Kroger Gobbles Up ModernHEALTH

Specialty pharmacy deals are usually few and far between. But this year, we’ve seen six deals announced in the first seven months. The most recent is from Kroger Co. (NYSE: KR), the giant food and consumer goods retailer. Kroger acquired Modern HC Holdings, the parent company of ModernHEALTH, and plans to merge it with its own specialty pharmacy subsidiary, Axium Pharmacy Holdings. Financial terms were not disclosed.

Specialty pharmacy ModernHEALTH has been a portfolio company of Altamont Capital Partners since July 2012, and has grown considerably with Altamont’s help. As Modern Healthcare, the company served customers with complex pharmaceutical therapies, including HIV, cystic fibrosis, transplants, hepatitis C and multiple sclerosis.

In March 2014, it acquired Total Life Care RX Pharmacy LLC (now known as TLCRx Pharmacy), with locations in Orlando, Florida and New Orleans, Louisiana. TLCRx’ core therapies include rheumatoid arthritis, dermatology, gastroenterology, hep C, oncology and multiple sclerosis. Concurrent with that transaction was the deal to buy Legacy RX Holdings LLC, located in Orlando. ModernHEALTH’s Biofusion subsidiary services patients requiring IV-based therapies, covering neurological, dermatological and immune deficiency diseases. It has one pharmacy in the Los Angeles, California area.

Axium, which became a wholly-owned subsidiary of Kroger in 2012, is one of the nation’s largest independent providers of specialty pharmacy services, offering a range of clinical services to patients with complex chronic conditions through locations California, Mississippi, Puerto Rico and Tennessee. The combined specialty pharmacy company will be located in a new facility now under construction in Lake Mary, and will continue to operate as an independent company within Kroger Co.

As a retail giant, Kroger operates its own pharmacies in 2,230 locations, as well as 195 The Little Clinic retail health locations. It is currently the fifth largest pharmacy operator in the United States, and specialty pharmacy is the primary area of growth in pharmaceuticals. Merging ModernHEALTH and Axium should improve purchasing efficiencies and combine each entities’ payer strategies to bring down costs.

Kroger also expects to expand its specialty pharmacy business into new territories in the west and southwestern United States, and expand offerings to other disease states. This strategy has legs, and will be looking to make more acquisitions soon.



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