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Search “Rite Aid apocalypse” on certain online forums and you’ll find a treasury of shocking artifacts the pharmacy chain’s shoppers have discovered over the years on its inimitable industrial shelving: 1990s computer games, VHS movies, even audio cassette players. “A lot of the merchandise is probably stuff I stocked when I worked there back in 2004,” jokes Matthew Rieger, a Seattle engineer and longtime holder of now-worthless Rite Aid stock. More recent efforts to clear the stores of ancient inventory, Rieger said, “almost made it worse, because then the shelves were just empty, and your eyes just immediately focus on those stark linoleum floors.”
For more than a decade now, Rite Aid and the nation’s other chain pharmacies have sat at the intersection of two existential apocalypses. The first is the so-called “retail apocalypse,” wherein virtually all the chain retailers of the early 21st century—from Payless ShoeSource and Toys ‘R’ Us to Barneys and Mitchell Gold + Bob Williams—were vanquished by the dual scourge of Amazon Prime and private equity looting.
And then there’s “Pharmageddon,” a wildcat strike movement of disgruntled pharmacists sick and tired of being worked to the bone, only to turn over ever larger cuts of their emaciated profit margins to the middlemen that control the pharmaceutical supply chain. If you’d bought shares in the world’s largest pharmacy chain, Walgreens Boots Alliance, 25 years ago, you’d have … about the same amount of money today, even as the cost of Enbrel has risen 701 percent. Fred’s Pharmacy, a Memphis drugstore chain that once boasted well over 500 locations, liquidated in 2019; CVS is in the midst of a three-year plan to close nearly a thousand stores. The phrase “pharmacy desert” is now a thing. Prescription drugs are more expensive than ever, but pharmacists have never made less money selling them.
And yet there has always been something extra about Rite Aid’s problems, something that still strikes Rieger as gratuitous, quite possibly even insidious. “I guess I originally invested in Rite Aid because it seemed like investing in Nickelback. Like everyone hates on Nickelback because at one point it just became cool to hate on them, but the reality is they didn’t sell 50 million albums because everyone hated them.”
In the end, Nickelback turned out to be the wrong late-’90s cringe-rock analogy. If anything, Rite Aid turned out more like Smash Mouth, whose lead singer died last year of liver failure following a decade spent humiliating himself in a series of head-scratching public performances, including the infamous Sturgis Motorcycle COVID superspreader event of August 2020. Rite Aid has followed a similarly self-destructive arc since Rieger first began accumulating shares seven years ago—and as with the Smash Mouth guy and every other fallen chart-topper, a degree of addictive drug dependence that tends to rob existence of its meaning.
October 15, the day Rite Aid finally filed for bankruptcy protection, happened to be Rieger’s 37th birthday. He was too beaten down to feel any relief, though when his friends came over that weekend for beers he remembered how he’d once literally required his friends to buy any beer they consumed on the premises at Rite Aid, receipts ready for inspection. The memory filled him with dull rage, not for the $100,000 he’d lost betting that the stupid pharmacy chain was undervalued, but for the excruciating waste of time and energy it had been: the weeks spent digging into financial reports, corresponding with investor relations guys, composing open letters to management on LinkedIn, comparing notes with his fellow retail investors.
In the end, it was an exercise in complete futility. “I learned a lot about corporate governance,” Rieger concedes. “Like you think MBAs are algorithmically going to try to maximize shareholder value. But really they just look out for themselves and other MBAs who are playing the same con they are. They do not share your interests.”
THE STORY BEGINS ON REDDIT, where Rieger spent a lot of time when he was in Iraq supervising construction projects for the U.S. Army between 2015 and 2017. “When you’re deployed,” he said, “your bank balance just grows because you don’t have any expenses, there’s nothing to buy, and combat pay isn’t even taxed.” Rieger began frequenting a relatively new subreddit called Wallstreetbets, where a group of value investors was touting a fail-safe trade in the sub-$4 shares of the drug chain for which he’d worked throughout high school. At some point, they would start calling themselves the RAD-tards, after the pharmacy chain’s ticker symbol, RAD. Later, after the Wallstreetbets crowd moved on, a few hundred RAD-tards would gather at a “Rite Aid is RAD” Facebook page.
