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One of the biggest pharmacy retailers in the USA has filed for bankruptcy protection and is set to close many of its stores across the country. Rite Aid, founded in 1962, has more than 2,000 pharmacy stores in the US across 17 states but will now be forced to take action due to crippling debts and a slump in sales figures.
Much of that is due to ongoing lawsuits relating to illegal painkiller prescriptions. In March, the Justice Department filed a complaint against Rite Aid for “unlawful prescriptions” that allegedly had “obvious and multiple red flags.”
The company has always denied the claims but confirmed on Sunday that they had filed for bankruptcy protection to “increase financial flexibility.” In a press release, Rite Aid’s newly appointed CEO, Jeffrey Stein said:
“Rite Aid has served customers and communities across our country for more than 60 years, and our important actions today will enable us to move ahead as a stronger company.
“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.
“We remain focused on serving our customers and communities, and we are grateful that they continue to choose our stores and pharmacies for their healthcare needs. We thank our associates for their ongoing hard work and dedication, and we extend our gratitude to our partners, suppliers, and vendors for their continued support.”
How did Rite Aid get to this position?
Rite Aid has always been one of the most reputable and reliable drug stores in the US, but in recent years, its finances and reputation have both taken a hit. Although they have filed more than 200 million prescriptions in the past year, they made a loss of $750m.
Much of that is due to the U.S. opioid epidemic, which has seen pharmacy retailers contribute to a combined one million overdose deaths in the country since 1999.
Rite Aid has always maintained its innocence when it comes to filling illegal opioid prescriptions, but as things stand, they face 1,600 lawsuits relating to the crisis from the national government, local government, hospitals, and affected individuals.
As part of their bankruptcy, Stein has said that he hopes to reach an “equitable” settlement of opioid litigation so that they can move on from the situation. In doing so, they have joined Mallinckrodt and Endo International in turning to bankruptcy protection for support in the opioid epidemic.
Aside from that, the company has further financial worries. They are $4bn in debt and have $8.6bn in total liabilities. They plan to get a $3.45bn bankruptcy loan to help them restructure the company to help them become future-proof while they are also planning on selling their pharmacy benefit company, Elixir.
Further cost-saving activity will include closing hundreds of stores across the 17 states they operate in which will mean redundancies for some of their 45,000 staff members.
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