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Week 8 Assignment
Research Assignment – Rite Aid Corporation
School of Business, Liberty University
BUSI 735: Strategic Organization Design and Theory
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Abstract
At its peak, Rite Aid was among the largest retail pharmacy chains in the United States, with
over 5,000 stores across 17 states. Its annual prescription-filling volume of 300 million rivaled
that of competitors like Walgreens, CVS, and Amazon. Unfortunately, a series of financial
mismanagement and societal issues led to the company's struggles. As the opioid crisis began to
impact the US, Rite Aid was accused by the government of contributing to the problem through
illegal opioid prescriptions. The second challenge Rite Aid faced was unstable debt and poor
financial management by its leadership. Without sufficient funds, Rite Aid was unable to invest
in technology that could support the company's long-term stability. Finally, because it lacked the
capacity to compete with rivals by adopting technological advancements, adapting to consumer
habits, and developing a strategic plan, the company was forced to close multiple stores and
implement layoffs to remain viable. When these measures failed, Rite Aid filed for bankruptcy
multiple times as a last-ditch effort to revive the company. What remained of a once-dominant
force in the retail pharmaceutical industry was a shell of its former lucrative business and a slow
fade of a top industry name.
Introduction
Founded in 1962, Rite Aid operated more than 5,000 stores at its peak and employed
more than 100,000 people (Young, 2025). Rite Aid was one of the top three drug store chains in
the U.S. for several years, along with Walgreens and CVS (Bılbeısı & Narayanaswamy, 2022).
Maintaining its position as one of the top drugstore chains in the US, Rite Aid achieved this
through steady growth in its early years. There were multiple merger attempts and attempts to
acquire other chains, which the government approved or rejected based on its reviews. All of
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which could not make the company immune to the many issues that would threaten its
existence.
This article will explore three issues that plagued Rite Aid and presented the most
formidable challenges that the company has seen throughout its 60+ year history. The first is
the opioid crisis, which is ravaging many communities within the US. Of an estimated total of
107,622 drug overdose deaths reported in the U.S. in 2021, the latest data made available by
the Centers for Disease Control and Prevention (CDC) shows that 75.4 percent were linked to
opioids (Carbonaro, 2023). In a March 20, 2023, complaint, the US Department of Justice (DOJ)
alleged that Rite Aid knowingly filled unlawful prescriptions for controlled substances (opioids)
that lacked a legitimate medical purpose and were not for a medically accepted indication, or
were not issued in the usual course of professional practice (Alcoholism & Drug Abuse Week,
2023). This first suit would lead to at least a thousand more and constitute an enormous
litigation burden for the company, thereby eroding its medical credibility and financial stability.
The second issue that plagued the company was the mismanagement of its debt and
finances. Reports of empty shelves, inflationary pressures, and changing consumer behavior
were the initial red flags for the company (McCarthy, 2025). There have also been reports
regarding the size of its debt and the large sums owed to many creditors (Pinto, 2023). Given
the available facts, it is evident that a series of management shortcomings has led to Rite Aid’s
current situation. Amid competition from larger chains and falling sales, Rite Aid filed for
Chapter 11 bankruptcy twice, once in October 2023 and again in May 2025 (Long Island
Business News, 2025).
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The third issue this research will examine is the competitive market in which Rite Aid
operates and its performance within that market. Total retail prescription dispensing revenues
from retail, mail, long-term care, and specialty pharmacies reached a record $446 billion in
2019, with specialty drugs accounting for 36% of revenues—both metrics set annual industry
records (Hemphill, 2021). These competing channels for medication delivery create a
competitive landscape across the entire industry, whether through traditional retail (Rite Aid,
CVS, Walgreens) or mail order (Amazon). Rite Aid's need to adopt a strategic business model to
remain competitive was never successfully implemented, further hindering a company already
struggling.
Opioid Litigation
In 2017, approximately 12 million Americans misused opioids, and more than 47,000
people died of opioid overdose (Jalali et al., 2020). These drugs have shown up in every corner
of America, costing local governments financial and personnel resources and, in many cases,
stretching essential services thin.
Over the last two decades, the Federal Government has become increasingly involved in
supplementing state resources or providing support to law enforcement agencies nationwide to
combat these issues. In 2000, the Drug Addiction Treatment Act was signed into law under the
Children’s Health Act by President Bill Clinton, allowing doctors to obtain waivers to treat opioid
addicts with different scheduled drugs (Jones et al., 2019).
