Rite Aid Files for Bankruptcy Following Declining Sales, String of Opioid Lawsuits

Rite Aid pharmacy chain has filed for bankruptcy as it faces more lawsuits related to opioid and illegal prescription allegations. The company’s sales are also declining, so its debt is increasing as it continues to operate.

According to The New York Times, Rite Aid filed for Chapter 11 bankruptcy protection on Sunday, Oct. 15. The company filed at a court in New Jersey.

Growing Sales Slowdown Led to Failure

In recent years, Rite Aid has struggled to compete against its rivals, such as Walgreens Boots Alliance, Amazon, and CVS. With low sales, it has very little funds to spend on investments that will help boost its businesses.

The declining sales also made it harder for the company to pay its debts, which have ballooned to a massive $3.3 billion as of June. Two of its largest creditors are Humana Health and McKesson Corp., a pharmaceutical company. It was reported that this amount does not include its pending opioid litigation.

Rite Aid’s Scheme to Stay Afloat

CNN Business reported that Rite Aid revealed it was able to secure $3.5 billion in financing and debt reduction agreements from several lenders. It hopes this fund will help it keep the business running through bankruptcy.

Part of the plan is to speed up the pace of its store closures and offload some of its existing business units, such as Elixir Solutions. Rite Aid also believes bankruptcy protection will help it solve its legal disputes at a lower cost.

“With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy,” Rite Aid’s newly-appointed chief executive officer, Jeff Stein, said in a statement. “In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on - now and into the future.”

Photo by: Tony Webster/Flickr (CC BY-SA 2.0)