Rite Aid is reportedly preparing to declare chapter 11 bankruptcy, the Wall Street Journal reported Friday, citing unnamed sources, a move that would halt lawsuits over allegations the pharmacy chain oversupplied prescription painkillers during a national opioid addiction crisis and help the company deal with its $3.3 billion debt load.
This is the sign outside a Rite Aid store in McKeesport, Pennsylvania, on November 3, 2020. (AP ... [+]
Rite Aid is facing more than a thousand federal, and a number of state-level, lawsuits over allegations that the company contributed to the opioid crisis by oversupplying painkillers, as well as a civil lawsuit from the Department of Justice that accuses the company of violating the False Claims Act and Controlled Substances Act, according to the Journal.
A bankruptcy filing would allow Rite Aid to halt these lawsuits and potentially resolve them in a single forum.
Additionally, the company’s revenue declined 6% last quarter compared to a similar period last year, and its net loss rose to $307 million, nearly triple that of last year, according to a securities filing reviewed by the Journal.
This lack of cash flow has hurt the company’s ability to pay off $3.3 billion it owes to lenders and bondholders, a debt it could negotiate in this bankruptcy.
Rite Aid has not responded to Forbes’ requests for comment.
In the early 2000s, fatal overdoses from prescription drugs, particularly opioids, skyrocketed, with popular painkillers like OxyContin at the center of the problem, according to the Food and Drug Administration. This epidemic soon became known as the opioid crisis, and it subsequently became apparent that pharmaceutical companies were aggressively marketing the drugs and lying about their addictive qualities and harmful effects, according to the conclusions of multiple government agencies and courts. In March, the Department of Justice accused Rite Aid and other pharmacies of playing a role in the crisis by oversupplying the highly-lucrative drugs. The department alleges that Rite Aid filled hundreds of thousands of prescriptions that did not meet legal requirements and gave away these dangerous drugs to patients “with obvious red flags.” Specifically, the department accused the company of deleting internal notes from pharmacists about suspicious prescribers, including notes that said “cash only pill mill???,” “writing excessive dose[s] for oxycodone” and “DO NOT FILL CONTROLS,” according to the Guardian. Additionally, there are more than a thousand federal lawsuits related to the opioid crisis against Rite Aid that have been consolidated into a multidistrict litigation in federal court in Ohio, in addition to a number of state-level lawsuits. Walgreens and CVS have also faced similar lawsuits.
This bankruptcy wouldn’t be the first time a company was bankrupted by lawsuits related to their alleged actions in the opioid crisis. Purdue Pharma, Mallinckrodt and Endo International, three drugmakers that sold opioid painkillers during the opioid crisis have all been forced to pay multi-billion-dollar settlements and have subsequently declared bankruptcy.
Rite Aid Prepares Bankruptcy That Would Halt Opioid Lawsuits (The Wall Street Journal)