PHILADELPHIA, PENNSYLVANIA: The Philadelphia-based debt-ridden drugstore chain Rite Aid, a public company founded by Alex Grass, has been in plans to file Chapter 11 bankruptcy.
According to the Wall Street Journal, the third largest drugstore chain in the USA could shut nearly 500 out of its 2,150 brick-and-mortar stores in the upcoming days.
The company, registered as RAD at New York Stock Exchange, is currently headed by Elizabeth Burr as the Interim President and CEO after the former President and Chief Executive Officer, Heyward Donigan, resigned with immediate effect on January 7, 2023.
Why does Rite Aid plan to file for Chapter 11 bankruptcy?
As per Daily Mail, Rite Aid is looking forward to shutting down a quarter of its stores and letting the creditors take over the operation of the rest because of its debt-ridden condition.
The company is currently reeling from a debt of 3.3 billion dollars, and a Chapter 11 filing can help the company keep the business running while paying creditors back over time, according to the reports of the Wall Street Journal.
Daily Mail further noted that by closing an approximate quarter of its 2,150 stores, the company forecasts it will generate "approximately $650 million and $680 million" in losses the following year.
They further said in a statement to NBC News that the company is looking forward to "continuing to work collaboratively and constructively with our financial stakeholders to identify the best path forward to reduce our debt and position the business for continued success."
What is Chapter 11 bankruptcy?
The United States Courts states, "This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time."
Thus, through the reorganization of the business, Rite Aid would look forward to paying the creditors back over time.
Women are predicted to suffer the most as a result of Rite Aid shutting nearly 500 stores
The President of the Rite-Aid Workers’ Union Local 1776, Wendell Young, told ABC 6 that the women would face the maximum brunt because of the closure of 500 odd stores.
He said, "People are going to have to go further for their pharmacies where the company doesn't have the resources to properly staff," adding, "They are going to find longer lines, probably some challenges getting things timely."
Highlighting the effects on women, Young stated, "It is mostly women. Hard-working women who took these jobs on part-time while raising a family and they really run these stores."
What is the 2023 Rite Aid scandal?
Rite Aid is not only reeling under an enormous amount of debt but also facing lawsuits filed by the US alleging that the drugstore company dispensed controlled substances violating the False Claims Act and the Controlled Substances Act.
According to the Department of Justice, in the complaint filed in March, Attorney General Merrick B Garland stated, "The Justice Department is using every tool at our disposal to confront the opioid epidemic that is killing Americans and shattering communities across the country."
Pointing squarely at Rite Aid, he added, "That includes holding corporations, like Rite Aid, accountable for knowingly filling unlawful prescriptions for controlled substances."
Associate Attorney General Vanita Gupta said, "We allege that Rite Aid filled hundreds of thousands of prescriptions that did not meet legal requirements."
She continued, "According to our complaint, Rite Aid’s pharmacists repeatedly filled prescriptions for controlled substances with obvious red flags, and Rite Aid intentionally deleted internal notes about suspicious prescribers."
"These practices opened the floodgates for millions of opioid pills and other controlled substances to flow illegally out of Rite Aid’s stores," claimed the attorneys.
As per reports, the filing of Chapter 11 bankruptcy might also help Rite Aid in dealing with the impending lawsuits.
