Capital Rx: A Cure for Overpriced Prescriptions

Traditionally, PBMs showcased an attractive healthcare model where employers and insurers hired these intermediaries to lower pharmaceutical costs. However, over time, many PBM leaders have adopted “spread pricing” (the difference between what PBMs charge buyers and how much they pay pharmacies), leading to an unnecessary increase in drug costs.

Alumni Ventures portfolio company Capital Rx is the pharmaceutical industry’s first online, cloud-native PBM to connect buyers (employers and health plans) with drugmakers. The company’s online platform provides price transparency and operational efficiency through services like formulary management, prescription claims processing, and clinical utilization programs.

An Improved PBM Model

Unlike legacy PBM systems that require specialized personnel, 400-600 hours of set-up, and 30-45 days for order changes, Capital Rx’s enterprise system reduces time spent to just a few hours. It uses a natural language platform that is user-friendly and reduces client costs.

Capital Rx has gained traction as an emerging industry leader with paying customers. Their customer adoption has also skyrocketed within the last year due to a strategic partnership with Walmart.

Deal Highlights and Leveraging Relationships

Proven value proposition: in just two years, Capital Rx has garnered a 96 NPS score (vs industry average of 24) and provided clients savings over 6x higher than the industry average.

Sizeable Addressable Market: The U.S. PBM Market is expected to reach $700 billion by 2025, offering Capital Rx a massive market opportunity.

Domain Expertise and Complementary Team: CEO Anthony Loiacono, COO Joseph Alexander, and CTO Ryan Kelly all worked at tech solutions company Truveris before Capital Rx. Eventually, Anthony — leveraging more than 20 years of experience in the pharmaceutical industry on manufacturing and payer sides — left Truveris to build Capital Rx, his ideal version of a PBM, bringing with him ~25 employees from Truveris.

Castor Ventures (for the MIT community) sponsored AV’s investment in Capital Rx’s $50 million Series B in 2021 alongside Transformation Capital and Edison Partners. Castor Managing Partner Cainon Coates learned about the deal through co-investor Edison Partners and leveraged a relationship with Transformation Capital to secure an allocation in the round. In 2022, AV re-invested in the company’s $106 million Series C alongside B Capital and General Catalyst.

Other AV funds invested in Capital Rx include:

• 116 Street Ventures (for the Columbia community)
• Lakeshore Ventures (for the University of Chicago community)
• Westwood Ventures (for the UCLA community)
• Growth Fund (follow-ons in highly promising AV investments)
• Total Access Fund (AV’s broadest, most diversified fund)