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Rite Aid Considers Bankruptcy to Avoid Opioid Lawsuits

By Michael DeRienzo, Esq. | Last updated on

In 2021, an estimated 220 people died every day due to opioid overdose. There are many factors to the opioid epidemic — mental health issuesthe Covid-19 pandemic, and economic downturns, just to name a few. However, many experts agree that one of the main causes of the epidemic came from the over prescription of opioids.

Many argue that the doctors and hospitals should shoulder the blame for these deaths. A logical deduction, given the fact that doctors are the ones prescribing the medications. Others point to pharmaceutical companies, as they created a highly addictive and extremely dangerous drug while making billions of dollars in sales.

One group that has often been overlooked in these legal and ethical debates has been the pharmacies that stored and distributed the drugs. While they did not directly prescribe or create opioids, they did continue to bring in money from their sale despite worrying trends in opioid prescriptions and use. However, pharmacies have largely been free from lawsuits — until now.

Rite Aid, a relatively small pharmacy, is currently embroiled in over one thousand lawsuits over its role in the opioid overdose epidemic. It's solution to avoid payment? Bankruptcy.

A Staggering Loss of Life

According to the United States Centers for Disease Control, the Opioid Overdose epidemic has come in three waves. The first wave began in the 1990s when doctors began prescribing opioids at an unprecedented rate. The second wave began in 2010 amid a rise in heroin deaths. The third wave began in 2013 with the increased use of synthetic opioids like fentanyl.

All three waves has resulted in more than 650,000 deaths between 1999 and 2021.

Who Should Be Blamed?

Over the past few years, local governments, state governments, and the federal government have brought thousands of lawsuits against doctorsdistributors, and pharmaceutical companies. Many cases involve criminal charges, alleging bribery, fraud, and/or conspiracy to commit illegal acts and has resulted in jail time and billions of dollars in fines.

One organization in the midst of the litigation is Rite Aid, who is the defendant in a False Claims Act lawsuit.

The Federal False Claims Act is a federal statute that allows whistleblowers to bring lawsuits on behalf of the United States Government against corporations that defraud the government. In this case, the government alleged that Rite Aid purposefully ignored "red flags" and knowingly filled medically unnecessary prescriptions for opioids in violation of the Controlled Substances Act. By seeking reimbursement from federal healthcare programs like Medicare, Rite Aid violated the False Claims Act.

How Rite Aid Can Avoid Payment.

Given that the False Claims Act is one of the governments most powerful weapons in fighting healthcare fraud, there is little doubt that any judgment will be several millions, if not billions of dollars. With $3.3 billion owed already in debt, Rite Aid is reportedly looking to file Chapter 11 bankruptcy.

In Chapter 11 bankruptcy, a company can protect it's assets and all liabilities can be subject to an automatic stay, thus delaying any repayments until the bankruptcy is concluded. The bankruptcy process then determines which creditors are paid and how much.

Will it work? It's not a guarantee the court will approve it. Only time will tell, a luxury many victims of the epidemic will never get again.

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