FILE - This photo shows a sign of Rite Aid on its store in Pittsburgh on Jan. 23, 2023. Rite Aid, a major U.S. pharmacy chain, said Sunday, Oct. 15, that it has filed for bankruptcy as part of its effort to restructure its finances. (AP Photo/Gene J. Puskar, File)
Gene J. Puskar / AP Photo
Gene J. Puskar / AP Photo
FILE - This photo shows a sign of Rite Aid on its store in Pittsburgh on Jan. 23, 2023. Rite Aid, a major U.S. pharmacy chain, said Sunday, Oct. 15, that it has filed for bankruptcy as part of its effort to restructure its finances. (AP Photo/Gene J. Puskar, File)
Rite Aid is undergoing its second bankruptcy process since 2023, but this one seems likely to spell the end of the struggling Philadelphia-based pharmacy chain.
Some media outlets have reported that this means all stores will close. That is not the whole story, however.
The company says its plan means that in the coming weeks and months all Rite Aid distribution centers will close, but its retail stores will either close or be operated by a new owner.
Rite Aid last week filed for Chapter 11 bankruptcy protection. The chain is looking to sell off its prescriptions, pharmacy and front-end inventory, and other assets. Its case is before the U.S. Bankruptcy Court for the District of New Jersey, and the plan is subject to court approval.
Thousands of customers rely on Rite Aid in the Keystone State: The chain operates 1,240 stores in 15 states, including 345 stores in Pennsylvania.
In addition to examining company statements and broader media coverage, we spoke with Pennsylvania Pharmacists Association (PPA) CEO Victoria Elliott to learn what she and her group’s members are hearing.
“We have about a fourth of what’s going to be closed,” Elliott said of Pennsylvania. “I already have members getting calls from Rite Aid customers that are trying to find a new home.”
Here is what the process could mean for customers and employees.
Maybe not immediately, according to a release issued by the company, but eventually and probably soon, if they aren’t purchased by another operator.
A letter to customers issued May 5 stated: “The majority of our stores will remain open and operating for the next few months.”
That means some stores, including in Pennsylvania, could close before the bankruptcy proceedings are complete. The company’s press office referred back to the media release and did not elaborate when asked for further details about early closures.
Business magazine Fast Company reported last week that Rite Aid was looking to close 47 locations across the chain, including eight in Pennsylvania. The Berwick location on West Second Street was the only one in WVIA’s coverage area.
That list quickly grew. Fast Company reported today that an additional 68 stores are on the fast-track to closure, including over 40 in Pennsylvania. They include locations in Moscow, Montrose, Tamaqua, and Mahanoy City.
That is one of the company’s stated goals, but it isn’t guaranteed, and some observers aren’t optimistic.
Rite Aid has been in talks with “a number of potential national and regional” buyers, CEO Matt Schroeder said. That creates the possibility another chain could buy some of the stores and operate them under another brand name.
As explained below, Rite Aid has attempted to sell off stores before — sometimes successfully, sometimes not.
Forbes on Monday said it is not uncommon for other chains to pick up prescriptions when stores close, but called it “unlikely” that CVS, Walgreens or other operators would take over Rite Aid’s bricks-and-mortar locations.
PPA’s Elliott was similarly skeptical about any large-scale takeover of Rite Aid’s stores.
“What I’m hearing from members is it’s probably not realistic,” she said, although she acknowledged there was some talk of a possible West Coast buyer.
“Again, that’s just a rumor. At this point, it’s really hard to say,” Elliott said. “But I don’t think it looks optimistic based on the history of the past couple of years.”
“What we understand is that everything will be liquidated or sold within two to six weeks,” Elliott said.
What is clear is that all Rite Aid customers should be prepared for eventual closures, especially if the chain does not find a buyer for its stores.
“Any operations or assets the company does not sell through this process will no longer be owned or operated by Rite Aid,” a message from Kroll Restructuring Administration states.
During the bankruptcy process, Rite Aid customers can continue to access pharmacy services and products in stores and online, including prescriptions and immunizations, the company says.
Beyond that time, Rite Aid says it is “working to facilitate a smooth transfer of customer prescriptions to other pharmacies.”
Philadelphia NPR affiliate WHYY spoke to an industry expert who said there is “no guarantee those files will wind up at a retailer near the location that is closing.”
That could be a significant challenge for customers who live in one of the state’s growing pharmacy deserts, which are defined as places where the nearest drugstore is at least five miles away. It is a problem for urban as well as rural areas.
That is a definite concern for Elliott, who noted that “Rite Aid was it” in many urban neighborhoods.
“And so, if you’ve got to get on a bus to get (to another store), can you afford the bus fare? Does the bus run at a convenient time (when) the pharmacy is going to be open?” she asked. “Is there even one close enough for you to get to?”
If there is one, will they accept your prescription?
Reimbursement rates for pharmacies are a major factor financially squeezing chains and independent operators, and Elliott explained that could affect smaller drugstores’ ability to take over some scripts.
“The challenge for a lot of our independents will be what they can actually accept,” Elliott said.
“If it’s generic that’s on their shelf, and they’re not going to lose money on filling it, they may fill it,” she added. “But there are some brand-name products that they’re not stocking because they can’t afford to dispense those.”
GLP-1 drugs for diabetes and weight loss are an example.
Rite Aid had already announced it would no longer fill prescriptions for those drugs, Elliott said, as did Giant Eagle, a Butler County-based supermarket chain which operates in-store pharmacies.
“So these patients will be hard-pressed to find a pharmacy that can even afford to carry and dispense these kinds of products,” Elliott said. “For us, that’s the biggest concern.”
