Bankrupt Rite Aid sues US Justice Dept to stop opioid lawsuit (updated)

Rite Aid

16/11/2023 22:12

(Adds background on bankruptcy in paragraph 6, material from
bankruptcy court hearing in paragraphs 7-12)
    By Dietrich Knauth
       NEW YORK, Nov 16 (Reuters) - Rite Aid sued the U.S.
Department of Justice on Thursday, seeking to block a lawsuit
alleging that the bankrupt pharmacy chain ignored red flags and
illegally filled hundreds of thousands of prescriptions for
addictive opioid medication.
    The DOJ, which sued Rite Aid in March, agreed only to a
"brief pause" of its lawsuit after Rite Aid went bankrupt last
month, a position that threatens to undermine the company's
restructuring efforts, Rite Aid said in a complaint filed on
Thursday in New Jersey bankruptcy court.
    Rite Aid asked U.S. Bankruptcy Judge Michael Kaplan to rule
that the DOJ lawsuit cannot proceed while Rite Aid is bankrupt,
which would put the government on equal footing with other
opioid plaintiffs whose lawsuits were automatically stopped by
the company's bankruptcy filing. 
    The DOJ has argued that U.S. bankruptcy law does not stop it
from exercising its "police powers" through its lawsuit.
    Rite Aid would not concede that point, and said Kaplan, who
is overseeing the company's Chapter 11 proceedings, should rule
on that dispute rather than the judge overseeing the DOJ's
lawsuit in Cleveland federal court.
    Rite Aid, which operates about 2,000 retail pharmacies in 17
U.S. states, filed for bankruptcy protection on Oct. 15, seeking
to close underperforming stores, sell its pharmacy benefit
company Elixir and resolve over 1,600 lawsuits alleging it
oversold addictive opioid medications by filling illegal or
suspicious prescriptions. 
    A court-appointed committee representing opioid plaintiffs
warned Kaplan at a Thursday court hearing in Trenton, New
Jersey, that Rite Aid's bankruptcy could result in no payment to
victims injured by the company's allegedly reckless sale of
opioid drugs.  
    "Rite Aid made money on tort claimants and now proposes to
provide them nothing in return," attorney Arik Preiss said. 
    Rite Aid competitors Walgreens  WBA.O , Walmart  WMT.N  and
CVS  CVS.N  have agreed to pay $13.8 billion to settle a wave of
similar opioid lawsuits outside of bankruptcy. 
    Preiss said Rite Aid's opioid creditors could find
themselves opposing both the company, which seems to be
prioritizing its top lenders over other stakeholders, as well as
the DOJ, which has disrupted opioid settlements in the
bankruptcies of Endo International and Purdue Pharma. 
    The DOJ appealed Purdue's bankruptcy settlement to the U.S.
Supreme Court when nearly all other creditors wished to settle,
and its opposition delayed Endo's proposal to sell itself to a
group of lenders and pay nearly $600 million in settlements to
states and people afflicted by the U.S. opioid crisis.  
    Rite Aid attorney Josh Sussberg said in court that the
pharmacy chain's bankruptcy is "not an opioid case" like Endo or
Purdue, because the company's significant retail operation costs
create more pressure to quickly reach a bankruptcy settlement.

 (Reporting by Dietrich Knauth
Editing by Bill Berkrot and Alexia Garamfalvi)
 ((Dietrich.Knauth@thomsonreuters.com;))