Kroger Health President Talks 'Food As Medicine,' Prescription Drug Prices
Colleen Lindholz, president of Kroger Health, spoke about the grocery store's plans to expand further into healthcare.
(CINCINNATI – April 24, 2019) - Cincinnati-based grocery and retail giant Kroger Co. has ambitions to continue its healthcare expansion mission, according to Colleen Lindholz, president of Kroger Health.
Kroger is one of the largest grocery stores and retail companies in the country, with about 2,300 pharmacies and 221 retail clinics, offering it a sizable footprint to compete in healthcare. Lindholz has been with the company for more than two decades and has helped craft its business strategy focused on health and wellness.
"Our vision is to help people live healthier lives, and our mission statement states that we're going to simplify healthcare by creating solutions that combine health, wellness, and nutrition to connect with people on a personal level," Lindholz told HealthLeaders.
From Lindholz's perspective, there are several opportunities for Kroger to grow in healthcare, most notably through improving prescription drug delivery in a way that benefits consumers and focuses on promoting 'food as medicine.' However, she also spoke to the lingering challenges Kroger faces, including industry consolidation, difficult negotiations with pharmacy benefit managers (PBM), and rising direct and indirect remuneration (DIR) fees.
Below are some takeaways from Lindholz on what lies ahead for Kroger in the healthcare sphere.
Maneuvering PBMS And DIR Fees
Lindholz said that Kroger, like other healthcare players, is subject to the pressures produced by widespread vertical integration and consolidation. Kroger's strategy to drive prescriptions into its stores has been affected by the fact that it contracts with multiple PBMs, the major ones being owned by large health plans.
"We're seeing a lot of pressure as far as reimbursements are concerned and DIR fees, which are escalating out of control," Lindholz said. "I know there's some activity going on in Washington right now with a call for DIR reform and where should most of the cost reduction be."
Lindholz added that Kroger remains a supporter of the concept of DIR fees, citing the purpose for their initial creation as a way to provide a higher quality of care for patients.
"However, we are getting hit with DIR fees that are 300% ahead of where we were in 2016," Lindholz said.
PBMs also compound the problem for Kroger, according to Lindholz, since they act as a negotiator with the drugmakers but ultimately set the standards for how rebates are passed through to pharmacies.
"The way that they measure us and the way that we compete to get those rebates back, where 2,300 pharmacies are compared to an independent that has five pharmacies, is crazy," Lindholz said. "I think the way that they're measuring it is all for their gain, not necessarily for the patient's gain. We want the lowest cost to be at the point of sale where the patient actually is."
'Food As Medicine'
A key component to addressing chronic disease is addressing what people eat, Lindholz said. Kroger introduced its free "OptUp" app in an attempt to correct some of the root problems that contribute to chronic disease.
In 2017, Kroger conducted a study to analyze A1Cs, the average blood sugar over 90 days, and blood pressure in diabetic employees and leverage nutritional science to assist them in making food purchasing decisions.
Kroger was so encouraged by the results of the study that it had nutrition and technology experts at the company design an app driven by the Kroger loyalty card as a way to "simplify Kroger customers’ ability to shop for healthier foods."
"The results were so statistically significant that we decided to bring the app to the market because we believe that over time it can sustain behavior change," Lindholz said. "What we're trying to do is be in the prevention space, specifically around diabetes, where we're helping our diabetics make those food choices that they critically need in order to keep from progressing with their disease and going from two oral medications onto insulin."
A spokesperson from Kroger said the company will soon be rolling out an update to the app to allow customers the ability to shop for healthier foods, even if they do not shop at Kroger.
Lindholz also commented that healthcare is a fragmented industry, citing the lack of communication between different electronic medical records (EMR) systems.
Lindholz said the company sought to create a solution to foster a better line of communication with systems that run on Epic and Cerner.
"We're building a platform that we're going to be able to see across all of our pharmacies and will connect with the top 17 EMRs in the country," Lindholz said. "It's important in our quest to go after the triple aim and to decrease some of this fragmentation while closing gaps in care."
"One of the unique pieces of that new platform is that it will be the first time that anyone's ever included a food score. We're going to test in Cincinnati with a cardiologist and an endocrinologist around getting to look at how customers eat, if we can help change their behavior, and will their overall outcomes be better over time?"
Tackling Prescription Drug Prices
Given Lindholz's background as a pharmacist, it should come as no surprise that one of her major initiatives at Kroger is improving the availability and affordability of prescription drugs for customers. To that end, Lindholz noted that Kroger currently has three central prescription fill facilities around the country that fill prescriptions overnight so Kroger can have the lowest cost to fill.
"This allows us to spend more time with the patients that are in the store and deliver the highest quality of care that we can at the lowest cost," Lindholz said. "We're doing a lot more one-on-one counseling with customers, both at the counter and also through a center of excellence that we have. We're up 320% in clinical interventions versus a year ago and that is due to us putting a system in place that queued up pharmacists at the time either when they're with patients at the store or through our call center."
Kroger also launched a pharmacy savings club in partnership with GoodRx last December to assist customers dealing with high prices and limited access to prescription drugs."What that club does is it brings transparency and pricing directly to the customer. It costs $36 for an individual, $72 for a family, and we are delivering a significant amount of savings to the consumer," Lindholz said. "What we're doing with the savings club is cutting out the middleman. We're taking all the rebates that we would get from the manufacturers and passing them directly down to our customers, which is saving them a whole lot of money."
About The Kroger Co.:
At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are nearly half a million associates who serve nine million customers daily through a seamless digital shopping experience and 2,800 retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.