CENTRAL VALLEY – While reeling from allegations that the company filled thousands of fraudulent painkiller prescriptions, as well as facing a shrinking consumer base due to brick and mortar and online competitors like Walgreens and Amazon, the pharmacy chain Rite Aid has filed for bankruptcy.
The Rite Aid Corporation, the seventh largest pharmacy chain in the nation, filed for Chapter 11 bankruptcy protection on Oct. 15. This petition allows a process for businesses, large and small, to restructure their debts while staying in operation by providing them with the framework to figure out how to repay their creditors over time as they keep their business intact.
Rite Aid store managers in Reedley and Dinuba told the Times they have not received any notice from Rite Aid corporate regarding the action and that their stores are operating as usual.
In one of the two press releases Rite Aid issued on Oct. 15, the company said it had reached agreements in principle with key creditors regarding a financial restructuring plan. The company received $3.45 billion in new financing from lenders to maintain operations. According to the release, the “financing is expected to provide sufficient liquidity to support the Company through this process.”
In the second press release, the company announced it had appointed Jeffrey S. Stein as CEO. Stein, who was also appointed chief restructuring officer and appointed to the board of directors, is tasked with shepherding the beleaguered pharmacy through the restructuring process.
“I have tremendous confidence in this business and the turnaround strategy that has been developed in recent months,” Stein said in the release. “I look forward to working closely with the Board, management team and our lenders and bond holders as we better position Rite Aid to deliver on our purpose of bringing people whole health for life.”
JUSTICE DEPARTMENT COMPLAINT
On March 20, the U.S. Attorney’s Office, Northern District of Ohio, filed a complaint against Rite Aid alleging that the company dispensed prescriptions in violation of the False Claims Act and the Controlled Substances Act.
According to a U.S. Attorney press release, the Justice Department alleges that between May 2014 and June 2019, Rite Aid “knowingly filled at least hundreds of thousands of unlawful prescriptions for controlled substances that lacked a legitimate medical purpose.”
The complaint alleges the illegal activity included prescriptions for excessive quantities of oxycodone and fentanyl. These prescriptions were often written by prescribers who the company had previously identified as being guilty of writing bogus prescriptions.
“These practices opened the floodgates for millions of opioid pills and other controlled substances to flow illegally out of Rite Aid’s stores,” said Associate Attorney General Vanita Gupta.
The complaint alleges that over the five-year period, Rite Aid pharmacists continued to fill prescriptions for the opioids despite clear warnings the prescriptions were unlawful.
According to the complaint, the company sought to cover its tracks by intentionally deleting internal notes from Rite Aid pharmacists regarding suspicious prescribers, going so far as to direct district managers to tell their pharmacists “to be mindful of everything that is put in writing.”
A COMPANY IN DECLINE
According to a New York Times article from Oct. 15, the company is over $3 billion in debt. In 1998, the company’s market value was nearly $13 billion – not including the debt it has racked up in litigation costs.
As of Oct. 13, its market value was less than $40 million and its stock value has fallen almost 80% since the start of the year.
According to the Wall Street Journal, over the past two years, the company has closed over 200 stores.
In 2022, CVS, the country’s largest pharmacy chain, had $322.5 billion in revenue in 2022. Walgreens, the second largest chain, had $132 billion. Rite Aid had $24.6 billion in revenue in 2022.