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Rite Aid Corp (NYSE:RAD) is reportedly on the brink of filing for bankruptcy amidst many lawsuits over its purported role in the opioid crisis to address its significant debt burden, which exceeds $3.3 billion, through a Chapter 11 filing.
The drug retailer is grappling with over a thousand consolidated federal lawsuits in Ohio and numerous similar state lawsuits.
The Justice Department has slapped Rite Aid with a civil lawsuit, accusing it of dispensing controlled drugs violating the False Claims Act and Controlled Substances Act.
Rite Aid's financial health has deteriorated with declining revenues and mounting losses. Furthermore, its shares plummeted by over 80% within a year.
This bankruptcy move is largely in response to numerous allegations suggesting the pharmacy oversupplied prescription opioids, the Wall Street Journal noted.
Currently, Rite Aid has not agreed to settle these claims under the anticipated bankruptcy framework and is considering treating them as general unsecured claims.
Rite Aid has staunchly refuted these allegations, challenging the department's lawsuit. By filing for bankruptcy, Rite Aid can temporarily suspend these lawsuits and seek a consolidated resolution.
Rite Aid's potential bankruptcy trajectory mirrors that of other pharmaceutical giants, like Purdue Pharma, Mallinckrodt Plc (NYSE:MNK), and Endo International Plc (OTC:ENDPQ), all pushed to bankruptcy due to opioid-related litigations.
However, these settlements have faced hurdles. For instance, Purdue's massive $6 billion agreement with the Sackler family is currently under scrutiny by the Supreme Court, questioning the bankruptcy plan's legality.
Rite Aid's financial woes are not new. Between 2015 and 2018, the company attempted, without success, to merge with Walgreens Boots Alliance Inc (NASDAQ:WBA) and later with Albertsons Companies Inc (NYSE: ACI). These efforts aimed to bolster its capital base and expand its pharmacy outreach.
Price Action: RAD shares are down 48.80% at $0.74 on the last check Friday.
