Drugstore chain Rite Aid (ticker: RAD) announced late Sunday that it has filed for Chapter 11 bankruptcy in order to address the numerous lawsuits it faces regarding the country’s opioid epidemic. The company stated that this filing will allow it to handle the litigation claims in a fair manner.
Ongoing Opioid Crisis Challenges
Rite Aid is the latest company to face bankruptcy due to its involvement in the opioid crisis. In August, drugmaker Mallinckrodt (MNKTQ) also filed for bankruptcy in an effort to reduce its settlement payments related to the epidemic. Rite Aid’s bankruptcy filing comes after this recent trend.
New Leadership and Financial Support
To navigate through this challenging period, Rite Aid has secured $3.45 billion in new financing from lenders. Additionally, the company has appointed Jeffrey Stein as its new CEO, effective immediately. Stein replaces Elizabeth Burr, who had been serving as interim CEO since January.
Impact on Stock and Lawsuits
Following the news of the bankruptcy filing, Rite Aid’s stock dropped about 6% in premarket trading on Monday. The stock had already fallen by 16.8% on Friday and has suffered a total decline of over 80% in 2023.
The lawsuits against Rite Aid, including the one filed by the Department of Justice (DOJ), have been temporarily paused due to the bankruptcy filing, according to The Wall Street Journal. The DOJ’s lawsuit joined an existing whistleblower lawsuit from October 2019 in Ohio. Rite Aid continues to deny all allegations made against it.
Future Plans and Agreement with MedImpact
CEO Jeffrey Stein emphasized that the court-supervised bankruptcy process will enable Rite Aid to optimize its operations and make necessary changes in an efficient and organized manner. As part of its restructuring efforts, Rite Aid has agreed for MedImpact, a pharmacy benefit management firm, to acquire its Elixir Solutions business.
Shares of Rite Aid’s competitor, CVS Health (CVS), saw a 2% increase before the market opened on Monday following Rite Aid’s bankruptcy announcement. Walgreens Boots Alliance, another rival, experienced a 0.2% increase in its stock price.