Rieger hadn’t had the stomach to buy BP when its shares shrank by half after the 2010 Deepwater Horizon spill, but he increasingly liked the idea of hedging his political values by investing in stocks that capitalized on their compromise. As someone who was “generally opposed to corporate concentration” in the midst of the biggest year for mergers and acquisitions in history, he found himself gravitating toward so-called “merger arbitrage” plays, and Rite Aid, whose mega-merger with Walgreens was set to close on July 7 pending a Federal Trade Commission (FTC) review, seemed like a no-brainer. He didn’t like that the deal stood to whittle the retail pharmacy industry down to just two big national players, but only two of the agency’s five commissioner seats were filled, and Republican Maureen Ohlhausen seemed to disagree with him. That deadlock all but guaranteed that the merger would sail through, more than doubling Rite Aid’s value in the process. Around March 2017, Rieger made the first of what would become $100,000 worth of hopeless RAD purchases.
Then, eight days before the deadline, Rite Aid and Walgreens abruptly called the deal off. No one ever definitively figured out why. In public statements, the retailers blamed the FTC, even though the agency’s Bureau of Competition almost immediately issued an unusual statement all but denying they had anything to do with it. RAD plunged 29 percent on the news.
That wasn’t the worst part for the RAD-tards, though. In lieu of a full merger, Rite Aid agreed to sell Walgreens just over 1,900 of its roughly 4,500 stores, along with three of its warehouses, for $4.4 billion, a little over one-quarter of the original $17 billion purchase price. The new agreement left Rite Aid with a much smaller footprint—and negotiating leverage—than its two major rivals Walgreens and CVS. (Democratic commissioner Terrell McSweeny voiced this concern in a statement on the deal.)
For more than a decade now, Rite Aid and the nation’s other chain pharmacies have sat at the intersection of two existential apocalypses.
By mid-July, the RAD-tards would learn from an insider-trading indictment related to the deal that Rite Aid CEO John Standley was negotiating with his old mentor Bob Miller to merge Rite Aid with the supermarket chain Albertsons, which Miller helmed on behalf of its private equity owners. Miller had been Standley’s boss at the supermarket chain Fred Meyer in the 1990s, and tapped Standley to join Rite Aid when the private equity mogul Leonard Green appointed him head of a “turnaround team” charged with cleaning house after a major accounting scandal back in 1999 for which RAD founder Alex Grass’s son Martin Grass ultimately served seven years in prison. As part of the Albertsons deal, Standley would become CEO of the newly merged company.
RAD shareholders would get only a minority stake in the combined company, while Cerberus and the other private equity firms that controlled Albertsons would get at least 70 percent of the shares. The ratio reflected the two chains’ respective revenues, but failed to take into account Albertsons’ eye-popping $11.9 billion debt load and more than $25 billion in outstanding obligations, the whole reason the grocery chain had been unable to interest underwriters in a straight IPO of its shares. Shareholder activists—namely a longtime RADfly and Seeking Alpha contributor named Steve Krol, whom the RAD-tards view as a patron saint—howled about conflicts of interest, and proxy advisory firms Institutional Shareholder Services and Glass Lewis ultimately recommended against approving the transaction. The deal was shelved; the RAD-tards viewed it as a huge victory. Rieger bought more stock.
But he also began to wonder what other ways Standley, who made $110 million during his 20-year on-and-off (but mostly on) tenure at Rite Aid even as the stock lost 90 percent of its value, had sold them out. Standley, such an underachiever in his youth that his father filled out his college applications, suffered perhaps his biggest fiasco in his involvement with the “pharmacy benefit management” business that secretly controls the mechanisms of drug reimbursement on behalf of the insurance industry. Back in 1998, Rite Aid had spent $1.5 billion buying what was then the nation’s second-biggest PBM, a longtime McKesson subsidiary called PCS Health Systems. But Miller and Standley’s turnaround team sold PCS at a $500 million loss to a little company founded by a longtime business partner of then-GOP presidential candidate George W. Bush, who realized his private equity backer J.H. Whitney a gain of 150 times its initial investment when he sold the company to Caremark Rx for $7.5 billion just three years later.
