Bankrupt Rite Aid resolves drug supply dispute with McKesson

By Dietrich Knauth

NEW YORK (Reuters) – Pharmacy chain Rite Aid (NYSE:) has settled a critical dispute with drug supplier McKesson Corp (NYSE:) to ensure that customers’ prescriptions will continue to be filled during Rite Aid’s bankruptcy, attorneys said on Tuesday.

Rite Aid, which filed for Chapter 11 bankruptcy on Sunday night in New Jersey, sued McKesson the following morning, seeking to stop it from terminating a drug supply agreement that accounts for 98% of the pharmacy chain’s prescription drug sales.

Joshua Sussberg, an attorney for Rite Aid, announced the settlement at a Tuesday court hearing in Trenton, saying that McKesson would continue supplying drugs at least through the end of Rite Aid’s bankruptcy case. In exchange, Rite Aid will make faster payments on new drug shipments and ensure that new deliveries are paid for before it pays other creditors.

Rite Aid is working to finalize the settlement and will submit it to the court for approval, Sussberg told U.S. Bankruptcy Judge Michael Kaplan, who is overseeing the case.

While the agreement only covers the period that Rite Aid remains in bankruptcy, it and McKesson will continue to negotiate toward a longer-term solution, Sussberg said.

Rite Aid, which has more than 2,000 retail stores in the U.S., filed for bankruptcy with a plan to close underperforming stores, sell its pharmacy benefit company Elixir and resolve lawsuits over its sale of addictive opioid medications.

The lawsuit against McKesson alleged that the distributor improperly attempted to terminate the drug supply agreement on Saturday, just before Rite Aid declared bankruptcy. Rite Aid had accused McKesson of threatening to cut off its drug supply unless it immediately paid $700 million for amounts due under the contract.

A McKesson spokesperson confirmed that the dispute has been resolved and that the company will continue to make shipments during Rite Aid’s bankruptcy.

Rite Aid has relied on McKesson for its drugs for 20 years, and paid McKesson $9 billion under the contract in 2023, according to court filings. Rite Aid said it maintains very low drug inventory, forcing it to rely on daily deliveries from McKesson.