One of the largest pharmacy chains in the United States has just filed Chapter 11. Rite Aid is officially going bankrupt.
In addition to declining sales, Rite Aid is facing literally THOUSANDS of lawsuits from local, state, and federal governments because of their allegedly filling thousands of illegal opioid prescriptions.
Yes, someone is finally paying a price for helping to fuel the opioid crisis.
Rite Aid has raised more than $3 billion to keep their stores up and running during the restructuring period. The pharmacy giant has also made a change in leadership.
The company also appointed a new chief executive, Jeffrey Stein, to lead its restructuring. Mr. Stein is the founder of Stein Advisors, a financial advisory firm that focuses on fixing troubled companies. Elizabeth Burr had been serving as Rite Aid's temporary chief executive since January.
While Rite Aid isn't alone in facing scrutiny over its handling of opioids, the Justice Department has gone hard after the chain.
In March, the Justice Department filed a complaint against Rite Aid and its various subsidiaries asserting that the company filled prescriptions for excessive quantities of opioids "that had obvious, and often multiple, red flags indicating misuse."
Rite Aid denies the claim made by the Justice Department, but in the meantime, the brand is in real trouble until they get to the other side of the lawsuit.
The company was already over $3 billion in debt while competing with Walgreens, CVS, and other larger pharmacy brands, and that was before paying any legal fees related to the federal lawsuit.
Since January, Rite Aid stock has tumbled by nearly 80%.
Put all this together and it's a nasty concoction that is bound to lead to failure.
That array of problems has created "just kind of the perfect storm," said Sarah Foss, the global head of legal and restructuring at the financial services company Debtwire. "I think Chapter 11 is really the only option for somebody like a Rite Aid to get all of this settled. On a basic level, what bankruptcy does is it allows you to settle it all in one forum."
We'll see if the brand, which employs 45,000 people, can weather the storm and come out on the other side.
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