(RepublicanJournal.org) – Drugstore chain Rite Aid has filed for bankruptcy as legal problems combined with rising debt and falling cash flow threaten its business model. The company says it voluntarily entered the process and plans to restructure and carry on. However, it faces a tough battle to rescue itself from the many challenges it’s facing.
With 2,100 locations across 17 states, Rite Aid pharmacies are a familiar sight on American streets, but the company has been struggling for years. Sales have been declining, threatening profitability. Then, this March, the Justice Department filed a lawsuit against the company, alleging that it had played a role in the country’s opioid epidemic. According to prosecutors, Rite Aid pharmacists filled thousands of prescriptions despite there being “red flags” of drug abuse — and they say the company knew what was going on, warning pharmacists to be “mindful of everything that is put in writing.”
In August, Rite Aid started looking for a way out of its problems, and rumors circulated that it was getting ready to file for bankruptcy. This had obvious attractions; as well as the federal lawsuit, the chain also faces numerous state suits, and a Chapter 11 bankruptcy would freeze all those legal proceedings and give the company some breathing space. Rite Aid was also reported to be looking at closing around 500 unprofitable locations.
On October 15, those rumors panned out; Rite Aid has now filed for Chapter 11 bankruptcy. The filing says the company has been forced under by increased competition and the lawsuits, as well as high debt and falling revenues. As part of the process, it will sell Elixir, its pharmacy benefit branch, and settle claims from the opioid lawsuits. It’s also replaced CEO Elizabeth Burr, who’s been moved to the company’s board, with Jeffrey Stein, who will also serve as Chief Restructuring Officer while Rite Aid tries to pull its shattered business back together.
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