Debt-laden Rite Aid (RAD.N), a chain of American pharmacies, announced late on Sunday that it had filed for bankruptcy protection and that it would liquidate underperforming locations, sell its pharmacy benefit firm Elixir, and settle legal claims related to the selling of addictive opioid prescriptions.
According to court documents, Rite Aid, one of the biggest pharmaceutical merchants in the United States, struggled with high debt, declining income, more competition, and opioid litigation.
Rite Aid, which was founded in 1962 and has 45,000 employees across 2,000 retail locations in 17 states, will continue to operate as usual throughout the bankruptcy. In fiscal year 2023, the business generated $24 billion in sales and filled 200 million prescriptions.
Additionally, it lost $750 million for the fiscal year 2023 while dealing with increasing legal expenses.
Rite Aid is facing 1,600 additional drug lawsuits from state and municipal governments, hospitals, and people. The U.S. government has accused Rite Aid of ignoring “red flags” when writing prescriptions for illegal opiates.
Rite Aid stated that it hoped to seek an “equitable” settlement of the opioid litigation in bankruptcy, despite having denied any wrongdoing.
It joins a number of businesses that have declared bankruptcy as a result of lawsuits regarding their claimed contributions to the U.S. opioid epidemic, including Mallinckrodt and Endo International.
In settlements connected to the opioid crisis, which has resulted in more than a million overdose deaths in the United States since 1999, drug producers, distributors, and pharmacy chains have agreed to pay more than $50 billion.
According to documents filed in the U.S. Bankruptcy Court for the District of New Jersey, Rite Aid has $7.65 billion in assets, $4 billion in debt, $8.6 billion in total liabilities, and $8.6 billion in total assets.
It intends to use a $3.45 billion bankruptcy loan from its current lenders to pay for its restructuring.
The pharmacy benefit firm MedImpact Healthcare Systems has made the company a $575 million offer for Elixir, the company claimed.
According to court documents, Rite Aid will look for greater bids for that business and may possibly decide to sell some or all of its retail operations.
A disagreement with drug distributor McKesson (MCK.N), which supplies 98% of the prescription medications sold by Rite Aid, was immediately sparked by the bankruptcy declaration. Rite Aid, which owes $700 million on its medicine supply contract, filed a lawsuit against McKesson early on Monday to stop it from ending the relationship due to the debt.
While bankruptcy proceedings are starting, a McKesson spokesman declined to comment on the disagreement other than to clarify that the company is still sending shipments to Rite Aid.
Before filing for bankruptcy, Rite Aid closed 200 locations, and it anticipates closing more as its Chapter 11 case develops.
In place of acting CEO Elizabeth Burr, the company named Jeffrey Stein as its CEO and chief restructuring officer.
In Bengaluru, Leroy Leo, Abinaya Vijayaraghavan, and Mariam Sunny reported; Arun Koyyur, Marguerita Choy, and Bill Berkrot edited the story.