Is Rite Aid at Risk of Bankruptcy? What does the introduction of Chapter 11 mean for shoppers?

Aid ritual It is reportedly preparing to file for bankruptcy to handle a slew of opioid-related lawsuits.

The stock price of Philadelphia-based Rite Aid plunged more than 50% on Friday after reports of a pending bankruptcy filing were published by The Wall Street Journal And bloombergCiting people familiar with the matter. Filing Chapter 11 would allow the company to restructure its debt burden of more than $3 billion and help it handle lawsuits alleging the company illegally filled hundreds of thousands of opioid prescriptions.

When asked to comment on the reports, Rite Aid spokeswoman Joy Errico said, “We do not comment on rumor or speculation.”

What is the Rite Aid opioid scandal?

Rite Aid is facing lawsuits alleging that the company helped fuel the country’s opioid epidemic by prescribing prescriptions for painkillers that did not meet legal requirements.

Ministry of Justice She filed a civil lawsuit against the company earlier this year, alleging it violated the Controlled Substances Act by repeatedly providing prescriptions that contained “obvious red flags”.

The newspaper reported that the company also faces more than 1,000 federal lawsuits that have been consolidated in Ohio and other lawsuits pending in state courts.

Centers for Disease Control and Prevention He says the rise in opioid overdose deaths in the United States could be linked to the rise in opioid prescriptions starting in the 1990s. Overdose deaths from prescription opioids increased from 3,442 in 1999 to 16,706 in 2021. According to the data From the National Institute on Drug Abuse.

Why file Rite Aid for bankruptcy?

Rite Aid has yet to agree to a settlement with opioid plaintiffs to settle liabilities in a potential bankruptcy filing, according to the Journal. Filing Chapter 11 will pause those lawsuits and allow the company to consolidate the claims.

“It’s one-stop shopping,” he said. Bruce MarkelProfessor of Bankruptcy Law at Northwestern University’s Pritzker School of Law. “Otherwise, they would have to go into something like multi-district litigation…with a lot of different trials.”

Pharmaceutical companies including Purdue Pharma, Mallinckrodt and Endo Pharmaceuticals have already reached settlements of similar opioid claims in bankruptcy.

“Obviously the downside is that victims who have been hurt get a limited court day if they get a court day at all,” Markel said. “They cannot plead their case in front of a jury.”

Filing for bankruptcy could also impose a hard limit on Ride Aid’s total liability exposure, he said. Ralph BrubakerProfessor of Law at the University of Illinois.

“Companies have become very aggressive in using bankruptcy to try to cap that limit on their liabilities, even if the lawsuits aren’t as difficult to deal with,” he said.

Brubaker pointed out Johnson & Johnson As a recent example. Its attempt to settle lawsuits from people claiming its talcum powder caused cancer in bankruptcy court He was expelled by a federal judge Earlier this year because the company was determined not to experience financial hardship.

What does this mean for Rite Aid customers?

with Over 2,000 retail pharmacy locations Across 17 states, Rite Aid is among the largest pharmacy chains in the country. But clients won’t have to worry about the possibility that a bankruptcy filing will change their daily interactions with the company.

Brubaker said the Chapter 11 process is “fairly invisible as far as clients are concerned.” “The primary goal of Chapter 11 operations is to preserve business operations and the value of that ongoing business to the greatest extent possible so that damages to claimants are as large as possible.”

Markel said regular customers can expect their interactions with Rite Aid to continue as normal in the event the company declares bankruptcy.

“Rite Aid has every incentive to continue operating and serving its customers the way it has in the past,” he said. “If I had a long-standing Rite Aid prescription, I might not change it if they offered it. If Rite Aid was the closest pharmacy to where I go to get pads, I wouldn’t stop doing that.

This article originally appeared in the USA TODAY: Why Rite Aid could file for bankruptcy