Rite Aid

Rite Aid Corporation is an American drugstore chain based in Philadelphia, Pennsylvania. It was founded in 1962 in Scranton, Pennsylvania, by Alex Grass under the name Thrift D Discount Center. It is the third-largest drugstore chain in the United States, with over 2,000 stores, and ranked No. 148 in the Fortune 500 in 2022.

After several years of growth, Rite Aid adopted its current name and debuted as a public company in 1968. Rite Aid was publicly traded on the New York Stock Exchange under the symbol RAD. In October 2023, the company filed for Chapter 11 bankruptcy, due to a large debt load and thousands of lawsuits alleging involvement in the opioid crisis.

History
Alex Grass founded the Rite Aid chain in Scranton, Pennsylvania, in September 1962, after marrying into Harrisburg Pennsylvania's Lehrman family in the early 1950s. The first store was called Thrift D Discount Center. The store expanded into five additional states in 1965 and went public as Rite Aid in 1968. It moved to the New York Stock Exchange in 1970.

Ten years after its first store opened, Rite Aid operated 267 locations in 10 states. In 1981, Rite Aid became the third-largest retail drugstore chain in the country. 1983 marked a sales milestone of $1 billion. A 420-store acquisition along the east coast expanded Rite Aid's holdings beyond 2,000 locations.

A large number of acquisitions brought the chain to the state of Michigan in 1984. These were of Grand Rapids, Michigan-based Muir Drug and Remes Drug, along with Lippert Pharmacy of Lowell and Herrlich Drug of Flint; one year later, Rite Aid opened stores in Lansing, Michigan through the acquisition of State Vitamin. Rite Aid expanded further into Ohio in 1987 through the acquisition of Cleveland-based Gray Drug. Among the companies acquired was Baltimore, Maryland's Read's Drug Store. On April 10, 1989, Peoples Drug's 114 unit Lane Drug of Ohio was purchased by Rite Aid.

Rite Aid acquired twenty-four Hook's Drug Stores stores in 1994, selling nine of those stores to Perry Drug Stores, a Michigan-based pharmacy chain. One year later, Rite Aid acquired Perry, entering Metro Detroit for the first time, and expanding its presence in Michigan even further.

In 1996, Rite Aid acquired Thrifty PayLess, a 1,000-store West Coast chain. The acquisition of Thrifty PayLess included the Northwest-based Bi-Mart membership discount stores, which was sold off in 1998. Acquisitions of Harco, Inc. and K&B, Inc. brought Rite Aid into the Gulf Coast area.

In the 1990s, Rite Aid partnered with Carl Paladino's Ellicott Development Co. to expand the company's presence in upstate New York.

In the late 1990s, Rite Aid performed poorly, and its stock dropped precipitously from $30 to $4.40. At this time, Mary Sammons, of Fred Meyer, was tapped by Leonard Green, of Leonard Green & Partners to become President/COO. She went on to become CEO in 2003.

In July 2001, Rite Aid agreed to improve its pharmacy complaint process by implementing a new program to respond to consumer complaints.

Brooks Eckerd merger
On August 23, 2006, The Wall Street Journal announced that Rite Aid would acquire Brooks Eckerd, with 1,858 Eckerd Pharmacy and Brooks Pharmacy stores, from the Quebec-based Jean Coutu Group for US$3.4 billion. The company's shareholders overwhelmingly approved the merger on January 18, 2007, and the deal closed on June 4 of that year. Following an antitrust review, Rite Aid was required to divest 23 stores. Rite Aid later announced that the two chains' stores would be rebranded, retiring the 109-year-old Eckerd banner; all stores were converted to Rite Aid by September 2007. The merger made Rite Aid the dominant drug store retailer in the Eastern U.S., and the third largest drug retailer nationwide; at its peak in 2008, Rite Aid had a total of 5,059 stores and employed 112,800 people. The following fiscal quarter saw an increase in revenue but a sharp fall in net income as Rite Aid began the integration process, and The New York Times reported that Rite Aid saw record-breaking losses that year. Rite Aid shares fell over 75% between September 2007 and September 2008, closing at a low of $0.98 on September 11, 2008, and subsequently dropping to $0.20 on March 6, 2009.