No one can fault Standley and company for failing to predict that the PBM industry would, thanks largely to Bush’s friend’s aggressive lobbying on the Medicare Modernization Act, ascend to dominate the drug business as it does today. But by 2006, its rival CVS recognized the increasing control PBMs exerted over pharmacy margins, acquiring Caremark for $21 billion. Meanwhile, that same year Rite Aid blew $3.4 billion buying nearly 2,000 Brooks and Eckerd stores.
Nine years later, Standley attempted to undo the mistake by buying Rite Aid a PBM of its own, paying $2 billion for a small company called EnvisionRx that the Texas Pacific Group had bought less than two years earlier for $800 million. Within months of the purchase, an anonymous whistleblower sued EnvisionRx, alleging the PBM had orchestrated a massive fraud and kickback scheme that was simultaneously defrauding the government of as much as $151 million a year, overcharging “mom-and-pop” pharmacies, engaging in kickback schemes with TPG-owned hospitals and elder care facilities, and systematically bypassing customary controls to reimburse at least $12 million a year in drugs prescribed by doctors and nurses who had been sanctioned for improper prescribing. Soon after, EnvisionRx showed up in a Senate investigation into the rogue fentanyl spray manufacturer Insys, as one of the PBMs whose “prior authorization” protocols had been duped by the opioid maker’s call center. The degree to which EnvisionRx’s business relied on kickbacks and dubious providers is unclear, but the company’s subscriber base plunged from over 23 million to just about two million under Standley’s stewardship.
There were other signs, too, that Rite Aid might be relying on dubious practices to pay the bills. While CVS and Walgreens began cracking down on opioid prescriptions around 2012, Rite Aid was so eager to lap up the business that one of its government affairs officials literally admonished a pharmacist who flagged a clinic as a potential “pill mill” in a company database by deleting it and responding: “Remember to always be very cautious of what is put in writing.” In one month of 2017 alone, Rite Aid filled 1,000 prescriptions for a telltale “Holy Trinity” of meds with virtually no legitimate medical purpose that pharmacists are trained to refuse to fill, and the chain continued filling dubious prescriptions suspected to originate from cash-only pill mills as late as 2019, according to a whistleblower lawsuit filed by the Justice Department in March.
The board finally ousted Standley in March 2019, not long after he pulled one final inexplicable move and signed a new ten-year contract with McKesson, a notorious $276 billion drug wholesaler. “There’s a saying in the business that if you think you’re smarter than McKesson, you’re stupid,” says pharmacist and consultant Luke Slindee. The deal baffled the RAD-tards, because Walgreens had given Rite Aid the option to piggyback on its superior wholesale contracts to obtain lower prices for ten years as a kind of consolation prize for not buying the company.
Mere weeks after his yearlong noncompete expired in August 2020, Standley found a new home as CEO of Walgreens, where he would make another $19.4 million or so before being terminated without cause in November 2022. In January 2023, Chain Drug Review honored him with a “Lifetime Achievement Award,” in a story that led with a throwaway line about how Standley’s road had been “long and winding, but the direction was always upward.” The RAD-tards were agape.
“Has everyone gone nuts?” wondered a RAD-tard in California named Emilio. “Am I missing something??”
BY THAT POINT, RITE AID WAS ON ITS THIRD CEO in four years, and the RAD-tards were even starting to miss Standley. Rieger had initially been optimistic about his replacement, a former CEO of an upstart health care price transparency app named Heyward Donigan, “mostly because she’s a woman, and studies have shown that women in leadership positions make better decisions and are more collaborative than men,” he remembers.
Somewhat understandably, Donigan fixated on Rite Aid’s ghastly aesthetics, holding a conference call a few months into her tenure to unveil an ambitious project to renovate and rebrand Rite Aid’s retail outlets into what she called “stores of the future.” The date of the call was March 16, 2020, right at the beginning of the COVID lockdowns. In percentage terms, it was the worst day the U.S. stock market had suffered since Black Monday 1987. But Rite Aid stock, which had fallen by nearly half the week earlier, rallied. The RAD-tards were full of hope at the very thought that “someone was at least trying to do something” to rescue their investment, as Rieger puts it.
