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https://www.nytimes.com/2023/10/15/business/rite-aid-bankruptcy.html
The pharmacy chain, one of the country�s largest, faces more than a
thousand lawsuits that say it filled illegal prescriptions for
painkillers.
Rite Aid, one of the largest pharmacy chains in the United States, filed
for bankruptcy on Sunday, weighed down by billions of dollars in debt,
declining sales and more than a thousand federal, state and local lawsuits
claiming it filled thousands of illegal prescriptions for painkillers.
The company filed for Chapter 11 bankruptcy protection in New Jersey. Its
largest creditors include the pharmaceutical company McKesson Corporation
and the insurer Humana Health. The pharmacy has raised $3.45 billion to
fund its operations while it is in bankruptcy, during which it expects to
continue to operate its stores and serve its customers.
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.
Rite Aid is one of many drugstore chains dealing with lawsuits stemming
from the deadly abuse of opioids in the United States. 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.�
The company has denied these claims.
Rite Aid, which has more than 45,000 employees, has struggled in recent
years to compete against larger peers like CVS and Walgreens Boots
Alliance, as well as Amazon. Deteriorating sales left the company with
less money to invest in its businesses, and more difficultly in paying
back its debt. As of June, according to company filings, it had $3.3
billion in debt, not counting the pending opioid litigation.
Rite Aid�s stock has fallen nearly 80 percent since the start of the year.
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.�
Rite Aid has closed several stores in recent months and has been preparing
to close hundreds more. The shrinking of the company has made it even
harder to compete.
�Because they closed so many stores, if you happen to need something, you
might not necessarily have a Rite Aid next to you, so you�re going to go
to a competitor,� said Chedly Louis, a vice president at Moody�s Investors
Service, who follows Rite Aid. �So that�s another reason why you�ve got
weakness.�
Mr. Stein, the company�s new head, said his focus would be to steer the
company through the bankruptcy process, when it will be able to trim debt,
close some stores and deal with the opioid litigation. Mr. Stein said he
hoped to help the chain �reach its full potential as a modern neighborhood
pharmacy.�
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The bankruptcy filing is a dramatic fall for what was once the biggest
drugstore chain in the United States. In 1998, Rite Aid�s market value was
nearly $13 billion. It closed on Friday with a market value of less $40
million.
�The company has not been well managed for a very long time,� said David
Silverman, a retail analyst at Fitch Ratings. �They have been stuck in the
perpetual inability to improve their fortune.�
Rite Aid said on Sunday that it was working on a potential deal to sell
Elixir, the pharmacy benefit manager it bought for $2 billion in 2015, to
MedImpact. Any deal would be subject to approval by a bankruptcy judge.
Pharmacy benefit management companies, often referred to as P.B.M.s in the
industry, act as intermediaries on behalf of employers and health
insurance plans, performing services like negotiating discounts on drugs.
Elixir has been a challenge for Rite Aid, because its smaller scale has
put it at a disadvantage when negotiating for larger contracts that could
generate more cash. CVS Caremark, Cigna�s Express Scripts and UnitedHealth
Group�s OptumRx are the three biggest pharmacy benefit managers,
processing about 80 percent of all prescription claims in the United
States.
�It would have been different if they would have been able to grow that
business, grow that P.B.M.,� Ms. Louis said.
In recent years, Rite Aid has been shuttering stores to keep pace with
declining sales. It now has about 2,000 locations in 17 states. CVS
Pharmacy, on the other hand, has more than 9,500 stores and Walgreens
around 8,700.
Rite Aid shrank its store base significantly after a failed merger with
Walgreens in 2017. The Federal Trade Commission had antitrust concerns
about combining two of the country�s largest drugstore chains. When the
merger fell through, Rite Aid agreed to sell to Walgreens more than 2,000
stores � around 48 percent � along with three distribution centers for
$5.18 billion. At the time, Rite Aid said it would be left with its best
performing locations, and John Standley, who was the chief executive, said
the sale of those assets was an �important strategic transformation� for
the company.
Mr. Silverman of Fitch said that Rite Aid �generated quite a bit of cash�
from the sale and used it to pay down debt. But, he added, �from a
competitor standpoint, now they�re even smaller.�
Rite Aid later tried to merge with the grocery chain Albertsons, but the
deal was called off in 2018 after it lost support from Rite Aid�s
shareholders.
During the pandemic, Rite Aid initially benefited from a sales boom as
people stocked up on hand sanitizers and cleaning and beauty products. It
sped up technological offerings, opened smaller-format stores aimed at
addressing pharmacy needs and said it was focusing on winning over more
millennial and Generation X customers. Rite Aid saw its earnings rise and
losses narrow.
But as the pandemic wore on, customers started consolidating their trips
to drugstores, cutting into Rite Aid�s opportunities to capture impulse
purchases. Social distancing protocols led to a less severe cold and flu
season during the first winter of the pandemic, resulting in a big drop in
the company�s cough, cold and flu business.
�We just didn�t realize how evaporated that business actually would be,�
Heyward Donigan, Rite Aid�s chief executive at the time, said in an
interview on CNBC in 2021.
As earnings eroded, the debt load became heavier. �It�s all about the cash
flow,� Ms. Louis at Moody�s said.
In June, Rite Aid reported revenue of $5.7 billion for its most recent
quarter, down from $6 billion a year earlier, driven partly by continued
challenges in selling merchandise like food, beauty items and household
goods. Consumers are increasingly turning to Amazon, the corner store and
elsewhere to buy those goods.
The company began in 1962 as Thrif D Discount Center in Scranton, Pa. The
chain changed its name to Rite Aid in 1968 and became a publicly traded
company that year. Its founder and chief executive, Alex Grass, helped
expand the company and its stores quickly over the next decade, expanding
west to Michigan, Ohio and along the Gulf Coast and West Coast. For a
time, Rite Aid was the nation�s largest drugstore chain and the largest
within New York City.
In the late 1990s and early 2000s, Rite Aid was embroiled in a securities
and accounting fraud case. Former Rite Aid executives � including Martin
Grass, the son of Rite Aid�s founder and a onetime chief executive � were
indicted as part of a securities and accounting fraud that regulators said
led to a $1.6 billion restatement of earnings, the largest ever at the
time. The company was forced to restate its earnings in 2000.
Elizabeth Burr, the current Rite Aid chief executive, took over after Ms.
Donigan abruptly left in January after four years in the role.
Pharmaceutical manufacturers have also filed for bankruptcy amid
litigation fights over their role in the opioid crisis. In August, the
opioid manufacturer Mallinckrodt Pharmaceuticals filed for bankruptcy for
a second time in three years. Last year, it had promised to pay $1.7
billion, but after making one payment and missing a second one this June,
it devised a plan with its creditors to cancel a majority of the $1.25
billion that the company still owed under the original settlement
agreement. In exchange, Mallinckrodt paid $250 million ahead of its second
bankruptcy.
--
We live in a time where intelligent people are being silenced so that
stupid people won't be offended.
Durham Report: The FBI has an integrity problem. It has none.
No collusion - Special Counsel Robert Swan Mueller III, March 2019.
Officially made Nancy Pelosi a two-time impeachment loser.
Thank you for cleaning up the disaster of the 2008-2017 Obama / Biden
fiasco, President Trump.
Under Barack Obama's leadership, the United States of America became the
The World According To Garp. Obama sold out heterosexuals for Hollywood
queer liberal democrat donors.
President Trump boosted the economy, reduced illegal invasions, appointed
dozens of judges and three SCOTUS justices.
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