Once a titan of American retail pharmacy, Rite Aid is now unraveling in real time. In a development that surprised few analysts but alarmed employees and investors alike, Rite Aid is reportedly preparing to file for bankruptcy again—its second filing in just two years.

The company has been battered by debt, litigation tied to the opioid crisis, shrinking market share, and a collapsing business model. Even after a Chapter 11 restructuring in 2023 that included store closures and a sale of major assets, Rite Aid’s financial health has only worsened.

So what went wrong? Why is Rite Aid collapsing while competitors like CVS and Walgreens survive? And what does this signal for the future of brick-and-mortar pharmacy retail?

Let’s break it all down.

The Immediate Trigger: A Second Bankruptcy Filing

According to internal communications and multiple news reports, Rite Aid’s leadership informed employees in early May 2025 that a second bankruptcy filing is imminent. In a letter to staff, CEO Matthew Schroeder said the company was unable to secure the capital needed to continue operating and would also begin reducing staff at its Pennsylvania headquarters.

This news comes just 18 months after its first bankruptcy filing in late 2023, which had already led to:

• Closure of over 500 stores
• Sale of its pharmacy benefit manager (PBM) business, Elixir
• Hundreds of job cuts

Despite these efforts, the company still carries billions in debt, is battling multiple lawsuits related to the opioid epidemic, and is facing operational decline across nearly every metric.

Legal Pressures: Opioid Litigation Worsens

A major factor hastening Rite Aid’s collapse is its exposure to lawsuits alleging that it contributed to the national opioid crisis.

While not as prominent as Purdue Pharma or CVS in these lawsuits, Rite Aid has still been named in dozens of high-profile legal actions, accusing the company of:

• Failing to monitor prescription volumes
• Allowing high-risk opioid distribution in vulnerable areas
• Neglecting compliance systems that could prevent abuse

Some of these cases are tied to the Department of Justice, which significantly raises both the risk and potential financial penalties. Even a few multi-million-dollar settlements would be devastating for a company already bleeding cash.

Financial Struggles: Debt, Declining Sales, and Negative Cash Flow

Rite Aid’s numbers tell a bleak story:

• Revenue has fallen year-over-year since FY2022
• Operating cash flow is negative
• The company reported a net loss of $1.3 billion in FY2024
• It holds over $3 billion in long-term debt

Even after cutting back on operations and selling off assets, the company cannot generate enough income to service its obligations.

Rite Aid had hoped to stabilize post-2023 restructuring, but instead:

• Sales declined further
• Vendor and supplier relationships became strained
• Investors lost confidence, pushing share prices below $0.50

This trajectory left the company with few options outside of another bankruptcy process.

Operational Issues: Store Closures and Customer Loss

While restructuring might work for companies that can still maintain customer traffic, Rite Aid has been steadily losing footfall and relevance.

Since 2022, the company has:

• Closed nearly 800 stores across 20 states
• Exited unprofitable rural and suburban locations
• Faced stockouts due to supply chain disruptions
• Lost key pharmacy staff amid low morale and uncertainty

Competitors like CVS and Walgreens aggressively expanded into digital health, insurance services, and primary care. Meanwhile, Rite Aid remained primarily a retail pharmacy with declining foot traffic and shrinking prescription volume.

Even loyal customers began migrating to more convenient, tech-integrated providers.

Structural Problems: Why Rite Aid’s Model No Longer Works

At the heart of Rite Aid’s collapse is a broader reality: the traditional pharmacy retail model is outdated.

What used to work—convenient locations, generic meds, and minor health services—has been disrupted by:

• Digital pharmacy startups like Capsule and Amazon Pharmacy
• Retail clinic expansions from Walmart Health and CVS MinuteClinic
• Direct-to-consumer models for wellness, prescriptions, and diagnostics

Rite Aid made limited investments in digital innovation and was unable to pivot quickly. It also lacked scale—unlike CVS (which acquired Aetna) or Walgreens (which formed partnerships with VillageMD and DoorDash).

With no clear value proposition and minimal digital presence, Rite Aid fell behind in every growth category.

Employee Impact: Layoffs, Uncertainty, and Low Morale

As part of this second restructuring wave, corporate layoffs have already begun in Pennsylvania. More cuts are expected across regional offices, IT, HR, and pharmacy staff.

Morale is reported to be low inside the company. Many employees are unsure:

• Whether their location will survive
• What benefits they will retain post-bankruptcy
• Whether their job will exist in 6 months

Meanwhile, recruitment has stalled. With major pharmacy chains competing for top tech and operational talent, Rite Aid is struggling to retain skilled professionals.

Competitor Advantage: CVS and Walgreens Poised to Gain

The biggest winners from Rite Aid’s collapse are its competitors—particularly CVS, Walgreens, Walmart Health, and digital disruptors.

• CVS continues integrating its insurance arm Aetna and expanding into primary care
• Walgreens has increased its digital delivery and telehealth operations
• Amazon and Mark Cuban’s Cost Plus Drug Company are offering lower prices online
• Walmart is becoming a serious contender in affordable walk-in health services

These players are absorbing Rite Aid’s market share, retail real estate, and pharmacy staff at scale.

What’s Next?

While official filing has not yet occurred at the time of writing, multiple indicators confirm it’s coming:

• Employee letters and media leaks
• Store shrinkage in high-cost markets
• Resignations of mid-level executives
• Lack of funding from private lenders or institutional investors

Possible outcomes over the next 6–12 months include:

• Liquidation of remaining assets if no buyer emerges
• Court-supervised wind-down
• Acquisition of regional assets by competitors
• Franchise or brand licensing deals to recoup value

Shareholders are unlikely to recover much (if any) equity. Bondholders and litigants will likely get priority in restructuring outcomes.

Final Thoughts

The fall of Rite Aid is not just a story about one company—it reflects the deeper fragility of traditional retail models in the healthcare space.

Even with name recognition, thousands of stores, and decades of legacy, Rite Aid failed to adapt. The company was too slow to digitize, too fragmented to scale, and too exposed to legal risk.

As the company prepares to enter bankruptcy again, it serves as a case study in what happens when a once-dominant brand misses its moment to evolve.

Disclaimer

This article is for informational purposes only and should not be construed as financial advice. Please consult a licensed financial advisor before making any investment decisions.