Is Rite Aid at Risk of Bankruptcy? What it Means for Shoppers

Buffalo, NY, USA - May 23, 2022: A Rite Aid store in Buffalo, NY, USA.
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Rite Aid, a prominent pharmacy chain headquartered in Philadelphia, is facing rumors of an impending bankruptcy, largely triggered by ongoing opioid-related lawsuits.

The discussions come at a time when the company’s stock value has witnessed a sharp decline, fueling more concerns among its stakeholders.

The Opioid Controversy

Rite Aid is currently embroiled in a significant legal battle over its alleged role in contributing to the US opioid crisis. Accusations have surfaced that the pharmacy chain knowingly approved and filled opioid prescriptions that didn’t adhere to legal prerequisites. Consequently, the Justice Department took legal actions against Rite Aid, asserting the company’s continuous breach of the Controlled Substances Act by repeatedly ignoring “obvious red flags.”

These allegations, along with thousands of other related lawsuits primarily consolidated in Ohio, have placed the company under immense scrutiny and financial pressure. Historical data reveals a distressing rise in opioid overdose deaths from the 1990s, escalating concerns about the role of pharmacies like Rite Aid.

Why Bankruptcy?

Filing for Chapter 11 bankruptcy would provide Rite Aid with a strategic pause from the barrage of lawsuits. This step would enable the company to streamline and possibly consolidate all claims under one umbrella, ensuring a more systematic approach to resolving the issues at hand.

In recent times, several pharmaceutical giants, such as Purdue Pharma and Mallinckrodt, have employed bankruptcy as a tool to settle opioid-related allegations. Bruce Markell, a distinguished expert from Northwestern’s Pritzker School of Law, indicated that using bankruptcy as a shield offers companies a form of “one-stop shopping” to deal with myriad legal issues. However, this approach has its downsides, particularly for the plaintiffs who might find their avenues for seeking justice limited.

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Moreover, using bankruptcy can also be a strategic move to set a definite limit on a company’s aggregate liabilities, as observed by Ralph Brubaker, a law academic at the University of Illinois.

Implications for the Regular Customer

For the loyal customer frequenting any of Rite Aid’s 2,000+ outlets spanning 17 states, this news might raise eyebrows but should not disrupt their routine engagements with the chain. The essence of the Chapter 11 protocol is to ensure the smooth functioning of business operations, preserving its value for the benefit of all stakeholders.

Regular customers are unlikely to notice any tangible shifts in their shopping experiences, even if Rite Aid were to officially declare bankruptcy. Markell reiterates that the company’s primary goal would be to maintain its established service standards and operational norms. Whether it’s a long-term prescription refill or a quick errand to pick up essential supplies, shoppers can expect business as usual.

While Rite Aid navigates these turbulent waters, consumers can remain assured that their interactions with the pharmacy giant will remain largely unchanged.

Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.

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