Rite Aid’s Chapter 11 Bankruptcy: Overview and Path to Emergence

Rite Aid Corporation, one of the largest pharmacy chains in the United States, filed for Chapter 11 bankruptcy protection on October 15, 2023, citing a burdensome debt load, persistent operational headwinds, and extensive opioid litigation liabilities. The company, which operated more than 2,100 stores in 17 states, assured customers that stores would remain open throughout the restructuring. Rite Aid took this step to manage $4 billion in funded debt and resolve legal uncertainties that had weighed on its performance.

Background

Founded by entrepreneur Alex Grass in 1962, Rite Aid started as Thrift D Discount Center in Scranton, Pennsylvania. It quickly expanded throughout the 1960s and 1970s, eventually rebranding as Rite Aid Corporation. By the early 1990s, it had grown into one of the nation’s leading drugstore chains. Notable acquisitions—such as Thrifty PayLess in 1996 and Brooks and Eckerd in 2007—helped Rite Aid surpass 5,000 stores at its peak. However, unsuccessful merger attempts (including a protracted effort to be acquired by Walgreens) and ongoing competition from CVS, Walgreens, and big-box retailers such as Walmart and Target slowed its momentum.

Prior to its bankruptcy, Rite Aid explored multiple cost-saving measures, store closures, and asset sales. In 2018, the company sold 1,932 stores to Walgreens for $4.375 billion, with the transaction completed in March 2018, but leaving the remainder of the business struggling with debt. A potential merger with Albertsons collapsed that same year. Despite these challenges, Rite Aid persisted as a crucial community pharmacy resource, with thousands of pharmacists handling millions of prescriptions annually. The company became one of the large companies facing mass opioid liabilities to file Chapter 11 without a prearranged agreement with opioid plaintiffs.

History & Growth

Over six decades, Rite Aid established itself as a fixture in U.S. neighborhoods. In addition to selling healthcare and consumer goods, the company expanded services to include immunizations, disease management, and basic clinical support. Rite Aid’s heritage of providing accessible health services in underserved regions helped solidify its position as the third-largest pharmacy chain in America.

Rite Aid’s store count reached an all-time high in the early 2000s, but market shifts and debt service obligations forced management to re-evaluate its footprint. The company launched RxEvolution in 2020—a strategic overhaul that refocused its pharmacists as healthcare providers, offering clinical services like point-of-care testing and expanded immunizations. Nonetheless, persistent financial and regulatory pressures complicated growth.

Business Segments

Rite Aid operates two core segments: Retail Pharmacy, comprising its brick-and-mortar stores, and Pharmacy Services, primarily organized under the "Elixir" brand. The retail segment accounts for the lion's share of the company's $24.1 billion in annual revenue (fiscal year 2023), while the Elixir PBM processes prescriptions, negotiates rebates with manufacturers, and administers Medicare Part D plans for over 1.5 million members. The Retail Pharmacy business encompasses front-end merchandise (cosmetics, household essentials, over-the-counter medications) plus prescription drug services. In many areas, Rite Aid was the only pharmacy offering an accessible walk-in clinic model, providing immunizations and basic healthcare education. Meanwhile, the Elixir segment includes mail-order and specialty pharmacy services, helping insurers and employers manage drug costs.

Capital Structure

As of its bankruptcy filing, Rite Aid reported $3.999 billion in funded debt obligations, along with significant operating lease liabilities. The company’s liquidity was limited to roughly $524 million—$134 million in cash and $390 million in available borrowing capacity. Major secured instruments included a senior asset-based revolving credit facility, a FILO (first-in, last-out) term loan, and multiple tranches of secured notes, some maturing as early as July 2025.

Prepetition Challenges

Opioid Litigation

Aside from debt, Rite Aid grappled with persistent underperformance in certain regions, declining front-end sales, and a shifting reimbursement climate. The company also faced more than a thousand lawsuits tied to the U.S. opioid epidemic. On March 13, 2023, the U.S. Department of Justice filed a civil complaint accusing Rite Aid of ignoring red flags and inappropriately dispensing opioids in violation of the False Claims Act. The case was later settled in July 2024 for $7.5 million in cash and a $401.8 million allowed unsecured claim in the bankruptcy case.

Financial Deterioration

Despite aggressive cost-cutting measures, Rite Aid faced mounting financial pressures leading up to its Chapter 11 filing. These efforts were ultimately insufficient to offset the company's debt load, legal liabilities, and underperforming stores. In an effort to mitigate losses, Rite Aid closed approximately 210 stores in the year ending September 30, 2023, prior to its bankruptcy filing. Nevertheless, costly rent obligations on vacated leases continued to pressure cash flow. Inflationary pressures and labor shortages also complicated efforts to maintain profitability, prompting an eventual move to seek Chapter 11 protection.

