A proposed mega-merger between Kroger and Albertsons that critics said would result in diminished access to prescriptions suffered a major setback Tuesday as judges in Oregon and Washington blocked the deal.
In separate rulings, a federal judge in Oregon and a King County Superior Court judge concluded that the $25 billion merger would mean less competition and consumers paying more for groceries and medications with less access to pharmacies.
The judges’ rulings come amid rising anxiety over the rapidly dwindling number of local pharmacies and what that has meant for working conditions as well as access to prescription medications, particularly in rural areas. Opponents of the deal breathed a sigh of relief.
Brian Mayo, executive director of the Oregon State Pharmacy Association, told The Lund Report in an email that his group was “thrilled” that the merger was halted, and may not move forward.
“This merger would have reduced the limited number of pharmacies even more,” he wrote. “We can’t afford to lose any more pharmacies.”
Mayo cited an Associated Press analysis from earlier this year showing that Oregon is second only to Alaska in having the fewest retail pharmacies per capita in the nation.
Oregon pharmacists have appeared before lawmakers in recent years presenting a dire picture of the viability of local pharmacies and asking them to crack down on middlemen companies they blame for making their businesses unfeasible. Oregon’s total number of pharmacies declined from 681 to 499 between 2008 and 2022, according to numbers from the National Community Pharmacists Association.
“This merger would have reduced the limited number of pharmacies even more. We can’t afford to lose any more pharmacies.”
The now-scuttled deal would have meant Kroger would have taken control of nearly a third of Oregon's retail prescription market had the deal been allowed to proceed, according to an early state analysis.
“At a time when higher grocery and pharmacy prices are hurting countless households, today’s decision is a win for Oregonians and a win for competition in the marketplace,” Oregon Attorney General Ellen Rosenblum said in a statement.
Feds join Oregon case
Lawyers for the Federal Trade Commission joined Rosenblum in challenging the deal, arguing it would increase prices for consumers and give Kroger less reason to offer pharmacy services to draw in customers.
Oregon Sen. Ron Wyden, along with other members of Congress, submitted a brief against the deal in August. It pointed out that the 2014 merger of Albertsons and Safeway meant the closure of dozens of pharmacies in Oregon.
Kroger operates roughly 2,200 pharmacies in Oregon with Albertson operating about 1,725, according to U.S. District Judge Adrienne Nelson’s ruling.
As part of the proposed merger, a third company, New Hampshire-based C&S Wholesale Grocers, would have acquired 579 stores, including hundreds of pharmacies. However, Nelson suggested that the planned divestiture would not likely be successful.
“The evidence available suggests that C&S’ current stores are performing below expectations,” Nelson wrote.
Ruling echoed in Washington state
King County Superior Court Judge Marshall Ferguson reached a similar conclusion in response to an antitrust lawsuit brought by Washington state’s Attorney General Bob Ferguson.
More than half of Washington’s supermarkets are owned by either Kroger and Albertsons and Ferguson opposed the merger citing concerns of consumer prices and choice.
The elected Washington prosecutor, who is not related to the judge, argued in his suit that consumers have grown accustomed to supermarkets offering pharmacies and other other amenities.
Washington has not seen the dramatic loss of pharmacies that other states have seen. But competitors face regulatory obstacles such as obtaining DEA licenses to operate pharmacies as well as hiring specialized staff and negotiating supply chains, Ferguson argued.
“In my view, the evidence convincingly shows that the current competition between Kroger and Albertsons stores is fierce in the State of Washington,” Ferguson, the judge, said in a statement.
The judge also raised questions about whether C&S was well-suited to operate pharmacies spun off as part of the deal.
It’s unclear if the companies will appeal.