Rite Aid has filed for bankruptcy protection and plans to sell part of its business as it attempts to restructure while dealing with losses and opioid-related lawsuits.
The drugstore chain said late Sunday it also has obtained $3.45 billion in fresh financing from some of its lenders, which will help support the company through its voluntary Chapter 11 process.
The plan will “significantly reduce the company’s debt” while helping to “resolve litigation claims in an equitable manner,” Rite Aid said.
The company also said it expects to receive court approval for several motions it made to support its business. Those include paying employee wages and benefits without interruption. The company also said it still plans to pay vendors in full.
Rite Aid Corp. runs more than 2,100 stores in the United States, mostly on the East and West Coasts and has posted annual losses for several years. The Philadelphia company, which is marking its 60th birthday this year, has been cutting costs and closing some stores as it has dealt with long-standing financial challenges.
The company, like its rivals, also faces financial risk from lawsuits over opioid prescriptions. Rite Aid already has reached several settlements, including one announced last year with the state of West Virginia for up to $30 million.
In March, the U.S. Justice Department intervened in a whistleblower lawsuit brought by former employees under the False Claims Act. Federal officials said in a statement that the drugstore chain filled “at least hundreds of thousands” of illegal prescriptions for drugs including opioids.
Rite Aid called the government’s claims “hyperbolic” in a subsequent motion to dismiss. The company said facts alleged in the case actually showed it exceeded regulatory requirements for diversion control. Tough market conditions including tight prescription reimbursement and waning COVID-19 vaccine and testing business also have hit drugstores in recent quarters. But Rite Aid’s larger competitors have moved more aggressively into health care, opening clinics and adding other sources of revenue.
Walgreens and CVS Health, by contrast, each run about 9,000 locations or more in the U.S.
Drugstores also have been dealing with several issues that frustrate customers. They’ve handled prescription drug shortages, and they have struggled to fill their stores with enough pharmacists and technicians to run the pharmacies. CVS and Walgreens both have dealt with walkouts by pharmacy employees concerned about their growing workloads and lack of help.
The drugstore chain also said it will continue to look at its stores and close underperforming locations.
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Written by: Editor