Following negative fourth quarter and FY 2023 results, Rite-Aid has mentioned a few cures moving forward, but all attention should be on the turnaround program, the company said.
The pharmacy reported a net loss of $241.3 million, an adjusted net loss of $68.2 million, and an adjusted EBITDA of $128.6 million for the fourth quarter, resulting in total adjusted EBITDA of $429.2 million for the fiscal year. For all of FY 2023, Rite-Aid, headquartered in Camp HIll, Pa., is looking at $749.9 million in net losses, which comes out to an adjusted net loss of $174.3 million and an adjusted EBITDA loss of $429.2 million.
Store closures, a total of 145 over the last year, and weakening COVID-19 vaccine and testing sales were the main culprits in the dismal financial numbers. Deepening the company’s troubles are bouts with lawsuits. Rite Aid and CVS were involved in a case accusing both of using a doctor’s name for prescription orders without the doctor’s approval. Rite Aid pharmacists also have been involved in a suit where they allegedly ignored guidance given regarding the distribution of controlled substances. Rite Aid is accused of violating the False Claims Act by submitting false subscription claims to Medicare, Medicaid and other government healthcare programs.
With the fourth quarter and all of FY 2023 in the background, the company will focus efforts on a turnaround program that will include:
- Leveraging a highly prescriptive and programmatic approach to deliver results
- Applying rapid cadence and analytical rigor and engaging associates across the enterprise
- Upleveling talent and abilities to bring in new discipline and expertise
- Focusing on driving performance acceleration
More specifically, Rite Aid wants to see a reduction in abandoned scripts through messaging and in-store execution, improved retention from acquisition efforts, an elevation in price management responsiveness, promo optimization, and product mix, more shelf-space efficiency, an increased penetration in owned brands, and targeted negotiations with suppliers. Rite Aid also wants to lean on generic drug purchases.
The fourth quarter financial news was not all bad for Rite Aid, as revenues in the retail pharmacy segment increased 8.2% vs. fourth quarter 2022 and same store sales were up 8.9%. The extra week helped the fourth quarter sales.
“Our fourth quarter results were at the higher end of our guidance and above consensus, driven by encouraging results in retail pharmacy and year-over-year improvement for the quarter at Elixir,” said Elizabeth “Busy” Burr, interim chief executive officer. “We are making progress in our turnaround program to drive performance acceleration that we expect will help mitigate fiscal 2024 challenges related to reimbursement, COVID headwinds and enrollment at Elixir, and to drive meaningful Adjusted EBITDA growth in fiscal 2025 and 2026.”
Elixir is Rite Aid’s pharmacy benefit management subsidiary, and the company wants to scale it to include:
- Improved procurement economics, specifically through contributions from plan design administration, formulary and rebate management services, and network performance
- Optimizing specialty and mail pharmacies with expanded access to networks and additional limited distribution network drugs
- Continued focus on client retention through improved reporting and pricing competitiveness
- Building out the top of the sales funnel by expanding relationships among brokers, TPAs and consultants
- Offering a new diabetes clinical solution, enhanced rebate reconciliation processes, and formulary consultations
- Relaunching claims adjudication software
Unfortunately it looks like the bleeding will continue in FY 2024, where the company is projecting losses that could be as much as $466 million.