Similar to what CVS experienced in the Chicago metropolitan area after its purchase of Albertsons drug store chains, the deal gave Rite Aid stores that were too close to each other. In many situations, especially in Pennsylvania, where both chains were dominant and had roots in the Commonwealth (Rite Aid originated in Scranton; Eckerd began in Erie, while Thrift Drug was popular in the Pittsburgh area), there were, in some cases, neighboring Rite Aid stores. However, in March 2008, some of these overlapping stores were closed. Most of these stores that closed were pre-existing Rite Aids from before the Eckerd deal, since Eckerd had built newer, more modern stores with drive-through pharmacies and larger space under ownership of both JCPenney and Jean Coutu Group; and the "moved to" sites were converted Eckerds. Employees at the closed stores were transferred to nearby locations, so no layoffs were necessary.

As a former subsidiary of JCPenney, Eckerd accepted JCPenney's store credit card, a practice continued by Rite Aid to this day. Many stores acquired from Brooks Eckerd had previously been Rite Aid locations, as Rite Aid had sold some stores to JCPenney's Thrift Drug chain in the mid-1990s (shortly before JCPenney's acquisition of Eckerd), and had also sold all of its Massachusetts stores to Brooks in 1995.

Market exits
On January 4, 2008, Rite Aid announced the closure of all 28 of its stores in the Las Vegas Valley, and the sale of patient prescription files from the market to Walgreens. The company said Las Vegas was a non-core market that had not been contributing to overall results, and it had not opened a new store there since 1999. One Nevada store would remain open in Gardnerville, near the California border, where Rite Aid at the time had more than 600 stores. On February 5, 2009, Rite Aid announced that it would terminate operations of seven Rite Aid stores in San Francisco, along with five stores in eastern Idaho through a sale to Walgreens.

Rite Aid formerly had a presence in the Columbus, Ohio market, but has since sold off its stores there to CVS.

Founder Alex Grass died of cancer on August 27, 2009.

In June 2010, John Standley was promoted from Chief Operating Officer to chief executive officer, with former CEO Mary Sammons retaining her position as chairperson; Ken Martindale, previously co-president of Pathmark, was named Chief Operating Officer.

In 2015, Rite Aid purchased EnvisionRx, a pharmacy benefit manager, which owns subsidiary PBMs MedTrak, Connect Health Solutions, and Smith Premier Services.

Attempted acquisition by Walgreens
On October 27, 2015, Walgreens Boots Alliance announced that it expected to acquire Rite Aid for $9.4 billion, pending shareholder and regulatory approval. The combined company would have been the largest pharmacy chain in the United States, reportedly controlling 46% of the market. Walgreens planned to keep the Rite Aid name on existing stores if the deal went through, though the company's long-term plans for the Rite Aid name were unknown.

Most analysts expected that the merger would close by the end of 2016; it was initially delayed by regulatory review. It was announced on December 21, 2016, that that to address antitrust concerns, Rite Aid would sell 865 stores to Fred's for $950 million, though the Federal Trade Commission (FTC) was dissatisfied with the proposal, and requested the sale of 650 additional stores. In January 2017, Rite Aid and Walgreens further delayed the merger's closing to July, and reduced the sale price to approximately $6.8 billion. 1199SEIU United Healthcare Workers East, a labor union representing 6,000 Rite Aid employees, announced its opposition to the merger on January 31. On June 29, 2017, Walgreens announced the cancellation of the merger. Walgreens instead offered to purchase 2,186 Rite Aid stores, less than half of the chain, for $5.18 billion (plus a $325 million cancellation penalty), a deal which would have seen Rite Aid effectively exit the southeastern United States. Further negotiations led to a fourth revised deal, in which Walgreens would purchase 1,932 Rite Aid locations for $4.38 billion, which was approved by the FTC on September 19. The revised sale was completed on March 27, 2018, leaving Rite Aid with roughly 2,600 remaining stores. Three distribution centers and related inventory were transferred starting September 1, 2018, and the majority of stores were then rebranded as Walgreens. 600 stores were closed, most of which were Rite Aid stores within a mile of an existing Walgreens.

Attempted acquisition by Albertsons
On February 20, 2018, Albertsons announced plans to acquire the remainder of Rite Aid, in a merger of equals, subject to shareholder and regulatory approval. On August 8, 2018, Rite Aid announced that the plan had failed to please shareholders and the proposed acquisition would be cancelled.

