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Kroger plans to sell its specialty pharmacy business to insurer Elevance's subsidiary CarelonRx.

Why it matters: Elevance Health (fka Anthem) continues to build its specialty pharmacy presence in a bid to reduce its reliance on top dog CVS Health.

Financial details weren't disclosed and the deal is expected to close in 2H24.

Kroger's in-store retail pharmacies and immediate care clinics are not included in the deal.

Catch up quick: As of 2022, Kroger Specialty Pharmacy generated about $3.9 billion in revenue and claimed 2% of the overall market.

Meanwhile, Elevance has been busy in the space. It launched CarelonRx Pharmacy in 2022, acquired BioPlus Specialty Pharmacy in 2023 and scooped up Paragon Healthcare for $1 billion-plus earlier this year.

Those moves followed Elevance's joint investment with Humana on new PBM tech DomaniRx in 2021.

What they're saying: Kroger Health president Colleen Lindholz said that after a review of assets, Kroger decided the unit would "better meet its full potential outside of our business," per the Wall Street Journal.

The intrigue: Kroger is working through a $25 billion proposed merger with rival Albertsons, currently being challenged by the FTC.

The companies promised to sell some 400 stores, plus distribution centers and some private label brands, to C&S Wholesale Grocers, which the FTC says is not enough to offset competitive concerns.

What we're watching: With FTC battle lines drawn, will Kroger pitch this as a further divestment effort to appease the regulators?

State of play: Specialty pharmacies keep finding themselves in the news.

Earlier this month, Walgreens CEO Tim Wentworth put the kibosh on Bloomberg's report that it's exploring a $4 billion-plus sale of its specialty pharmacy Shields Health.

"Shields is a terrific asset, and I love the fact that we've got it. And so from that standpoint, whatever you may have read, don't believe it. We are not announcing we're selling Shields," Wentworth said.

Privately held Senderra specialty pharmacy — the 12th largest specialty pharmacy in 2022, per Drug Channels — was slated to come back to market last year.

In 2020, Senderra got to the 1-yard line with Elevance before deal talks fell apart, in part due to executive turnover at Elevance's PBM.

Kroger offloads specialty pharmacy to Elevance

Elevance Health continues to build its specialty pharmacy presence

Illustration of a price tag shaped and colored like a prescription pill bottle

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Kroger offloads specialty pharmacy to Elevance

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