Feb 02, 2021
We can probably all agree that ending COVID-19 should be the top priority for the healthcare industry at the moment, but we shouldn’t forget that the industry is in need of reform in many areas, not the least of which is the cost to individual consumers.
At Edison Partners, we are committed to fostering the growth of businesses and technologies that disrupt markets, enable change, improve lives, and ultimately democratize markets. In many cases, these businesses have a social impact as well.
Take, for example, our investment in Health Recovery Solutions (HRS), whose telemedicine solutions allow health systems and home care agencies to reduce hospital readmission rates by up to 80% while improving patient and caregiver satisfaction. Or, our investment in Zelis Healthcare, the company formerly known as Premier Healthcare Exchange (PHX), whose healthcare payments optimization platform substantially reduces its clients’ healthcare costs.
And today, we announce our follow-on investment in Capital Rx, as the company adds $50 million in growth capital. In 2019 we led a $12 million growth investment in the company, which services hundreds of thousands of lives in all 50 states, up an impressive 400% from 2019. Capital Rx plans to use the funds from this raise to further accelerate growth, invest in the company’s technology platform, and diversify the business segments in which they operate.
A Market Out of Control
According to The Peterson Center on Healthcare and the Kaiser Family Foundation, health spending has increased from $353 per person in 1970 to $11,582 in 2019 with out-of-pocket expenditures growing steadily to an average of $1,240 per capita in 2019, up from $115 in 1970 ($603 in 2019 dollars). Out-of-pocket medical costs do not include the amount individuals contribute toward health insurance premiums.
As healthcare costs continue to rise with no slowdown in sight, the Pharmacy Benefits Management (PBM) market is one segment that is ripe for reform. Projected to reach $600 billion by 2023, the PBM industry has historically provided little-to-no price transparency -- primarily because customers have not demanded it.
We have experienced great modernization (and acceleration) of the drug manufacturing process—most recently the COVID-19 vaccines— however, these factors have not resulted in reduced prices for consumers. For example:
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The standard course of Amoxicillin has dropped from an acquisition cost of $6.00 per course to $2.00 per course, on average, over a 15 year period. While traditional PBMs use AWP which has actually inflated the reference price of the same course of amoxicillin from $7 to $9 over the same timeframe.
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According to 46brooklyn, by January 25th, drugmakers had collectively increased prices on 929 drugs, setting a record for the most January price increases in the past decade (the previous high was 895 in 2018).
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According to a 2019 Consumer Reports survey, 30% of Americans who take prescription medicine say their out-of-pocket cost for a drug they regularly take had increased in the past year.
The cost of prescription drugs is so out of control that an increasing number of Americans are forced to decide between paying for much-needed medications or putting food on the table.
What if consumers started to demand transparency into the real costs because price discovery was suddenly available to them in a different format?
Make Way for the Changemakers
At Edison, we are confident that change is afoot because of the work being done by Capital Rx. Led by performance-focused CEO AJ Loiacono, Capital Rx is the fastest-growing PBM in the U.S. with impressive forecasted 3X growth for Q1 2021 vs. the same period a year ago.
The firm is experiencing stellar growth too, adding notable logos and even striking a deal with Walmart to offer employers a unit price for all prescriptions across retail, mail, and specialty.
We believe fiercely in Capital Rx’s ability to drive further growth on its platform and to effectuate change in the healthcare industry. AJ and the firm’s collective hustle, grit and determination shine through in how the business has grown and where it is headed. (As an aside, Capital Rx is no stranger to growth—the firm originally had 16 LinkedIn followers prior to Edison’s initial investment and now it has over 22,000.) AJ has also run and scaled three companies, including as founder of Truveris.
A Better Care Industry
Capital Rx is revolutionizing the PBM and healthcare industry as they work to eliminate arbitrary drug prices and bring some light to the black box of the pharmacy benefit. The model is designed to avoid “spread pricing,” a controversial strategy in which insurers are charged notably more than the cost at the pharmacy for a drug, and PBMs pocket the difference.
The company’s recently launched Enterprise Pharmacy Platform is a first of its kind AI-driven, cloud-native healthcare management platform that brings together all PBM operations in one place. That means employers have access to everything from underwriting, implementation, claim adjudication, and data integration to prior authorization, patient communication, client reporting, invoicing, and reimbursement in the palms of their hands.
Named JUDITM, the platform can be implemented in just hours and enables employers and health plans to deliver the highest quality care at the lowest cost by:
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Delivering consistent, guaranteed pricing for all employers;
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Providing employers and plan members with real-time, transparent visibility into prescription drug prices; and
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Using adaptable, configurable technology to replace the industry’s existing 25-year-old systems.
JUDI is even being utilized to deliver an end-to-end COVID-19 vaccination solution for consumers, employers, and unions through Capital Rx’s partnership with VaxAtlas, Inc., the leader in vaccine management.
Imagine a world where companies can better manage their cost of providing employees with quality healthcare, and households can better manage their health with more transparent insights into their prescription drug costs. The time is now. Capital Rx is leading the revolution.