In October 2020, Rite Aid announced the acquisition of the privately held Bartell Drugs, a 67-location Seattle-area chain, for $95 million. Some customers have criticized the acquisition with reports of heavy staff turnover and computer system glitches.

In 2022, Rite Aid relocated its headquarters from Camp Hill, Pennsylvania to Philadelphia. As of fiscal year 2022, Pennsylvania, with 494 stores, is home to the largest number of Rite Aid locations, followed by California and New York, with 487 and 281 respectively.

Bankruptcy
On August 25, 2023, Rite Aid announced that it was preparing to file for Chapter 11 bankruptcy protection within the coming weeks, in an effort to settle federal and state lawsuits over the company's role in the opioid crisis. Plans also call for the potential closure of up to 500 underperforming locations nationwide. In October 2023, CreditRiskMonitor reported that Rite Aid was nearing a potential bankruptcy filing.

On October 15, 2023, amid several opioid lawsuits and legal battles, Rite Aid and some of its affiliated debtors filed for Chapter 11 bankruptcy protection in the United States District Court for the District of New Jersey. The next day, the company was delisted from the New York Stock Exchange, and commenced trading over-the-counter. The company said in a statement it had secured $3.5 billion in financing and debt reduction agreements from lenders to keep the company afloat through its bankruptcy. Around 500 stores will still shutter throughout the bankruptcy procedure throughout the remainder of 2023. On October 16, Rite Aid announced that 92 additional stores would either be shuttered or sold to other pharmacies. On October 18, Rite Aid warned investors that it may not be able to survive its bankruptcy filing and might have to permanently shutter or sell all of its remaining stores over the next twelve months. That day, the company announced the closure of 154 stores, and its stock closed at an all-time low of $0.13 per share.

On October 19, fellow competitor Walgreens agreed to pay $192.5 million in an effort to settle a lawsuit from Rite Aid investors accusing them that their executives misled them about their bid to acquire Rite Aid back in 2017.

On November 16, Rite Aid sued the United States Department of Justice in an effort to block an opioid lawsuit that accused the company of ignoring warnings and falsely filed thousands of prescriptions for addictive opioid medications. On November 21, a bankruptcy judge ordered Rite Aid to fully reorganize its operations by March 1, 2024. Rite Aid warned that if it failed to fully reorganize by the deadline, the company could face liquidation. On November 29, Rite Aid announced the closure of 30 additional stores that would close by December 2023. On December 5, Rite Aid announced that 79 stores would be put up for sale.

On December 19, Rite Aid agreed to a bankruptcy mediation with its opioid victims and creditors that would be supervised by the court. Rite Aid also received a loan approval that would allow for the company to receive approximately $200 million. That same day, Rite Aid announced that they have settled with the Federal Trade Commission over their AI-powered facial recognition technology, agreeing to a 5-year ban to forbid using facial recognition technology in all of their stores after being accused of misusing the system for falsely identifying shoppers of race and color. The system was originally supposed to be used for shoppers that are likely involved in some sort of criminal related activity. In addition, Rite Aid announced the closure of 19 additional stores nationwide.

On December 21, Rite Aid cancelled an auction for its Elixir division after no other higher bids came in, and would sell the insurance-related company to MedImpact Healthcare Systems for approximately $575 million.

In June 2024, the Detroit Free Press reported that Rite Aid was preparing to close all remaining stores in Michigan. Soon thereafter, the chain filed a WARN notice disclosing plans to close its Waterford, Michigan distribution center in August 2024, laying off nearly 200 employees.

Finances
For the second quarter of 2022, Rite Aid reported basic and diluted earnings of -1.86 per share. This is significantly down from prior quarters' report of -0.24 per share.

Legal Problems
In 2002, the SEC announced criminal charges against top Rite Aid executives for accounting fraud. Several executives served subsequent jail time, including CEO Martin Grass. Grass, who is the son of the founder, ultimately served six years in prison.

In October 2018, a former Rite Aid vice president of advertising and two co-owners of Nuvision Graphics Inc. pleaded guilty to in a $5.7 million kick-back scheme defrauding Rite Aid.

Litigation
On July 25, 2004, Rite Aid agreed to pay $7 million to settle allegations that the company had submitted false prescription claims to United States government health insurance programs.

