Rite Aid’s Bankruptcy and the Repercussions From Opioid Settlements on Drug Manufacturers, Distributors, and Pharmacies


On October 16, 2023, Rite Aid filed for Chapter 11 bankruptcy protection after losing more than one billion dollars in the months leading up to the filing.[1] The attempt to restructure comes after increasing debts, much of which come from opioid-related lawsuits.[2] This filing comes on the heels of other opioid-related bankruptcy filings, including Purdue Pharma[3] and Mallinckrodt.[4]

The Opioid Crisis

In 2021, 220 Americans died each day from an opioid overdose.[5] Those who are affected by opioid addiction often start taking opioids as a medication prescribed by their doctors for short-term usage after an acute injury, such as a bone fracture or surgery, or to treat an illness such as cancer.[6] Many doctors will knowingly prescribe patients controlled substances, such as OxyContin or fentanyl, for illegitimate medical reasons, leading to an increase in opioid addiction.[7] To hold doctors liable for such illegal practices, the government must prove beyond a reasonable doubt that the doctor prescribed the controlled substances for unauthorized usage.[8] Thus, pharmacists are responsible for searching for “red flags” that patients might be struggling with addiction or if their medications were improperly prescribed.[9]

The Case

Earlier this year, the U.S. Attorney’s Office for the Northern District of Ohio filed a complaint against Rite Aid and their subsidiaries for violating the False Claims Act under the notion that “Rite Aid knowingly filled unlawful prescriptions for controlled substances.”[10] The government also asserts that Rite Aid violated the Controlled Substances Act.[11] Associate Attorney General Vanita Gupta contends that not only did Rite Aid routinely fill prescriptions with blatant red flags, but it also protected suspicious prescribers by deleting internal notes about them.[12] As a result, Rite Aid pharmacists allowed millions of opioids prescribed without a “legitimate medical purpose, [that]were not for a medically accepted indication, or [that]were not issued in the usual course of professional practice” to be illegally distributed by Rite Aid stores across the country.[13]

What Happens Next?

Although Rite Aid is a pharmacy and the other lawsuits involve pharmaceutical companies, we can turn to the aforementioned bankruptcy cases to predict what will happen in the Rite Aid case.

The Supreme Court put Purdue Pharma’s bankruptcy plan on hold because there were questions as to the legality of it.[14] Purdue Pharma, the company that produces OxyContin, is commonly charged with being one of the driving forces of the opioid epidemic.[15] The company is controlled by the infamous Sackler family, who, starting in the 1990s, encouraged peddling opioids into the mainstream.[16] Before Purdue Pharma filed for bankruptcy, the Sackler family withdrew billions of dollars from the company; following the filing, the family agreed to pay six billion dollars in settlement money in exchange for immunity from civil liability.[17] The Supreme Court will review the bankruptcy arraignment next month, but it seems unlikely that the Court will approve of such an “abuse of the bankruptcy system.”[18]

On the other hand, the Mallinckrodt Chapter 11 filing and plan were approved by the U.S. Bankruptcy Court on October 10 of this year.[19] In the plan, Mallinckrodt was able to reduce its damages to opioid crisis victims by one billion dollars, to cancel existing equity shares, and to cut two billion dollars off of its debt, but needed to turn ownership of the company over to Mallinckrodt’s lenders.[20]

It seems as if Rite Aid’s bankruptcy will parallel Mallinckrodt’s more than it will reflect Purdue Pharma’s. Rite Aid states that through bankruptcy and restructuring, it intends to “‘significantly reduce the company’s debt’” and “‘resolve litigation claims in an equitable manner.’”[21] As a part of its plan, Rite Aid expects to close hundreds of stores in the U.S.[22] Only time will tell as to what happens, but it is clear that stoking the fire of the opioid epidemic has dire consequences on companies.

[1] Gabrielle Fonrouge, Rite Aid Lost More than $1 Billion in Months Before Bankruptcy Filing, CNBC (Oct. 18, 2023, 3:24 PM), https://www.cnbc.com/2023/10/18/rite-aid-lost-more-than-1-billion-before-bankruptcy-filing.html.

[2] Id.

[3] Devan Cole & Ariane de Vogue, Supreme Court Blocks $6 Billion Opioid Settlement that would Have Given the Sackler Family Immunity, CNN (Aug. 10, 2023, 11:32 PM), https://www.cnn.com/2023/08/10/politics/supreme-court-purdue-pharma-opioid-settlement/index.html.

[4] Lauren Hirsch & Jordyn Holman, Rite Aid, Facing Slumping Sales and Opioid Suits, Files for Bankruptcy, N. Y. Times (Oct. 15, 2023) https://www.cnn.com/2023/08/10/politics/supreme-court-purdue-pharma-opioid-settlement/index.html.

[5] Understanding the Epidemic, Ctrs. for Disease Control and Prevention, https://www.cdc.gov/opioids/basics/epidemic.html (last visited Nov. 10, 2023).

[6] Get Informed, Centers for Disease Control and Prevention, https://www.cdc.gov/rxawareness/information/index.html#:~:text=Prescription%20opioids%20can%20be%20used,(OxyContin%C2%AE%2C%20Percocet%C2%AE) (last visited Nov. 10, 2023).

[7] Press Release, Office of Pub. Affs., U.S. Dept. of Just., Doctor Charged for Unlawfully Distributing Opioids (Apr. 12, 2023), https://www.justice.gov/opa/pr/doctor-charged-unlawfully-distributing-opioids.

[8] Ruan v. United States, 142 S.Ct. 2370, 2375 (2022).

[9] Pharmacists: On the Front Lines, Centers for Disease Control and Prevention, https://www.cdc.gov/drugoverdose/pdf/pharmacists_brochure-a.pdf (last visited Nov. 10, 2023).

[10] Press Release, U.S. Att’y’s Office, N.D. Ohio, United States Files Complaint Alleging that Rite Aid Dispensed Controlled Substances in Violation of the False Claims Act and the Controlled Substances Act (Mar. 20, 2023), https://www.justice.gov/usao-ndoh/pr/united-states-files-complaint-alleging-rite-aid-dispensed-controlled-substances.

[11] Id.

[12] Id.

[13] Id.

[14] Amy Howe, Justices put Purdue Pharma Bankruptcy Plan on Hold, SCOTUSblog (Aug. 10, 2023, 4:41 PM), https://www.scotusblog.com/2023/08/justices-put-purdue-pharma-bankruptcy-plan-on-hold/.

[15] Id.

[16] Id.

[17] Andrew Chung & John Kruzel, US Supreme Court Halts Purdue Pharma Bankruptcy Settlement Pending Review, Reuters (Aug. 11, 2023, 8:55 PM), https://www.reuters.com/legal/us-supreme-court-scrutinize-purdue-pharma-bankruptcy-settlement-2023-08-10/.

[18] Id.

[19] Dietrich Knauth, Court OKs Mallincrodt Restructuring, $1 Billion Cut to Opioid Settlement, Reuters (Oct. 10, 2023, 4:44 PM), https://www.reuters.com/business/healthcare-pharmaceuticals/mallinckrodt-gets-approval-restructuring-1-billion-cut-opioid-settlement-2023-10-10/.

[20] Id.

[21] Elaine Kurtenbach & Tom Murphy, Ride Aid Seeks Chapter 11 Bankruptcy Protection as it Deals with Lawsuits and Losses, Associated Press (Oct. 16, 2023, 5:24 PM), https://apnews.com/article/rite-pharmacy-bankruptcy-f80c3d231946d675b03e4e797f627fa6.

[22] Id.


About Author

Comments are closed.

Fordham Journal of Corporate & Financial Law