The rise and fall of pharma bigwig Rite Aid, which couldn't keep up with rivals Walgreen and CVS

• Rite Aid filed for voluntary Chapter 11 bankruptcy on Sunday following slumping sales and a series of lawsuits.
• The 61-year-old pharmacy chain listed $3.3 billion in debt as of June, not counting pending opioid litigation.
• In recent years it's faced growing competition from DTC pharmacy startups and even Amazon and Uber.

Rite Aid filed for voluntary Chapter 11 bankruptcy in New Jersey on Sunday — marking a dramatic fall from grace for what was once one of America's biggest drugstore chains.

Not only is the company facing a thousand lawsuits claiming it helped fuel an opioid epidemic in the US by unlawfully filling prescriptions for the painkillers, it's also facing a slowdown in sales, shuttering storefronts, and a whopping $3.3 billion in debt. 

Rite Aid, which has over 47,000 employees, has struggled in recent years to compete against larger peers like CVS and Walgreens Boots Alliance, as well as Amazon. Its stock has fallen by nearly 81% since the start of the year.

Rite Aid reported revenues of $5.7 billion in the quarter ended June, down from $6 billion in the same period last year, per company filings. It listed $3.3 billion in debt as of June, not counting the pending opioid litigation, up from $2.9 billion as of March. The pharma chain and its senior secured debt holders have now agreed terms of a financial restructuring that would "significantly reduce" its debt, the company said in a statement on Sunday.

Jeffrey S. Stein has been appointed as the CEO, chief restructuring officer, and a member of the company's board, effective immediately. The outgoing interim CEO, Elizabeth Burr, who replaced Heyward Donigan in January, is to remain on the board.

The company lowered its outlook for the current fiscal year and warned investors it expects to report net losses between $650 million and $680 million during the year. 

Rite Aid, which had just under 2,300 stores across 17 states as of early June, shuttered 145 stores in 2022 and another net 25 in the second fiscal quarter of 2023. The company previously proposed that it could close roughly 400 to 500 stores in bankruptcy.

Rise of Rite Aid

Rite Aid's origins date back to 1962, when its first store opened in Scranton, Pennsylvania as Thrif D Discount Center, selling health and beauty products. Six years later, the company changed its name to Rite Aid Corporation. Over the years it acquired numerous other companies, including the Thrifty Drugs and PayLess Drug Stores chains.

But Rite Aid's footprint ended up shrinking massively after Walgreens' attempt to merge with the company fell through in 2017 following antitrust scrutiny. The pharmacy chains replaced the merger with a deal to sell more than 2,000 Rite Aid stores to Walgreens instead – in essence all

The next year, Rite Aid tried to merge with Albertsons, but this deal also fell through.

Rite Aid has faced growing competition from direct-to-consumer pharmacy startups as well as medication deliveries from the likes of Amazon and Uber. The New York Times reported that Rite Aid's earnings rose early in the pandemic as Americans stocked up on cleaning and healthcare products, but they fell in the winter of 2020/21 as social distancing meant that fewer people needed medication to treat colds and flu.

Then-CEO Donigan announced in 2021 that the chain would close dozens of stores to reduce costs and improve profitability. The company also planned to move away from traditional in-store pharmacies toward mail-order and digital retail markets, she said.

Burr said during Rite Aid's most recent investor call, in June, that the company had made "good progress on our turnaround," especially in controlling how much it spent on selling, general, and administrative expenses and in reducing drug purchasing costs. Retail pharmacy revenues were up because of increases in prescriptions, including weight-loss drugs like Ozempic.

But Burr said that there'd been a decline in store transactions, driven by a drop in demand for non-prescription items and respiratory-related products. Rite Aid also experienced supply chain challenges after changing supplier for many of its perishable consumer goods and shrink "continued to be a significant headwind," Burr said.

Representatives for Rite Aid did not immediately respond for Insider's request for further comment beyond sending statements about Stein's appointment and its Chapter 11 bankruptcy filing.