Pharmacy chain Rite Aid has begun Chapter 11 bankruptcy proceedings, the company announced on Monday, May 5.
Rite Aid CEO Matt Schroeder pointed to financial challenges that “intensified by the rapidly evolving retail and healthcare landscapes” for the filing in U.S. Bankruptcy Court for the District of New Jersey.
The company, which operates 1,240 stores across 15 states, said that customers will be able to access pharmacy services and that it is “working to facilitate a smooth transfer of customer prescriptions to other pharmacies.”
“As we move forward, our key priorities are ensuring uninterrupted pharmacy services for our customers and preserving jobs for as many associates as possible,” Schroeder said.
The company announced that it has acquired $1.94 billion in new financing to keep stores operational during the bankruptcy proceedings and potential sale.
Employees will continue to receive pay though Bloomberg News reported earlier Monday that the company will cut jobs after failing to secure additional financing from its lenders, citing an internal letter from Schroeder.
Schroeder said that the company has received “meaningful interest from a number of potential national and regional strategic acquirors.”
Rite Aid previously filed for Chapter 11 protection in October 2023 after reporting $750 million in losses for the previous fiscal year.
The company used its previous bankruptcy to cut $2 billion in debt, close hundreds of stores, sell its pharmacy benefit company Elixir, and negotiate settlements with its lenders, drug distribution partner McKesson, and other creditors.
The previous bankruptcy also resolved hundreds of lawsuits alleging that Rite Aid ignored red flags when filling suspicious prescriptions for addictive opioid pain drugs.
But despite those settlements, Rite Aid still had $2.5 billion in debt when it emerged from bankruptcy as a private company owned by its lenders in 2024.
Pharmacy chains such as Rite Aid and its rivals including Walgreens and CVS have been under pressure as falling drug margins and competition from Walmart and Amazon have led to the closure of hundreds of stores.
The store closures have exacerbated concerns about the emergence of “pharmacy deserts” – areas where residents lack access to a local pharmacy to fill their prescriptions, leaving them without a convenient and reliable source for essential medications, according to U.S. lawmakers and trade groups including the National Community Pharmacists Association.
Contributing: Reuters