Drug retailer Rite Aid filed for bankruptcy on Sunday, a move that would halt lawsuits the company faces over its alleged role in the U.S. opioid crisis. The Chapter 11 filing will allow Rite Aid to pause and resolve those lawsuits in a single forum, the Wall Street Journal reported. The company needs help to compete with larger competitors like CVS Health and Walgreens Boots Alliance and online pharmacies. In its most recent quarter, the company saw revenue decline and reported a massive net loss, which made it difficult to pay off its debt load.
The pharmacy chain has been hit hard by lawsuits from local and state governments and the federal government over allegedly filling unlawful prescriptions for opioid painkillers. The Department of Justice sued the company in March, alleging that the chain ignored “obvious red flags” when distributing the addictive drugs to customers. The company has yet to settle the lawsuits, but rivals like Walgreens and CVS have reached multi-billion dollar deals with government agencies over the same allegations.
In its bankruptcy filing, Rite Aid said it had received a commitment for $3.45 billion in new financing from some of its lenders. The company expects to use this cash to fund operations during the Chapter 11 process and will also seek to reduce its debt through asset sales. Rite Aid has also announced a new chief executive and named several other executives to its board. Jeffrey Stein will serve as CEO and chief restructuring officer, replacing Elizabeth Burr, who has served in an interim capacity since January of this year. Stein founded Stein Advisors, a financial advisory firm helping troubled companies.
The company also announced that it would close about 1,000 stores shortly. The company said it would transfer employees at these locations to other stores where possible and work with landlords to restructure leases as needed. “Unfortunately, this will leave some communities without a local drugstore option, but we believe these store closures will be in the best interests of our stakeholders, including shareholders, customers, and employees,” the company said in its statement. Rite Aid is also partnering with A&G Realty Partners to assist with its store closing and leasing program. The company said it would continue to support its communities and give back through its charitable giving programs, such as its Rite Aid Foundation. The foundation has awarded over 63 million in grants to nonprofit organizations and raised $92 million for Children’s Miracle Network hospitals. Rite Aid operates over 2,100 retail pharmacy stores in 17 states and owns the leading pharmacy benefit management company, EnvisionRxOptions. The company is based in Philadelphia, Pennsylvania. Its stock dropped more than 80 percent on Monday. The company’s market value had fallen to less than $40 million. That’s a significant drop from its peak market value 1998 of nearly $13 billion.