Rochester Drug Cooperative files bankruptcy in wake of opioid lawsuits

By Caroline Salls

Pittsburgh, March 12 – Rochester Drug Cooperative, Inc. filed Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the Western District of New York.

Interim chief executive officer and chief financial officer John T. Kinney said in a statement filed with the court that Rochester Drug has been the subject of numerous pending civil and criminal lawsuits filed by various government authorities and private parties in state, local and federal courts around the country seeking damages against the company as a former distributor of opioid-related medications.

Some of the suits filed by government authorities have resulted in Rochester Drug paying significant fines and implementing costly compliance programs, Kinney said.

During the past several months, Kinney said the company’s deteriorating liquidity situation has prevented it from making timely payments to vendors and it has had to forgo rebates and other discounts that have typically generated at least two-thirds of its gross profit.

Kinney said a decision by Rochester Drug insurer Hiscox Insurance Co., Inc. to disclaim coverage under a liability policy has required the company to self-fund its attorneys’ fees and defense costs in the pending lawsuits and has further hurt liquidity.

In addition, Kinney said Rochester Drug’s maximum revolving commitment under its credit agreement was reduced on May 31, 2019 and Sept. 9, 2019.

Since Dec. 16, the company has been unable to purchase sufficient levels of inventory using its existing liquidity, further exacerbating the declining sales and a loss of customers.

Kinney said Rochester Drug files bankruptcy to conclude the consolidation of its operations at its Rochester facility, to operate its business while marketing its assets for sale and to address its financial difficulties for the benefit of its creditors.

The company is seeking court approval to use the cash collateral of its pre-bankruptcy secured parties and arranger, swingline lender agent and letter-of-credit issuer M&T bank for working capital payments and to pay administrative costs and expenses.

According to court documents, Rochester Drug has $50 million to $100 million in assets and $100 million to $500 million in debt.

The largest unsecured creditors are the United States of America, in care of the New York U.S. Attorney’s office, with a $10 million settlement claim; Gilead Sciences, Inc. of Foster City, Calif., with a $7.69 million trade claim; GlaxoSmithKline of Philadelphia, with a $6.03 million trade claim; Merck & Co., Inc. of Kenilworth, N.J., with a $5.02 million trade claim; Allergan Sales LLC of Sunrise, Fla., with a $4.95 million trade claim; Sanofi Aventis US LLC of Bridgewater, N.J., with a $3.98 million trade claim; Bristol-Myers Squibb Co. of New York, with a $3.44 million trade claim; AstraZeneca LP of Wilmington, Del., with a $2.55 million trade claim; Janssen Pharmaceutica, LP of Titusville, N.J., with a $2.4 million trade claim; and Boehringer Ingelheim Pharm Inc. of Ridgefield, Conn., with a $2.28 million trade claim.

Bond, Schoeneck & King, PLLC is representing Rochester Drug in its Chapter 11 proceedings.

The company is a Rochester, N.Y.-based health care distributor. The Chapter 11 case number is 20-20230.

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