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It is anticipated that Rite Aid will close several hundred stores within a few weeks following its second bankruptcy filing in under two years.
In 2023, it managed approximately 2,000 pharmacies, yet currently, it operates just 1,240 outlets nationwide following recent store closings.
significantly reducing its presence
in markets such as
Ohio
and
Michigan
.
Pennsylvania
,
California
, New York,
New Jersey
And Washington was among the other states that took a hit.
As the publicly traded company based in Philadelphia searches for a potential new owner, it has obtained $1.94 billion in funding to ensure its stores remain functional throughout this transitional phase.
The number of stores slated for closure remains uncertain, but the company has stated that they intend to offload all of its ‘
prescriptions, pharmacy and
‘frontend inventory, and additional assets’.
The announcement has triggered panic among those with existing prescriptions, but Rite Aid notes in a letter to customers that ‘the majority of our stores will remain open and operating for the next few months where you can continue to access pharmacy services and products in stores and online, including prescriptions and immunizations’.
News of possible store closings has intensified worries over the rise of ‘pharmacy deserts’.
These pertain to regions where inhabitants do not have access to a nearby pharmacy to get their prescriptions filled, thereby lacking easy and dependable access to crucial medicines, as pointed out by U.S. legislators and organizations such as the National Community Pharmacists Association.
One of America’s leading pharmaceutical retail chains, Rite Aid, has faced challenges in recent times because of substantial debt, rising inflation, and heightened competitive pressure.
In a Chapter 11 filing submitted to the New Jersey bankruptcy court, the firm reported liabilities spanning from $1 billion to $10 billion.
Rite Aid plans to sell all of its assets to one or more buyers in bankruptcy.
The company already has started talks with potential national and regional strategic acquirers, and it will try to minimize disruption to employees and pharmacy customers during the bankruptcy sale process, Rite Aid CEO Matt Schroeder said in a statement.
‘As we move forward, our key priorities are ensuring uninterrupted pharmacy services for our customers and preserving jobs for as many associates as possible,’ Schroeder said.
After being unable to obtain further funding from their lenders, the firm informed staff that job reductions would be implemented, as mentioned in an internal memo from Schroeder.
Previously, Rite Aid soughtChapter 11 bankruptcy protection in October 2023 following a report of $750 million in losses for the prior fiscal year.
The firm utilized its prior bankruptcy to reduce $2 billion in debt, shut down numerous outlets, dispose of its pharmaceutical benefits manager Elixir, and reach agreements with its loan providers, drug supply collaborator McKesson, and additional creditors.
The prior bankruptcy also settled numerous lawsuits claiming that Rite Aid overlooked warning signs when dispensing questionable prescriptions for addictive opioid medications.
However, even after these settlements, Rite Aid was left with $2.5 billion in debt upon emerging from bankruptcy as a privately held entity controlled by its creditors in 2024.
Rite Aid embarks on its second bankruptcy with a reduced presence in the retail sector.
Retail analysts believe the firm is exiting markets where it struggles to compete against larger retailers like CVS and Walgreens, the latter of which also operates Duane Reade stores.
Rather than aiming for the top spot, it focuses on positioning itself as the second choice after either of them, similar to how things stand in Pennsylvania.
Pharmacy chains such as Rite Aid and its rivals including Walgreens and CVS have been under pressure as falling drug margins and competition from Walmart and Amazon have led to closure of hundreds of stores.
Facing substantial financial losses, Walgreens has recently accepted a $10 billion acquisition offer from the private equity firm Sycamore Partners—a stark contrast to its $100 billion value ten years prior, highlighting the major difficulties confronting conventional pharmacy stores.
On top of Rite Aid’s financial woes, it faced a series of lawsuits after being accused the company of overprescribing opioids.
In March 2023, the Justice Department filed a lawsuit against the retailer, accusing them of purportedly breaching the federal False Claims Act and the Controlled Substances Act.
The department alleged that the well-known retailer dispensed hundreds of thousands of prescriptions for controlled substances, such as opioids, even though there were clear warning signs.
The allegations suggest that the firm removed internal documents related to suspicious prescriptions and instructed management to advise pharmacists to ‘exercise caution with anything written down.’
Rite Aid has refuted every accusation.
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