Dietrich Knauth
NEW YORK (Reuters) – MedImpact’s attempt to recoup about $200 million related to its purchase of Rite Aid’s (NYSE:) pharmacy unit fell apart after a judge ruled on Monday that the company assumed Elixir’s debts when it bought the company.
U.S. Bankruptcy Judge Michael Kaplan said at a hearing in Trenton, New Jersey, that MedImpact was well aware that Elixir had been operating with a negative cash balance of about $200 million for about two years due to payments reimbursements it owes to pharmacies, including CVS Health (NYSE:) and Walgreens Boots Alliance (NASDAQ:)
Kaplan previously approved MedImpact’s $575 million purchase of Elixir and ruled that the sale agreement transferred those debts to the buyer.
Rite Aid, one of the largest U.S. pharmacy retailers, filed for bankruptcy in October, citing high debt, declining revenue, increased competition and litigation over its role in the U.S. opioid crisis as factors that led to its bankruptcy.
The dispute with pharmacy benefits manager MedImpact threatened to derail Rite Aid’s overall restructuring plan, which is expected to be approved at a final court hearing Thursday, Kaplan said.
The judge noted that Rite Aid had no extra money and said MedImpact had no reason to believe that Rite Aid agreed to cover Elixir’s old debts at a time when it was desperately trying to raise money and rid itself of its own liabilities.
“It’s no secret that money is tight in this case and there’s little wiggle room, let alone over $200 million in wiggle room,” Kaplan said.
Rite Aid’s bankruptcy plan would cut $2 billion in debt and provide $47.5 million to junior creditors, including individuals and local governments who have sued the company for allegedly ignoring possible warning signs and illegally writing prescriptions for addictive opioid painkillers. .