Rite Aid Underperforming Store Closings; What Happens To Prescriptions

ACROSS AMERICA — Struggling under slumping sales and heavy debt from opioid-related litigtion, the Rite Aid drug store chain said Sunday it will accelerate the closure of some underperforming stores while it restructures under Chapter 11 bankruptcy.

The company did not disclose the locations of Rite Aid drug stores considered for closure, or say when the stores would close. Rite Aid operates 2,054 stores in 17 states.

Prescriptions of customers of the affected stores will be transferred to a nearby Rite Aid or other drug store “so that there is no disruption of service,” the company said in a statement. People who work at the stores will also be transferred to other Rite Aid locations where possible, the company said.

Rite Aid said it had secured $3.45 billion in financing and debt reduction agreements that will help it stay afloat through the court-supervised bankruptcy. The company will sell off its Elixir Solutions, its prescription benefit provider.

Additionally, the agreement resolves outstanding litigation. In a whistleblower lawsuit brought by former employees under the False Claims Act, the Justice Department sued Rite Aid in March, accusing the company of filling prescriptions for large quantities of opioids “that had obvious, and often multiple, red flags indicating misuse.”

Rite Aid called the government’s claims “hyperbolic” in a subsequent motion to dismiss. The company said facts alleged in the case actually showed it exceeded regulatory requirements for diversion control.

Other drug store chains, including rivals CVS and Walgreens, have settled similar lawsuits, but were better positioned financially. But even they are struggling and closing some stores in a fraught environment for national drug store chains amid rising drug shortages and competition from behemoths like Amazon,Walmart, Target, Costco and others. Rivals CVS and Walgreens, which each run 9,000 or more U.S. locations, both have dealt with walkouts by pharmacy employees concerned about their growing workloads and lack of help.

The stores also have had to weather tight prescription reimbursement and waning COVID-19 vaccine and testing business in recent quarters. But Rite Aid’s larger competitors have moved more aggressively into health care, opening clinics and adding other sources of revenue.

Deutsche Bank analyst George Hill said in an August note that Rite Aid operates on a much thinner profit margin than its competitors and while it can pay costs to service its debt, it won’t be able to cover principal payments “based on the current trajectory of the business.”

In a notice to the Securities and Exchange Commission Thursday, Rite Aid said it was “unable, without unreasonable effort or expense,” to file its latest quarterly report as it reviewed “strategic alternatives.”

Losses that quarter are expected to be significantly higher than in the previous quarter, the company said. That’s on top of losses of about three-quarters of a billion dollars for the year ended March 2023, and losses of $307 million from March to May, CNN reported.

Rite Aid appointed a new CEO, Jeff Stein, who will lead restructuring efforts and also serve on the company’s board of directors.

“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,” Stein said in the statement. “In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on -— now and into the future.”

The Associated Press contributed reporting.