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Kroger offloads specialty pharmacy to Elevance

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Mar 19, 2024
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Illustration: Annelise Capossela/Axios

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.

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.
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