Purdue Pharma. The Supreme Court has halted Purdue's $6 billion settlement with the Sackler family as it examines potential legal flaws in the Chapter 11 plan, considering whether bankruptcy courts have the authority to approve settlements that protect third parties (like Purdue's owners) from legal claims.