Furthering their efforts to combat the addiction crisis, the Federal Government
implemented the Prescription Drug Monitoring Program (PDMP) to track and monitor
prescription data. PDMPs, when used in real time, can facilitate improved data tracking, such as
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prescription or dispensing histories; alert health care providers to high-risk or at-risk patients;
and encourage the review and revision of prescriptions, dispensing activities, or practices (Tay et
al., 2023).
Even with the stated resources available, Rite Aid was still accused of misusing or
overlooking the systems in place, which contributed to the opioid epidemic. The lawsuits
against the company were numerous and initially filed by the Federal Government. On July 10,
2024, the US DOJ settled with Rite Aid, requiring the company to pay $7.5 million and to have
an allowed, unsubordinated, and general unsecured claim of $401.8 million in Rite Aid’s
bankruptcy case pending in the District of New Jersey at the time of the settlement (U.S.
Department of Justice, 2024). Specifically, the lawsuit alleged that Rite Aid and its pharmacists
knowingly dispensed at least hundreds of thousands of unlawful prescriptions for controlled
substances that lacked a legitimate medical purpose, were not issued in the normal course of
professional practice, and/or were not valid prescriptions, did not serve a medically accepted
indication, or were medically unnecessary (U.S. Department of Justice, 2024).
The lawsuits against Rite Aid resulted from years of lax oversight by the company’s
leadership, which failed to enforce federal standards regarding opioid dispensing. The company
undertook several restructuring efforts before the lawsuits were filed, but these efforts
produced only minimal improvements that did not prevent litigation. Before analyzing the
causes of Rite
Aid's failures, it is important to understand the company's goal. According to The Org (2025),
Rite Aid’s mission statement is:
The Leadership Team at Rite Aid is responsible for strategic direction and oversight of
the company’s operations, focusing on enhancing healthcare delivery and retail services.
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This team collaborates across departments to drive financial performance, optimize
pharmacy services, and ensure the alignment of human resources, ultimately enhancing
the customer experience and meeting the healthcare needs of millions of Americans.
(theorg.com)
Rite Aid has a traditional vertical hierarchy, including a CEO, CFO, and lower-level executives who
make decisions. Meanwhile, employees carry out physical work in separate functional
departments (Daft, 2021). Although this structure was effective for Rite Aid during its first 40
years, it became less suitable in the rapidly evolving retail pharmaceutical industry. The way
customers receive their prescriptions and how competitors deliver prescriptions to theirs both
played crucial roles in shaping the strategy and should have been a top priority. Its lack of
oversight in its core duty of prescription filling called for a refocus and a strategy proven
successful in other markets.
Following the Federal Government's implementation of the PDMP, Rite Aid either
ignored or bypassed the new requirements. This led to the lawsuit mentioned earlier by the
Federal Government, which imposed a significant financial burden on the company. Daft (2021)
suggests the “Goal Approach,” which Rite Aid could have adopted and which would have
provided the necessary oversight. Daft describes the Goal Approach to effectiveness as the
process of setting an organization’s goals and evaluating how well those goals are achieved.
Many organizations develop plans to comply with new regulations, including oversight from
leadership. Rite Aid’s failure to do this and to implement any regulations was seen as negligent
during the opioid crisis, resulting in millions of dollars in penalties against the company.
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Debt & Financial Mismanagement
Capital plays an important role in the development and competition of enterprises (Wu
et al., 2021). Companies must maintain a cash surplus to fund initiatives, purchase inventory for
resale, and pay employees. Equally important to having cash on hand to support the
organization’s goals is the management of the cash. Deciding which initiatives to fund, how
much to allocate to the company’s innovation strategy, and the cost of growth all play key roles
in Rite Aid's ability to advance and remain viable in the market.
Rite Aid’s debt mismanagement was widely seen as a leading cause of the company’s
failures. In 2015, the company faced immense pressure to keep up with competitors in the drug
retail market. An effort to ease some of this pressure occurred when Walgreens offered to buy
the chain for $17 billion. However, U.S. regulators scrutinized the deal closely, and the
companies agreed to a smaller $4.4 billion transaction in which Walgreens purchased just under
2,000 Rite Aid locations, leaving Rite Aid diminished in stature and unable to compete at the
scale of its larger rivals (CNN, 2025). Fast forward to October 2023: the company filed for
bankruptcy for the first time, underwent a two-year process, and finally emerged in September
2024 by reducing $2 billion in debt, securing $2.5 billion in funding to continue operations, and
closing about 500 locations (CNN).
