Rite Aid filed for Chapter 11 bankruptcy protection in New Jersey on Sunday, reported the New York Times. The filing comes after billions of dollars in debt, declining sales and lawsuits claiming the company filled thousands of illegal prescriptions.
The pharmacy raised over $3.45 billion dollars to fund its operations while in bankruptcy, said the Times. Its largest creditors include the pharmaceutical company McKesson Corporation and the insurer Humana Health.
The Wall Street Journal notes that over the past two years, Rite Aid has closed more than 200 stores and, in connection with the bankruptcy filing, rejected 168 leases. While the company hasn’t determined how many more stores will be closed, it will close more of its 2,100 stores and name a new chief executive.
Rite Aid appointed Jeffrey Stein to lead its restructuring as chief executive, said the Times. Stein is the founder of Stein Advisors, a financial advisory firm that specializes in fixing ailing companies. Rite Aid’s current interim CEO Elizabeth Burr will remain on the board, reported the Wall Street Journal.
In March, the United States Department of Justice filed a complaint against the Rite Aid Corporation under the False Claims Act, alleging that the company knowingly filled unlawful prescriptions for controlled substances. Rite Aid has denied the allegations.
Filing for bankruptcy stays all pending litigation against the company. “We expect to negotiate a resolution of the opioid-related lawsuits with the various parties involved,” a Rite Aid spokeswoman said to the Journal. “We also intend to resolve our legacy contract disputes, government investigations and securities matters.”
Rite Aid has also struggled with sales as it competed with competitors like CVS and Walgreens, said the Times. The company has a little over 2,000 stores total, while CVS Pharmacy has more than 9,500 stores total and Walgreens around 8,700.
In overall market trends, NACS reported in January that drug stores showed a market decline while c-stores showed market growth, with a 1.5 percent increase year over year, as convenience and dollar stores become more prevalent.