Drugstore chain Rite Aid has filed for Chapter 11 bankruptcy protection in New Jersey owing to soaring debts and said it would be closing underperforming stores, selling its assets and resolving pending litigation against it.
Rite Aid is one of the largest pharmacy retailers in the United States. Court filings reveal that the company has been struggling over high debt, declining revenue, increased competition and the mounting costs over lawsuits regarding its sale of addictive opioid medications. (Related: Rite Aid to close up to 500 stores in BANKRUPTCY proposal.)
Founded in 1962, Rite Aid currently employs around 45,000 people at more than 2,000 retail stores in 17 states. It will remain open for business during its bankruptcy proceedings.
The company reported $24 billion in revenue during the 2023 fiscal year after it filled more than 200 million prescriptions during that period. However, Rite Aid also noted that it had $750 million in losses for the same year, mostly due to mounting litigation costs and reduced demand for Rite Aid products and services.
Rite Aid has listed around $4 billion in debt, $8.6 billion in total liabilities and $7.65 billion in assets. It plans to fund its restructuring with a $3.45 billion bankruptcy loan provided by its existing lenders. It has also received a $575 million offer in hand from pharmacy benefit company MedImpact Healthcare Systems for Rite Aid's subsidiary Elixir.
Court filings note that Rite Aid is seeking higher offers for Elixir and it is also considering selling some or all of its retail business.
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Ongoing litigation involving Rite Aid filed by the Department of Justice comes after an allegation that the company violated the Controlled Substances Act by ignoring "red flags" while filling out thousands of unlawful prescriptions for controlled substances like fentanyl and oxycodone. This has led to the company having to deal with more than 1,600 opioid-related lawsuits from state and local governments, hospitals and individuals harmed by Rite Aid.
The company has denied all wrongdoing, and it hopes to reach an "equitable" settlement of all pending opioid litigation in bankruptcy court.
Rite Aid, other drugstores losing out against big box retailers
Along with similar opioid litigation, drugstore chains like Rite Aid have also been dealing with other issues that frustrate customers. These include prescription drug shortages, labor shortages which see not enough pharmacists and technicians in their stores, and increasingly, walkouts and other labor actions over growing workloads, shrinking staff sizes and low pay.
The stores are also having to deal with tight prescription reimbursement from insurers and waning business related to the Wuhan coronavirus (COVID-19) pandemic, including vaccinations and testing.
All of these ailments have led Rite Aid and its main competitors to face an existential crisis as shoppers increasingly turn to big box retailers like Amazon, Target and Walmart. These same customers are also abandoning Rite Aid's non-prescription products like toothpaste and shampoo, as big box retailers often offer these at cheaper prices and with the added convenience of being able to deliver right to customers' doors.
Competitors Walgreens and CVS have also responded to the crisis facing Rite Aid and other drugstores by making a massive pivot to a healthcare focus with significant investments to match.
Watch this Sep. 26 episode of "Brighteon Broadcast News" featuring host Mike Adams, the Health Ranger, discussing Rite Aid's bankruptcy and decision to close up to 500 of its pharmacies.
This video is from the Health Ranger Report channel on Brighteon.com.
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