The “stores of the future” were supposed to reimagine the pharmacy as some kind of Sephora of wellness, but it would cost $8 million a store, making “the future” a $16 billion proposition that Rite Aid, which was barely generating enough cash to service its debts, could not even remotely afford. So instead the company focused on renovating a handful of locations—first it was 75, then 50, then ten—while spending $700 million updating the signage. Even this minimalist makeover was cursed: Rite Aid’s private equity–owned marketing firm, PureRED Creative, had designed the retailer a new logo using a proprietary font, Neutraface, that it was contractually prohibited from using for a logo, according to a lawsuit the font’s owner filed last year that remains ongoing.
In a shareholder suit compiled with input from numerous confidential witnesses who worked for the company throughout the pandemic, Hayward’s tenure at Rite Aid is described by a regional operations leader as “utter chaos.” Perhaps most crucially, in a two-year period during which notoriously unprofitable companies like Carvana and Uber issued nearly a trillion dollars in junk debt at rock-bottom rates, Donigan failed to refinance Rite Aid’s punishing debt load. She was sacked at the start of 2023, having made around $27 million in her two and a half years.
Then came, at a salary of $300,000 a month all in cash, Elizabeth “Busy” Burr—the nickname alone was enough to make Rieger feel like the board was personally insulting his intelligence—a self-described “corporate anarchist” with a résumé high on TED-vibe job titles. The RAD-tards quickly unearthed a 2021 tweet Burr had written about how “pumped, psyched, stoked” she’d been to join the board of the failed Silicon Valley Bank. From Rieger’s perspective, Burr’s sum total of work output was to repeat the phrase “sense of urgency” in two quarterly earnings calls while steering the company toward bankruptcy court.
A Florida retiree named Frank posted his retirement account statements showing the $250,000 he’d lost holding on to his RAD shares, and it hit Rieger that $250,000 was a mere three weeks’ paycheck for “Busy” Burr. “Think about every day you’ve given over to your job, every deadline you ever stayed up late to meet,” he says. “She’s taking home all the money most of us will ever make in our entire lives in this mortal coil, in nine months on the job.”
A NOVELTY OF THE WORLD WALLSTREETBETS briefly created during the COVID lockdowns was that a bankruptcy filing could and often did trigger a run-up in a company’s stock. Hertz shares soared more than 2,000 percent while the rental car agency reorganized its debts, and the trucking company Yellow experienced a meme stock rally after its own bankruptcy filing, even though the company explicitly said it would be liquidating. But by the time Rite Aid filed for bankruptcy protection in New Jersey on October 15, Rieger knew there’d be no rally for the RAD-tards. Too many meme stock speculators had already been burned.
Two years earlier, he had learned through one of his many hopeless exchanges with the RAD investor relations department that Rite Aid had, against all odds, covenants in all its credit agreements that forbade the company from buying back stock, no matter how diabolically low it sank. This seemed sensible on its face; Rieger generally despised the ubiquitous practice of squandering much-needed cash on corporate stock buybacks. But in Rite Aid’s case, given that it was still paying folks like Heyward Donigan and John Standley a substantial portion of their paychecks in stock whose short interest was regularly 30 percent or higher, periodic buybacks would have actually been a prudent move, if only to fend off the short-sellers. The RAD-tards wondered if the inability to do stock buybacks was the problem all along: that the only way shareholders could ever “incentivize” the C-suite to care about the stock price was by giving them the power to engage in routine stock manipulation.
On Facebook, the RAD-tards discussed the bankruptcy. They debated whether there was any hope for recovering some of their losses if Walgreens or Kroger decided to buy the stores; after all, Rite Aid’s revenues had been consistently growing, and it had not yet defaulted on its debts. But as an adversary case Rite Aid filed against McKesson as part of the bankruptcy illustrates, the gloves had come off. When RAD had told its exclusive supplier of 20 years it was preparing for a bankruptcy filing, according to the complaint, the wholesaler threatened to cut off the retailer entirely if it did not fork over an immediate $700 million.
That’s how the powerful operate in bankruptcy court, and it’s why workers and families of overdose victims and class action lawsuit plaintiffs and other nobodies like the RAD-tards would invariably get wiped out. “It’s a big club, and you ain’t in it,” Rieger wrote on LinkedIn, quoting George Carlin. “The American oligarchy marches on.”
