Much attention has been paid to the impact on the grocery market of Kroger’s proposed $24.6 billion acquisition of Albertsons Cos. If the deal passes muster with antitrust regulators, it will significantly strengthen Kroger’s position as the second-largest seller of food and related products in the United States. The importance of that development, however, shouldn’t be allowed to obscure another important result of the transaction — the expansion of a powerhouse in pharmacy and health care.
Prior to the divestitures that are expected to be required by the Federal Trade Commission before the deal can win approval, Kroger and Albertsons together operate 3,972 prescription counters within a network of 4,996 stores, sixth among U.S. pharmacy chains. Their combined prescription drug sales approach $18 billion a year, fourth behind Walgreens, CVS Health and Walmart. The enhanced scale will make Kroger more attractive to health plans seeking nationwide coverage for beneficiaries, and bolster its leverage in negotiations with pharmacy benefits managers and suppliers.The numbers only begin to tell the story. With a pharmacy base that spans the continental U.S., Kroger will be able to reach more patients in the communities where they live and work, support public health by building on the substantial contributions it made during the COVID pandemic, and extend the reach of its Food as Medicine initiative.
Kroger Health president Colleen Lindholz has kept the company in the vanguard of efforts to extend the scope of pharmacy practice. Speaking in her capacity as outgoing chair of the National Association of Chain Drug Stores, Lindholz laid out her vision last April at the group’s annual meeting.
“The future of health care is value-based, not volume-based,” she said. “I imagine a world where we fill fewer prescriptions per person and use food as medicine to prevent illness before it starts.
“The future of health care is personalized, not generalized. I imagine a world where data sharing across the health care ecosystem is the norm and people have easy access to their comprehensive health record.
“The future of health care is interprofessional, not siloed. I imagine a world where community-based health care providers are a part of every person’s health care team and recognized for their contributions to improving health outcomes.
“And the future of pharmacy is patient-driven, not prescription-driven. I imagine a world where pharmacists are universally recognized as accessible providers and the patient care they provide is fairly compensated.”
Lindholz’s determination to make Kroger a positive force in supporting the health and well-being of customers is shared by Rodney McMullen, the company’s chairman and chief executive officer.
“This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food …” he says. “We’ll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network, and grow our alternative profit businesses.”
The path toward achieving those goals will be fraught with difficulty. The announcement that the two largest traditional supermarket companies plan to merge has already sparked resistance from some members of Congress. Regulators have adopted a more aggressive stance under the Biden administration, with FTC chair Lina Khan expressing concerns about the effect that large concentrations of corporate power have on consumers. (She is currently spearheading an investigation into the business practices of PBMs.)
Kroger and Albertsons indicate that they are ready to divest as many as 650 stores in order to satisfy regulators, and may create a subsidiary consisting of between 100 and 375 locations to facilitate the process.
Despite the close scrutiny that the merger will no doubt receive, chances are that the deal, after adjustments in markets where both companies have a particularly strong presence, will come to fruition. It would be hard to argue that Kroger and Albertsons, with a combined grocery market share of about 15%, would have too much sway in a sector in which Walmart accounts for more than 20% of sales, and Amazon and other e-commerce companies are changing the way many people shop. When all is said and done, Kroger should emerge with greater capacity to meet the food and health care needs of consumers, and do so by leveraging the areas where those needs intersect.