Kroger signs definitive agreement to sell specialty pharmacy business

Kroger Co. has signed a definitive agreement to sell its specialty pharmacy business.

Downtown Cincinnati-based Kroger (NYSE: KR), the nation’s largest operator of traditional supermarkets, plans to sell the business to CarelonRx, a Morristown, N.J.-based pharmacy benefit manager that’s a subsidiary of Indianapolis-based Elevance Health.

The specialty pharmacy business is separate from Kroger’s in-store retail pharmacies and The Little Clinics, neither of which is part of the transaction.

Kroger’s specialty pharmacy serves patients with chronic illnesses that require complex care. Those illnesses include rheumatoid arthritis, growth hormone deficiencies, multiple sclerosis and bleeding disorders. Patients and prescribers work with skilled clinicians and access therapy programs through the specialty pharmacy to gain education, resources and counseling. They can also get help with side-effect management, financial assistance and personalized care.

Kroger has had the specialty pharmacy business since 2012.

"As part of our regular review of assets, it became clear that our strong specialty pharmacy business unit will better meet its full potential outside of our business,” Colleen Lindholz, president of Kroger Health, said in a news release. “One of the most important considerations was continued operations to ensure minimal disruption to our associates and patients. We are confident this transaction will help the business to grow and deliver better results for patients.”

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Courtesy of Kroger Health

Kroger expects the transaction to close in the second half of 2024. It does not anticipate it having any effect on the company’s financial guidance.

The sale comes as Kroger continues to work to complete its planned $24.6 billion acquisition of Boise, Idaho-based Albertsons Cos. Inc. The Federal Trade Commission has sued in federal court to block the sale and resulting merger due to antitrust concerns. Albertsons is the nation's second-largest operator of traditional supermarkets. Kroger continues to expect the transaction to be completed in August. A federal court hearing in Oregon is scheduled to begin Aug. 26.

The specialty pharmacy is a small part of Kroger’s overall pharmacy business. But it recorded goodwill value of $243 million for the specialty pharmacy business at the end of 2022. That amount plus the tangible assets equals the enterprise value of the business unit.

Overall, the pharmacy business has been a key contributor to Kroger’s results.

“Health & Wellness delivered a better-than-expected performance in 2023, and we are excited about the momentum in this area of our business,” CEO Rodney McMullen said on a conference call March 7 to discuss Kroger’s fourth-quarter earnings. “As we find in other areas of our ecosystem, customers who are retail pharmacy patients are more loyal to Kroger than non-pharmacy customers.”

The company’s retail pharmacy business is transforming, “which presents a significant opportunity for us,” McMullen said.

Kroger is going after those opportunities by providing strong patient experiences and by raising awareness to its non-pharmacy customers to attract new patients.

“Many of our customers are not familiar with Kroger's retail pharmacy operations,” McMullen said. “We are working to convert these customers by increasing our marketing and adding in-store engagement and utilizing our data sciences to help build awareness.”