Unfortunately, this was not the end of Rite Aid’s troubles. In May 2025, the company
filed a second bankruptcy, citing their financial setbacks this time as a result of the rapidly
evolving retail and healthcare landscapes” (McGowan, 2025). As a result of this second
bankruptcy, the company agreed to close all of its stores but will keep prescription-filling
operations going for now. At the same time, they will transfer their customers' refills to other
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pharmacies such as Walgreens and CVS. Employee cuts were kept to a minimum, with
employees reassigned to other stores to support downsizing efforts.
Rite Aid’s failure to innovate and adapt its product-delivery methods in response to
competitors was evident throughout its bankruptcy proceedings. While the prescription-filling
process is straightforward—when a patient presents a prescription, the company must fill it
correctly and efficiently—changing how the product is delivered is crucial. Daft (2021) presents
the prospector strategy, which encourages organizations to innovate, take risks, seek new
opportunities, and grow. Perhaps the most important aspect of this strategy is that using
creativity to differentiate the organization from competitors is more vital than efficiency (p. 68).
Rite Aid's failure to innovate negatively impacted its finances, a shortcoming widely
criticized. Innovation greatly influences companies' financial results, accounting for much of the
variation in performance (Jian-Hang et al., 2024). Leadership often discusses this with regret,
which can serve as a lesson for similar retail pharmacies. While other retail pharmacies were
introducing in-house clinics and digitizing some services, Rite Aid stuck with its traditional
pharmacy business model. This was a mistake, as society was beginning to embrace these
changes and accept them as standard business practices. Before long, customers perceived Rite
Aid’s business model as outdated and, in some cases, a threat to their healthcare.
Innovation requires funding, and innovating generates revenue for the company. All of
this depends on a robust strategy such as the prospector model discussed earlier. Not investing
sufficiently in innovation ultimately leads to a loss of income or missed opportunities to profit
from the innovations it creates. This might be an unconventional way to discuss debt
mismanagement, but it is essentially the same as some traditional issues, such as theft and poor
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financial decisions. Rite Aid’s problems and the eventual sale of its assets were directly caused
by its failure to recognize the need to adapt.
Competition
U.S. prescription drug expenditures rose to $805.9 billion in 2024, representing a 10.2%
increase over the previous year (ASHP News Center, 2025). In an environment where
pharmaceuticals are becoming more essential, the growth of pharmacy chains and the
development of innovative methods to deliver these vital medications to patients are crucial.
Americans are becoming sicker and increasingly rely on pharmacies to compete for their
business by reducing medication costs and implementing initiatives that promote healthy
lifestyles. Pharmacy chains have implemented numerous innovations to stay ahead of the curve
and outpace their competition.
Rite Aid’s failure to stay competitive with its rivals contributed to the company’s
downfall. Prescription delivery has changed over the years, and companies like Amazon have
revolutionized how it is done. With its Pill Pack service, Amazon created a full-service online
pharmacy, licensed to ship prescriptions in all 50 states in simple-to-use, prepackaged doses
(Shaya & Eddington, 2020). This service delivers users’ medications directly to their homes in
pre-sorted bags to be taken at specific times of day. It includes information sheets that list when
each medication should be taken, when the current batch of prescriptions will run out, when
the next delivery is expected, and other details (Hempel, 2023). This service provides a
convenience that is difficult to match, but it must be accompanied by a strategy that continues
to attract customers to traditional pharmacies.
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In their efforts to remain competitive, Walgreens teamed up with Verizon to offer digital
services to its customers. Rolling out its Network as a Service (NaaS), this new offering brings
virtual reality experiences built on Verizon's 5G network, which will be key in delivering lifestyle
management solutions in areas such as nutrition and wellness via customers’ delivery method
of choice, either remotely with digital devices and digital applications or with an in-store expert
enhanced with smart wearables in the future (Contify Telecom News, 2020). Harnessing the
advantages of technologies such as 5G is the epitome of innovation. It offers a service to its
customers in line with society’s adaptation to technology.