Strategic Initiatives

Pre-Filing Restructuring Efforts

Leading up to its bankruptcy, Rite Aid undertook several strategic moves. It engaged financial advisors and counsel to evaluate restructuring options, while launching a targeted store portfolio review under the “Rite Aid 2.0” plan. The company also marketed its Elixir PBM to potential bidders, hoping to generate funds to reduce debt. Meanwhile, Rite Aid worked on operational efficiencies—rationalizing front-end product lines, centralizing procurement, and refreshing store layouts to enhance the customer experience.

By August 2023, an ad hoc group of secured noteholders proposed a term sheet for a comprehensive reorganization, offering debtor-in-possession (DIP) financing to sustain operations. Rite Aid ultimately secured $3.45 billion in DIP financing—comprising a $2.85 billion asset-based revolving credit facility, a $400 million FILO term loan, and a $200 million senior secured term loan—to reassure suppliers, pay employees, and fund day-to-day expenses while negotiating a formal plan of reorganization.

First Day Motions and Court Filings

Shortly after filing, Rite Aid obtained court approval to continue using its prepetition cash management system and honor employee wages. The court also authorized DIP financing on an interim basis, allowing the company to access needed liquidity. Rite Aid filed motions requesting approval of store closure procedures, permission to continue customer loyalty programs, and retention of relevant advisory firms. All these steps aimed to stabilize day-to-day operations and minimize disruptions for employees, vendors, and customers. The company also signaled its intention to finalize any sale of Elixir PBM through a fair, court-supervised auction if higher offers emerged.

Emergence

A U.S. bankruptcy judge approved Rite Aid's restructuring plan in June 2024, allowing the pharmacy chain to cut $2 billion in debt and settle the majority of opioid-related claims. Rite Aid completed the sale of Elixir Solutions to MedImpact for approximately $576.5 million (court approval in January 2024; closing on February 1, 2024). Rite Aid emerged from Chapter 11 on September 3, 2024, with a smaller store base—having closed hundreds of locations—and $2.5 billion in exit financing to invest in its remaining markets.

In a public statement, Rite Aid emphasized its post-bankruptcy focus on delivering pharmacy services, streamlining front-end product lines, and further elevating its pharmacists as frontline health providers. With legacy debts significantly reduced and legal challenges largely resolved, the "new" Rite Aid was positioned to compete more effectively against major chains, digital pharmacies, and grocery-based pharmacies. Executives noted that the restructured organization's success would hinge on leveraging the Elixir PBM's capabilities (under its new ownership) and solidifying retail store offerings in its core regions.

Second Bankruptcy and Complete Closure

Failed Restructuring Leads to Second Filing

Despite the successful debt reduction and emergence from Chapter 11 in September 2024, Rite Aid's restructuring proved unsuccessful. Just eight months after emerging, the company filed for bankruptcy protection again on May 5, 2025, marking the second Chapter 11 filing in less than two years.

The brief nine-month period between emergence and the second filing highlighted fundamental challenges that debt restructuring alone could not solve. The pharmacy chain, which had approximately 1,250 stores remaining after the first bankruptcy—roughly half the number from just two years prior—continued to face intense competitive pressures and operational difficulties.

Complete Store Closures

In a dramatic conclusion to the company's 63-year history, Rite Aid shuttered all remaining stores on October 3, 2025. The pharmacy chain, once one of America's largest drugstore operators, closed its final 89 locations, ending operations entirely.

The company sold most of its U.S. stores' pharmacy services to rivals CVS Pharmacy, Walgreens, Albertsons, and Kroger, which collectively acquired more than 1,000 locations' worth of prescription files and customer relationships.

Lessons from Rite Aid's Collapse

The complete failure of Rite Aid—from 2,100+ stores at the first bankruptcy filing to complete liquidation just two years later—demonstrates the challenges facing mid-tier pharmacy chains in an increasingly consolidated market. Despite eliminating $2 billion in debt and securing $2.5 billion in exit financing, the restructured company could not overcome competitive disadvantages against larger rivals CVS and Walgreens, changing reimbursement dynamics, and the continued shift toward mail-order and digital pharmacy services.

For comprehensive analysis of pharmacy and retail healthcare bankruptcies, visit the ElevenFlo bankruptcy blog.