Bids are due on Tuesday for companies hoping to acquire Rite Aid’s prescriptions business, which it calls “its most valuable economics assets.” While the pharmacy chain has indicated that there are multiple potential buyers, it has also warned of risks to itself and its customers if a buyer doesn’t step up quickly.
The Philadelphia-based chain filed for Chapter 11 bankruptcy protection last week, and as part of its court filings, Rite Aid said a timely sale is necessary to minimize “significant” customer attrition that could erode the value of the company’s assets.
If the sale of Rite Aid’s pharmacy assets is done in a “disorderly and ad hoc manner,” the company said, then customers with prescriptions—not just at Rite Aid but at competing pharmacies—could also face service disruptions if other pharmacies are “inundated with requests and cannot efficiently process” the transfer of prescriptions.
Rite Aid is a distant third to CVS and Walgreens, though grocery store chains like Walmart to Albertsons also have pharmacy divisions. Still, Rite Aid said it fills more than 100 million prescriptions a year, which could equal a lot of extra time and labor for nearby pharmacies on the receiving end of transfers.
“Those pharmacies must receive legal prescriptions, integrate them into their systems, acquire a sufficient supply of medication to fill the prescriptions, and be staffed to handle the additional prescriptions,” the pharmacy chain said in the filing. “This is no small task.”
Reached for comment by Fast Company, Rite Aid emphasized that its customers can continue to access services such as prescriptions and immunizations during the sale process and that it is still in “active discussions” with potential buyers. The company didn’t directly respond to questions about potential bidders or how much customer attrition it has seen so far.
‘This is it for Rite Aid’
Rite Aid previously filed for bankruptcy in October 2023 and it’s very unlikely there would be a third bankruptcy, says Scott Stuart, CEO of the Turnaround Management Association in Chicago. “This is it for Rite Aid,” he says, adding that the dynamic explains why the company wants a rapid and successful sale of its assets.
“While there’s some urgency, for sure, the court will have to make the determination if the urgency is as great as they’re making it out to be,” Stuart says.
What also remains to be seen is what will happen with the 1,200-plus stores that Rite Aid currently operates in 15 states. The company is looking to sell its assets in two phases, with the pharmacy business up for auction first.
In court documents, it has already marked dozens of locations for closure, saying it saw “limited to no value” in keeping them open. Once the sale process is complete, all Rite Aid stores will either be closed or sold to other owners.
It’s difficult to speculate about the future because there are several different potential scenarios for the outcome of these auctions, says Sarah Foss, a bankruptcy attorney and head of legal at Debtwire, who has been tracking the company’s filings.
Because of the licenses and regulations related to filling prescriptions, there is a limit to the number of buyers that could step up to buy Rite Aid’s pharmacy assets, she adds.
It’s likely the pharmacy assets will be absorbed by one of the standing pharmacy brands, Stuart adds. That’s not necessarily a bad thing, he adds, because these chains have already been rethinking their retail footprints and some consolidation is necessary.
Will other pharmacies be inundated with prescription transfers?
There could be “some” fearmongering at play by Rite Aid about the risks of disruptions to pharmacy care, though competitors may be incentivized to sit back and await an influx of customers that will naturally flow to them, says Joe Camberato, CEO of National Business Capital, a lending platform for business owners.
But pharmacy customers who choose to go to competitors to get their prescriptions filled upon hearing of the bankruptcy and impending sales could mean the value of Rite Aid’s assets deteriorate quickly, which is a valid risk for debtors, Foss says.
That said, because customers have prescription needs ranging from ad hoc to those that are regularly filled, customer attrition may be less problematic if the pharmacy assets are sold quickly, she adds.
“We should know by the end of week with a little more clarity what’s going to happen,” Foss says.
Customers may win in the end
There may be a silver lining here for customers because a degree of reinvention and innovation is sorely needed in these pharmacy-retailer chains, Camberato says. Whereas Walgreens has been working to automate the prescription filling process to speed things up, for example, Rite Aid dragged its feet, he adds.
While it’s unfortunate to see a company as big and familiar as Rite Aid go bankrupt, Camberato says it could be part of a long-overdue reset for an industry that hasn’t evolved in years.
“If it pushes the rest of the industry to actually improve the customer experience, streamline operations, and treat pharmacy workers better,” he says, “then maybe something good comes out of it.”