Kroger to offload specialty pharmacy business to CarelonRx in strategic shift in healthcare services

The Kroger Co. (NYSE: KR) has announced a definitive agreement for the sale of its specialty pharmacy business to CarelonRx, a subsidiary of Elevance Health, marking a significant transaction in the healthcare industry. The deal is poised to reshape Kroger’s involvement in specialty pharmacy services, underscoring the company’s strategic evaluation of its assets to enhance patient care and business growth.

Colleen Lindholz, President of Kroger Health, expressed gratitude towards the management team and associates of Kroger Specialty Pharmacy for their dedication since 2012. Lindholz emphasized that the decision to sell comes from a thorough review of the company’s assets, concluding that the specialty pharmacy business would achieve its full potential under new ownership. “We are confident this transaction will help the business to grow and deliver better results for patients,” Lindholz stated, highlighting the priority of ensuring minimal disruption for associates and patients during the transition.

Kroger Specialty Pharmacy specializes in serving patients with chronic illnesses that require complex care, such as rheumatoid arthritis, growth hormone deficiencies, multiple sclerosis, and bleeding disorders. The service stands apart from Kroger’s in-store retail pharmacies and The Little Clinics, offering tailored education, side effect management, financial assistance, and personalized care to both patients and prescribers through its skilled clinicians and therapy programs.

The sale of Kroger Specialty Pharmacy to CarelonRx is subject to customary closing conditions, including regulatory approvals, and is anticipated to finalize in the second half of 2024. Importantly, the transaction is not expected to affect Kroger’s financial guidance for 2024, signaling a smooth integration of the specialty pharmacy into CarelonRx’s operations without significant impact on Kroger’s overall business strategy.

Advisory roles in the transaction are filled by RBC Capital Markets, LLC as the financial advisor, with Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP serving as legal advisors to Kroger. This strategic divestiture highlights the evolving landscape of the healthcare industry, where companies are increasingly focusing on specialization and patient-centered care to navigate the complexities of modern healthcare challenges.

This transaction between Kroger and CarelonRx represents a thoughtful approach to business strategy within the healthcare sector. By divesting its specialty pharmacy business, Kroger acknowledges the value of focusing on its core competencies while ensuring that its specialty pharmacy services can thrive under the stewardship of a company dedicated to healthcare solutions. For CarelonRx, acquiring Kroger’s specialty pharmacy business could bolster its offerings and reinforce its position in the market as a leader in comprehensive pharmacy care, especially for patients with complex healthcare needs.