© Reuters. FILE PHOTO: A woman shops inside a Rite Aid store underneath a DeepCam security camera in New York City, New York, U.S., June 25, 2020. Picture taken June 25, 2020. REUTERS/Lucas Jackson/File Photo
By Abinaya V and Dietrich Knauth
(Reuters) -Debt-laden U.S. drugstore chain Rite Aid (NYSE:) filed for bankruptcy protection late on Sunday and said it would close underperforming stores, sell its pharmacy benefit company Elixir and resolve lawsuits over its sale of addictive opioid medications.
Rite Aid, one of the largest U.S. pharmacy retailers, stumbled under its high debt, revenue declines, increased competition, and opioid litigation, according to its court filings.
Founded in 1962, Rite Aid employs 45,000 people at more than 2,000 retail stores in 17 states, and will remain open for business during the bankruptcy. The company had $24 billion in revenue in fiscal year 2023, filling 200 million prescriptions in the past year.
It also had $750 million in losses for fiscal year 2023 while facing mounting litigation costs.
The U.S. government has accused Rite Aid of ignoring “red flags” while filling illegal opioids prescriptions, and the company faces 1,600 other opioid lawsuits from state and local governments, hospitals, and individuals.
Rite Aid, which has denied wrongdoing, said it hopes to reach an “equitable” settlement of opioid litigation in bankruptcy.
It joins several companies, including Mallinckrodt (OTC:) and Endo International (OTC:), that have filed for bankruptcy due to lawsuits over their alleged roles in fueling the U.S. opioid epidemic.
Drug manufacturers, drug distributors and pharmacy chains have agreed to pay more than $50 billion in settlements to resolve lawsuits related to the opioid crisis, which has caused more than a million U.S. overdose deaths since 1999.
Rite Aid has $4 billion in debt, $8.6 billion in total liabilities and $7.65 billion in assets, according to court filings in the U.S. Bankruptcy Court for the District of New Jersey.
It plans to fund its restructuring with a $3.45 billion bankruptcy loan provided by its existing lenders.
The company said it has a $575 million offer in hand from pharmacy benefit company MedImpact Healthcare Systems for Elixir.
Rite Aid will seek higher offers for that business, and it will also consider selling some or all of its retail business, according to court filings.
The bankruptcy announcement triggered an immediate dispute with drug distributor McKesson (NYSE:), which provides 98% of the prescription medicines sold by Rite Aid. Rite Aid, which owes $700 million on its drug supply contract, sued McKesson early on Monday to prevent it from terminating its drug supply agreement over that debt.
A McKesson spokesperson declined to comment on the dispute, other than to say it continues to make shipments to Rite Aid as bankruptcy proceedings commence.
Rite Aid closed 200 stores before its bankruptcy, and it expects to close more as its Chapter 11 case proceeds.
The company appointed Jeffrey Stein as its CEO and chief restructuring officer, replacing interim CEO Elizabeth Burr.
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