A Rite Aid Corp. shareholder on March 20 filed a securities class action lawsuit against the company as well as former and current executives, alleging Rite Aid has given false or misleading statements regarding its alleged distribution of unlawful opioid prescriptions.
David Holland, on behalf of himself and other Rite Aid shareholders, filed the 50-page suit in U.S. District Court for the Northern District of Ohio. Rite Aid Corp., former CEOs John T. Standley and Heyward Donigan, former CFO Darren Karst and current CFO Matthew C. Schroeder are named as defendants.
The lawsuit comes about a week after the Department of Justice sued Rite Aid under the False Claims Act, accusing the pharmacy chain of missing “red flags” as it illegally filled hundreds of thousands of prescriptions for controlled substances, including opioids. The Department of Justice said Rite Aid repeatedly filled prescriptions from May 2014 to June 2019 that were medically unnecessary, for off-label use, or not issued in the usual course of professional practice.
Related: U.S. Sues Rite Aid for Missing Opioid Red Flags
Holland’s lawsuit outlines disclosure statements Rite Aid has made over the years in annual reports filed with the U.S. Securities and Exchange Commission. The pharmacy acknowledged it faced risks related to improperly filling prescriptions and that is was subject to the False Claims Act but it “did not disclose that it was at higher risk of regulatory action and litigation as a result of systematically and improperly filling unnecessary prescriptions,” according to the lawsuit.
The suit alleges Rite Aid’s disclosures were “materially false and/or misleading” or it failed to disclose that, “Until at least June 2019, Rite Aid filled at least hundreds of thousands of unlawful prescriptions for controlled substances that lacked a legitimate medical purpose, including for potentially lethal opioids such as oxycodone and fentanyl,” and that the pharmacy filled the prescriptions “despite clear ‘red flags’ that indicated that the prescriptions were unlawful.”
Furthermore, Rite Aid ignored evidence and deleted internal notes regarding suspicious prescribers, violated the Controlled Substances Act, and violated the False Claims Act – putting the company at risk of federal prosecution, the lawsuit alleges. In its 2021 annual report, Rite Aid said it remains a defendant in multidistrict litigation over the distribution of opioids, and faces “numerous state court proceedings by any array of plaintiffs, including state Attorneys General, counties, cities, municipalities, Native American tribes, hospitals, third-party payors, and individuals. The company has also received subpoenas, civil investigative demands, and other requests relating to opioid matters from the Department of Justice and several state Attorneys General,” according to the lawsuit.
Following the DOJ’s announcement on March 13, the suit says Rite Aid stock fell nearly 19% on March 14 to $2.66, and it fell nearly 4% on March 15.
The case is David Holland v Rite Aid Corp et al, U.S. District Court, Northern District of Ohio, 1:23-cv-00589.
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