MONDAY, Oct. 16, 2023 (HealthDay News) -- The drugstore chain Rite Aid has filed for Chapter 11 bankruptcy, due largely to competition and thousands of lawsuits for its role in allegedly filling unlawful opioid prescriptions.
The company filed a notice Thursday with the U.S. Securities and Exchange Commission (SEC) saying it would not be able to file its latest quarterly financial report before filing for bankruptcy on Sunday, CNN reported Monday. "It was always a matter of when, not if, Rite Aid would file for bankruptcy," said Neil Saunders, managing director of GlobalData, in a note to investors. "The company has been deep in the red for the past six years."
In the SEC filing, Rite Aid said it expected its losses would increase significantly in the past quarter. The company had already lost about three-quarters of a billion dollars between March 2022 and March 2023. It lost another $307 million between March and May of this year alone. Over six years, Rite Aid has lost close to $3 billion. It had only $135.5 million in cash on hand, with $3.3 billion in long-term debt when June started. Those debts exceeded assets by nearly $1 billion at a time of rising interest rates, CNN reported.
Rite Aid plans to stay open through bankruptcy, having secured $3.5 billion in financing and debt reduction agreements from lenders. It will speed store closures and sell some of its business, including Elixir Solutions, a prescription benefit provider.
However, the company is also the target of a U.S. Department of Justice lawsuit filed in March that claimed it knowingly processed "unlawful prescriptions for controlled substances," CNN said. Rite Aid missed "obvious red flags," the department has said, and is in violation of the False Claims Act and Controlled Substances Act.
As part of the bankruptcy plan, Jeffrey Stein was appointed the new CEO. He will also be head of restructuring and a member of the board of directors. "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," Stein said. "In doing so, we will be even better able to deliver the health care products and services our customers and their families rely on -- now and into the future."
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