MEMPHIS, Tenn., and DUBLIN, Ohio — Discount chain Fred’s Inc. has signed a primary supply agreement for pharmaceuticals with Cardinal Health Inc.The companies said Monday that the multiyear agreement makes Cardinal the primary supplier of both brand-name and generic drugs to Fred’s more than 360 in-store pharmacies and EIRIS Health Services.

Plans call for Fred’s and Cardinal to establish a strategic alliance to support the retailer’s initiative to drive rapid pharmacy growth, as well as build on a foundation of premier supply chain and asset management tools.

“Fred’s is enthusiastic about the partnership we have forged with Cardinal Health and the inventive solutions Cardinal will provide to support our strategic growth,” Fred’s chief executive officer Bruce Efird said in a statement. “This new alliance puts Fred’s in position to achieve our aggressive pharmacy growth goals in retail locations, clinical services and specialty pharmacy.”

Overall, Fred’s operates 704 discount general merchandise stores in 15 Southeastern states.

“We are excited about the opportunity to provide innovative services to support Fred’s strategies for growth, and we look forward to growing this alliance over time,” stated George Barrett, chairman and CEO of Cardinal Health.

Efird had alluded to the new pharmaceutical supply agreement last week in reporting Fred’s July sales results, noting that the deal will provide a substantial lift to the retailer’s pharmacy operation. He noted that during July Fred’s saw ongoing growth in pharmacy sales and prescription count, with the chain posting its best monthly comparable script growth of the year.

“Fred’s pharmacy department margins for July continued to be pressured by very significant vendor cost increases on both brand and generic drugs. This cost pressure in the pharmacy for the second quarter accounted for a drop of approximately 225 basis points in pharmacy department gross margin,” Efird explained. “However, on a positive note, the company has finalized a new pharmacy prime vendor distribution agreement. With this key strategic relationship, we have a new alliance that supports our rapid growth and addresses the issues experienced over the past year, while restoring Fred’s pharmacy department margin and significantly improving the profitability of its specialty pharmacy business.”