Kroger-Albertsons: The pharmacy question

Will the Kroger-Albertsons mega-merger require a pharmacy prescription?

The California attorney general thinks it might. According to a Reuters report, the state AG office is investigating whether the $24.6 billion deal—in which The Kroger Co. plans  to acquire Albertsons Cos.—would create “pharmacy deserts,” or communities with a dearth of access to pharmacy services.

The AG’s office didn’t respond to a request for comment from Winsight Grocery Business. But the Reuters story said California AG Rob Bonta is including pharmacies in the state’s antitrust review of the transaction.

Heretofore, not much hubbub has been made over the proposed merger’s impact on the pharmacy retail arena. And it’s not certain how closely regulators are scrutinizing the pharmacy dimension of the deal’s possible impact on the grocery retail market, which of course includes making sure that some communities don’t end up becoming “food deserts.”

Any loss of pharmacies from Kroger-Albertsons would conceivably come from store closings or divestitures, with the latter resulting from the purchasers of divested stores not opting to maintain a pharmacy business and selling the customer prescription files. In announcing the merger last fall, Kroger and Albertsons projected that they’d need to divest 100 to 375 stores to gain regulatory clearance for the deal, which includes a ceiling of 650 store divestitures. Stores would be divested through direct sales to other operators and/or via a new spinoff company dubbed SpinCo.

Related:Southeastern Grocers to divest pharmacy assets to CVS, Walgreens

In an interview this week with WGB, Kroger Chairman and CEO Rodney McMullen said no stores would be closed as a result of the deal and potential suitors for stores are being carefully evaluated to ensure they’re financially sound and would be solid grocery retailers. Ostensibly, that would include pharmacies if the divested stores house a prescription drug counter.

Indeed, Kroger told WGB that pharmacies would remain part of both acquired and divested stores as it wades through the review process with the Federal Trade Commission.

“Kroger will not close any stores, distribution centers or manufacturing facilities as a result of this merger, and that includes pharmacies in our stores," a Kroger spokesperson said in an email. "Post-transaction, Kroger will operate the pharmacies that are part of the Albertsons’ stores that it acquires. We are working with the Federal Trade Commission to develop a thoughtful divestiture plan, either through selling stores to strong buyers or by creating a stand-alone independent company. To the extent stores are divested or part of the stand-alone company, the pharmacies would go with the divested store to its new owner and be operated by that new owner."

Related:Kroger’s Rodney McMullen upbeat on Albertsons mega-merger’s potential

Fallout from Aldi’s acquisition of Southeastern Grocers’ approximately 400 Winn-Dixie and Harveys stores, unveiled last week, had cast some uncertainty over what may happen on the pharmacy side if the Kroger-Albertsons merger goes through. Days after the Aldi deal was announced, news surfaced that SEG was selling the prescription files for its Winn-Dixie and Harveys pharmacies to CVS and Walgreens. That amounts to several hundred SEG pharmacy locations going away, since Aldi doesn’t operate pharmacies.

Kroger now operates 2,254 pharmacies, while Albertsons has 1,726 pharmacies. Their 3,980 pharmacies would make the merged company the nation’s fifth-largest pharmacy retailer by locations. There’s certainly no question about Kroger's commitment to pharmacy. In fact, this week, the Tennessee Department of Economic and Community Development announced that Kroger plans to build a new central-fill pharmacy, its fifth such location nationwide, in Cleveland, Tennessee. The 50,000-square-foot facility would support Kroger Co. pharmacies across the Southeast.

Related:Does Aldi-Southeastern Grocers deal augur more supermarket consolidation?

*Editor's Note: Article updated with comment from Kroger.