Kroger to create new specialty pharmacy division

The Kroger Co. is expanding its position in the pharmacy market.



Axium Pharmacy Holdings Inc., a wholly-owned subsidiary of Kroger, will acquire Orlando, Florida-based specialty pharmacy retailer ModernHealth. Financial terms of the agreement were not disclosed.



The deal will create a combined specialty pharmacy that will operate as a wholly-owned Kroger subsidiary.



"This strategic investment will accelerate the growth of Kroger's health and wellness business," said Robert Clark, Kroger's senior VP of merchandising. "Expanding our specialty pharmacy services will provide our customers with greater access to medications we don't currently dispense and access to additional services without going to another pharmacy."



ModernHealth employs approximately 500 associates who provide comprehensive specialty pharmacy services, including IV-based therapies for autoimmune and primary immune deficiency diseases, as well as comprehensive medication management for several chronic diseases and medical conditions.



Headquartered in Lake Mary, Florida, Axium employs 300 associates who work at locations in California, Puerto Rico, Tennessee and Mississippi. Headquarters for the combined specialty pharmacy will be located in a new facility under construction in Lake Mary, Florida, with continued support from existing facility locations. The combined organization will employ approximately 800 associates and will continue to operate as an independent company within Kroger.



Don Meffe, CEO of ModernHealth, will lead the new combined business as CEO after close. Axium's CEO Mark Montgomery will help ensure a smooth transition after the merger closes.



Kroger currently operates 2,230 pharmacy locations and 195 The Little Clinic locations. Axium, which became a wholly-owned subsidiary of Kroger in 2012, is an independent provider of specialty pharmacy services for patients with complex chronic conditions.



Through the merger, Kroger seeks to improve purchasing efficiencies and allow the companies to combine each other's payer strategies to bring down costs. The combination will also allow Kroger's specialty pharmacy business to expand into new territories in the West and Southwestern U.S., and expand offerings to other disease states.



"Our partnership with Kroger and Axium will enable us to provide more customers in more places with the critical specialty pharmacy services they need," said Don Meffe, ModernHEALTH's CEO. "We believe this relationship will create efficiencies, accelerate growth in the high-growth specialty pharmacy market, and improve the overall quality of our combined healthcare services. We are also pleased that this partnership means our business headquarters will remain and grow in Orlando."



The transaction is subject to certain regulatory approvals, including from the FTC.