As of May 6, the company ceased issuing Rite Aid Rewards points for qualifying purchases.
All accrued points and BonusCash will expire per standard terms and conditions available at riteaid.com/rewards/terms-and-conditions, the company said.
Rite Aid also said it will no longer honor Rite Aid gift cards or accept any returns or exchanges beginning June 5.
Pennsylvania Attorney General Dave Sunday urged customers to be aware of those deadlines and act accordingly.
“I am encouraging Rite Aid customers to make returns and exchanges, and redeem gift cards and rewards points as soon as possible,” Sunday said. “These deadlines are approaching fast, and accrued points and gift card balances will soon become valueless.”
Any consumers who experience issues redeeming their Rite Aid points, coupons, unused gift cards, or with returning merchandise to Rite Aid should submit a complaint to the Bureau of Consumer Protection, Sunday said.
Customers can expect in-store offerings to change, too. WHYY reported that Rite Aid “isn’t buying new inventory, so bare shelves are likely to become more common.”
“Rite Aid employees assisting with this process will continue to receive pay and benefits,” the company said of the bankruptcy period.
That comes at a price. Rite Aid has secured commitments from lenders for $1.94 billion in new financing that will help keep operations going during the court process.
The company also has filed related motions with the court seeking authorization to support operations, including continued payment of employee wages and health and welfare benefits.
Beyond that point, the employees’ future is uncertain. It is not uncommon in retail ownership transfers to see some employees retained, but that is not guaranteed, and it depends on Rite Aid finding a buyer for its stores.
Elliott said she heard of some immediate termination notices going out last Monday at one location, the day the bankruptcy was announced.
“They can’t afford to cover payroll, so they’re reducing their staff to the bare minimum to try and still serve … patients,” she said.
Pennsylvania’s Worker Adjustment and Retraining Notification Act (WARN) requires companies to give a 60-day notice before closing plants or conducting mass layoffs. Those notices are posted on the Department of Labor and Industry’s website.
As of Monday morning a notice had been posted for Rite Aid, but it referenced only corporate offices in Philadelphia (595 jobs) and Etters, York County (501 jobs).
The Pennsylvania Department of Labor & Industry on Wednesday, May 14 will host a virtual Rapid Response Information Meeting (RRIM) for affected employees at those facilities. It will provide information about resources, including PA CareerLink services, unemployment guidance, health insurance enrollment, and additional local and state services.
“Our Rapid Response team is working to ensure those impacted by Rite Aid’s layoffs have access to the resources and support they need to help them transition to meaningful employment opportunities that offer family-sustaining wages,” Labor & Industry Secretary Nancy A. Walker said.
The meeting will take place online from 1-2 p.m., and registration is required. Impacted workers can sign up online.
Future meetings for impacted Rite Aid workers are also being organized, officials said.
Founded in 1962 in Scranton as Thrif D Discount Center, Rite Aid for many years was based in Cumberland County, near Harrisburg. Its headquarters moved to Philadelphia in 2022.
In its growth years, the company expanded exponentially, particularly through the acquisition of other chains.
As recently as 2017, the chain operated more than 4,500 stores in 31 states and the District of Columbia. But by that point, Rite Aid itself had become a target for larger competitors.
The Federal Trade Commission that year approved a deal allowing Rite Aid to sell over 1,900 stores and three distribution centers to Walgreens Boots Alliance, a rival that had previously failed in a bid to take over the entire chain. The sale took place in 2018.
The same year, Idaho-based Albertsons made a bid to purchase what remained of Rite Aid, but shareholders and investors were cool to the deal, which fell through.
The company has been struggling financially for many years amid a challenging retail landscape, particularly for pharmacies.
One of the geographical challenges Rite Aid has faced is that its remaining stores are widely spread out, clustered mostly on the East and West coasts, with relatively few in between.
In 2020, Rite Aid expanded its West Coast holdings with the purchase of Seattle-based Bartell Drugs. As Seattle Magazine reported in 2023, Bartell customers and health care providers complained of poor service following that acquisition.
Already struggling with falling sales, Rite Aid was rocked by allegations that the chain knowingly filled hundreds of thousands of unlawful prescriptions for controlled substances, contributing to the nation’s opioid addiction crisis.
The company reached several costly settlements, including a 2022 deal with the state of West Virginia for up to $30 million.
In October 2023, Rite Aid first filed for bankruptcy protection. As The Associated Press reported at the time, the company had posted annual losses for several years and expected a net loss of as much as $680 million that fiscal year.
In 2023, Rite Aid agreed to an opioid settlement with the U.S. Justice Department that required the company to pay the government $7.5 million and give a $401.8 million unsecured in the then-pending bankruptcy case.
Overshadowing all of those issues are the reimbursement struggles Elliott spoke about. It’s a topic WVIA has covered over the past year as state officials fought to pass legislation that would bring some relief.
At the heart of those challenges are pharmacy benefit managers, or PBMs, which act as intermediaries between insurance providers, drug manufacturers and pharmacies.
PBM policies have been accused of making it harder for chains and independent pharmacies to turn a profit, fueling closures and the growth of pharmacy deserts.
“We’ve seen closures upwards of 200 since January 2024, and pretty much we’re hearing about at least one a week at this point,” Elliott said.
They also have made it more costly for states to purchase drugs under the taxpayer-funded Medicaid program, critics say. Other states have had success in tackling that particular issue, including neighboring Ohio, Elliott said.
“We are continuing to press upon legislators, both in Pennsylvania and at the federal level, that a lot of this is driven by the fact that independent community pharmacies and these large retailers are underwater on reimbursements,” she said.
“This is not a new issue.”
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