The leading pharmacy chain, CVS, strengthens its market position by sourcing
medications through the global supply chain. CVS employs a business model known as
Pharmacy Benefits Management (PBM), which enables it to control pricing. A PBM works to
negotiate and lower prescription drug costs for consumers and companies that hire them
(Santizo, 2023). Through price negotiations, CVS uses the PBM to negotiate with drug
manufacturers on drug costs, as well as on discounts and rebates based on the volume of drugs
the pharmacy handles (p. 2). The cost savings accrued through this model are passed directly to
the customer in the form of lower-priced drugs, comparable to those offered by larger
pharmacies such as Amazon, which can deeply discount its drugs because of the volume it
purchases from the manufacturer and the number of customers who use its service.
To put these innovation efforts into perspective, Rite Aid did not implement any
significant technological advances over the 10 years of its financial woes. Daft (2021) mentions
two competitive strategies aimed at making an organization more profitable and less vulnerable.
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The low-cost leadership strategy means managers choose to compete through lower costs (p.
64). The differentiation strategy competes through the ability to offer unique or distinctive
products and services that can command a premium price (p. 64). All of Rite Aid’s competitors
utilized one of the aforementioned strategies to compete and have been highly successful thus
far. Rite Aid's research did not identify any strategies to achieve a competitive advantage, nor
any core competence efforts in research and development.
Personal Perspective
A common theme throughout this work is Rite Aid's hesitation to innovate in order to
keep pace with competitors. Adaptation is vital in a society in which technology affects our
operations. There are many strategies the company could have adopted. First, without
implementing an official strategy, Rite Aid’s leadership needed to analyze market trends to
explore options beyond prescription filling. One example is CVS and its MinuteClinics, created to
improve its healthcare services. These clinics operate in approximately 13% of CVS Pharmacies
in the U.S., making them the most extensive retail clinic network in the U.S., with over 1,000
locations and 52% of the retail clinic market (York et al., 2021). CVS provided services beyond
medication filling, allowing customers the option to have multiple needs fulfilled in one stop.
Going forward, Rite Aid would benefit from a divisional structure that organizes separate
divisions responsible for individual products, services, product groups, major projects or
programs, divisions, businesses, or profit centers (Daft, 2021). The company should be
restructured to allow for organizational outputs from three newly formed divisions:
pharmaceutical, health, and retail. Using a design similar to CVS, Rite Aid should negotiate drug
prices with manufacturers worldwide, develop additional health initiatives, and strengthen its
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retail segment by introducing everyday items that customers purchase and that are appropriate
for a drugstore to sell. Growing the business through advancements in technology, outreach,
and partnerships should be the centralized focus. A separate team responsible for measuring
the company’s success should be established, with the authority to increase or decrease efforts
as the team deems appropriate.
Biblical Perspective
Corporations are large enterprises that typically employ many people. They have
numerous rules and regulations designed to support their overall goals and ensure success.
These include mission statements, operating manuals, codes of conduct, and general rules that
all employees must follow. When these are not enough and leadership or individuals need extra
guidance to succeed, the Bible offers it.
Rite Aid has been through multiple instances of ruin and restoration. Through
bankruptcies, store sales, and rebranding to remain viable, the company casts reminders of ruin
in Israel and restoration in Judah. In 1 Kings 14:15, Ahijah told Jeroboam that the Lord would
“uproot” Israel and “scatter them beyond the Euphrates” (Merida, 2015). It also conveys God's
compassion and his saving of those who follow and believe from destruction. There is some
evidence that the leadership of Rite Aid is “stubborn like farm animals stemming from unbelief”
(p. 295).
Fortunately, there are stories of redemption, and companies like Rite Aid have benefited
from this in the past. The company redeemed itself many times over the years, but apparently
did not learn from previous mistakes. The real “story” of the gospel is the evidence of
redemption and renewal (Keller, 2014). Refreshing the brand and redeeming past errors are
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possible through belief and effort. Ephesians 1:7 states, “In him we have redemption through
his blood, the forgiveness of sins, in accordance with the riches of God’s grace” (Bible Gateway,
2025). Our most basic instinct is to forgive, but it requires thought and effort, grounded in an
understanding of the Bible's core tenets.
Conclusion
Rite Aid was once one of the largest retail pharmaceutical companies in the U.S. Due to
inadequate oversight and a reluctance to innovate, the company faced bankruptcy multiple
times, resulting in store closures and job losses. Although numerous attempts to revive the
company were made, its closure of all stores was the outcome. Rite Aid’s failures serve as a
reminder that leadership must focus not only on generating revenue but also on expanding
revenue to adapt to changing environments and embrace technology. Finally, regular
monitoring of market trends and competitors should be practiced to gather insights that can be
used to advance the company.
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