On July 14, 2022, Rite Aid inked a $10.5 million settlement with counties in Georgia, North Carolina, and Ohio, which allowed the company to sit out the next wave of trials stemming from the opioid epidemic in the U.S., which were slated to begin against national pharmacy chains by 2023.

On March 14, 2023, the United States government sued Rite Aid for missing "red flags" as it illegally filled hundreds of thousands of prescriptions for controlled substances, including opioids from May 2014 to June 2019.

Hall v. Rite Aid Corporation
In the employee seating lawsuit (Hall v. Rite Aid Corporation, San Diego County Superior Court), the parties reached a class action settlement for $18 million plus institution of a two-year pilot seating program for front-end checkstands. On September 14, 2018, the Court granted preliminary approval of the settlement. On November 16, 2018, the court granted final approval of the settlement.

In re National Prescription Opiate Litigation
As reported by Rite Aid, the company is a defendant in the consolidated multidistrict litigation proceeding, In re National Prescription Opiate Litigation, pending in the U.S. District Court for the Northern District of Ohio. Various plaintiffs (such as counties, cities, hospitals, and third-party payors) allege claims concerning the impacts of widespread opioid abuse against defendants along the pharmaceutical supply chain, including manufacturers, wholesale distributors, and retail pharmacy chains.

Byron Stafford v. Rite Aid Corp. and Robert Josten v. Rite Aid Corp.
As reported by Rite Aid, the company is involved in two consumer class action lawsuits in the United States District Court for the Southern District of California, alleging that it has overcharged customers' insurance companies for prescription drug purchases, resulting in overpayment of co-pays.

Surveillance practices
In July 2020, the Reuters news agency reported that during the 2010s Rite Aid had deployed facial recognition video surveillance systems and components from FaceFirst, DeepCam LLC, and other vendors at some retail locations in the United States. Cathy Langley, Rite Aid's vice president of asset protection, used the phrase "feature matching" to refer to the systems, a technical term related to the process of image feature extraction in the field of artificial intelligence for video surveillance, and said that usage of the systems resulted in less violence and organized crime in the company's stores, while former vice president of asset protection Bob Oberosler emphasized improved safety for staff and a reduced need for the involvement of law enforcement organizations. In a 2020 statement to Reuters in response to the reporting, Rite Aid said that it had ceased using the facial recognition software and switched off the cameras.

According to director Read Hayes of the National Retail Federation Loss Prevention Research Council, which in 2018 called facial recognition technology "a promising new tool" worth evaluating, Rite Aid's surveillance program was either the largest or one of the largest programs in retail. The Home Depot, Menards, Walmart, and 7-Eleven were among other US retailers also engaged in pilot programs or deployments of facial recognition technology at that time.

Of the stores examined by Reuters, those in communities where people of color made up the largest racial or ethnic group were three times as likely to have the technology installed, raising concerns related to the substantial history of racial segregation and racial profiling in the United States. Rite Aid said that the selection of locations was "data-driven", based on the theft histories of individual stores, local and national crime data, and site infrastructure.

Customer loyalty and rewards programs
The Wellness+ card is Rite Aid's free shopping rewards card that started nationwide on April 18, 2010. It became a part of the newly launched American Express-backed Plenti rewards program in May 2015, but the Plenti program was discontinued three years later. Rite Aid introduced Wellness+ BonusCash on January 1, 2018. Customers stopped receiving Plenti points; instead earning BonusCash that can only be redeemed at Rite Aid. The Plenti rewards program ended on July 10, 2018. After Plenti was discontinued, Rite Aid re-introduced the Wellness+ program.

Partnerships
General Nutrition Corporation (GNC) and Rite Aid formed a partnership in January 1999, bringing GNC mini-stores within the Rite Aid pharmacies. A partnership with Drugstore.com in June 1999 allowed customers of Rite Aid to place medical prescription orders online for same-day, in-store pickup.

Amazon announced in June 2019 that Amazon shoppers would be able to pick up their purchases at designated counters inside more than 100 Rite Aid stores across the US. The new service is called Counter and launched in the US after being used in the UK with the Next clothing chain and in Italy with Giunti Al Punto Librerie, Fermopoint and SisalPay stores.

In May of 2022, Rite Aid partnered with Homeward, a rural home care startup. Under this partnership, Medicare-eligible customers have been directed to Homeward's clinical services and have access to Homeward mobile care units.