Dive Brief:
- Rite Aid is selling more than 1,000 pharmacies to rival drugstore operators as the beleaguered pharmacy chain limps through bankruptcy processes for a second time.
- Rite Aid said it was formally pursuing sales of “substantially all of its assets” earlier this month. Now, healthcare companies CVS Health and Walgreens, along with grocery stores Albertsons, Kroger and Giant Eagle, are among the buyers snapping up Rite Aid stores, the company said on Thursday.
- CVS is one of the biggest buyers, agreeing to acquire prescription files from 625 Rite Aid locations in 15 states in areas where it already has a presence, along with fully buying and operating 64 stores in Idaho, Oregon and Washington. The sales are subject to approval by a New Jersey bankruptcy court, which is scheduled to hold a hearing on May 21 regarding the transactions.
Dive Insight:
Rite Aid used to be a pharmacy juggernaut with 2,100 pharmacies in 17 states, and 60 years of operations under its belt. The Pennsylvania-based company brought in more than $24 billion in annual revenue in 2023.
But Rite Aid wrestled with challenges facing legacy drugstores, including flatlining reimbursement rates from payers, higher labor costs, lower consumer demand for frontstore merchandise and rising competition, including from disruptors like Amazon.
Rite Aid also struggled to part ways with unprofitable stores due to sticky lease agreements — while it was on the hook for massive payouts to settle lawsuits over its role in furthering the opioid epidemic.
The company first filed for Chapter 11 bankruptcy in 2023 after reaching roughly $4 billion in debt. The goal was to restructure Rite Aid for long-term success, executives said at the time. Rite Aid emerged from bankruptcy last fall as a private company with its debt cut in half, a new CEO and a smaller store footprint.
But eight months later, Rite Aid found itself back in the same position earlier this month when it filed for bankruptcy a second time, citing unforeseen liquidity issues.
At that point, the company operated almost 1,300 stores in 15 states, but said it planned to pursue sales of its assets in an attempt to make its debtors whole. Rite Aid auctioned off its pharmacy assets over video conference on Wednesday after receiving multiple qualified bids, according to court documents.
Those assets include prescription files, which are the drug dispensing records from a specific pharmacy. Pharmacies can acquire prescription files from other locations to grow their business — the tactic CVS is pursuing here by nabbing hundreds of Rite Aid’s prescription files in locations where it already operates stores.
Financial details about the sales have not yet been disclosed, but additional information will likely be available following the May 21 hearing. A spokesperson for Rite Aid did not provide additional information on the deals beyond what was in the Thursday press release.
The sales, which will be implemented on a rolling basis, are still subject to court and regulatory approvals. Rite Aid’s stores will remain open during the divestiture process to ensure continuity of care for its customers, the company said.
“These agreements ensure our pharmacy customers will experience a smooth transition while preserving jobs for some of our valued team members,” Rite Aid CEO Matt Schroeder said in a statement.