Capital Rx
If you've listened to our podcast, read our content, attended an event where one of our executives presented, or been around our LinkedIn page for long enough, then you've probably heard a version of this quote from our co-founder and CEO, A. J. Loiacono: "If you're going to be an administrator, administrate. There should be no avenue or method to make money on drug spend."
Pharmacy benefit managers (PBMs) used to be just that - administrators. And the cost was a flat fee. Then, the industry started to evolve. Some PBMs got into the business of making money on drug spend the early 2000s, creating a massive conflict of interest. After all, when you make money on drug spend as an administrator, via fulfillment or otherwise, you make more money when the drug in question is more expensive. And that's how traditional PBMs lost their way.
AJ and Ryan Kelly initially co-founded Capital Rx to address that conflict and change the way prescription drugs are priced and patients are cared for. But in solving that problem, we identified a new one: how antiquated and inefficient the current legacy pharmacy claims processing platforms are, given the needs and demands of the modern healthcare consumer. So we built JUDI®, our proprietary enterprise health platform (EHP) and evolved our mission: to build and deploy the electronic infrastructure our nation needs to deliver the healthcare we deserve.
These days, everyone likes to talk about modern technology and transparency. For some plan sponsors, those words may not be the guiding light they were when we first arrived on the scene back in 2017. The knowledge we've gained by running a full-service, flat-fee-based PBM model leveraging award-winning technology - at scale - is what makes us unique in the industry.
Unparalleled and Infinitely Scalable Modern PBM Software
If you're familiar with the existing challenges surrounding our aging electrical grid, then you can appreciate how important it is to update the antiquated legacy pharmacy claim administration infrastructure used by ~80% of the industry. Anyone who has worked in one of these legacy systems knows that accomplishing the simplest of tasks can require accessing several different systems. The most modern of these systems was built back in the mid-2000s. They weren't designed to accommodate modern needs and members' current expectations with respect to accessibility and efficiency.
Put simply, it's 2024, and things have changed.
There's only one JUDI, and its power and scalability are unparalleled in healthcare. We are servicing millions of lives on one instance of JUDI for clients ranging from 100s of lives to hundreds of thousands, and through our alliance with Prime Therapeutics, 50+ million Americans' pharmacy benefits will be managed on our platform.
JUDI is designed to handle all administrative workflows and processes on one platform for all plan types: Medicare, Medicaid, and Commercial. It does so in a seamless and user-friendly way, eliminating the pain point we mentioned above (switching between systems) and countless more.
JUDI's intuitive design makes it easy for the team to move on a dime. Case in point, we were able to build a comprehensive Medicare Prescription Payment Plan (M3P) solution in a month that will help Medicare Part D plan sponsors meet Centers for Medicare & Medicaid Services requirements. Additionally, Capital Rx recently earned a United States utility patent for its data tagging system (what we refer to internally as "Smart Tags and Overrides"), which enables nearly limitless customization.
It's also relatively easy to develop and manage new API endpoints in JUDI, which plan sponsors may find helpful given new reporting requirements, the need to access and interact with member and claims data, and the opportunity to integrate with other vendors.
JUDI securely pushes and pulls data every day from over 600 unique entities -- carriers, health systems, point solutions, and more. Plus, this interoperability powers some of our clinical programs. For example, in 2023 we announced a partnership with Vida Healthto launch Rx Activate, a high-touch medication management supported by exceptional member service to build trust with providers and patients and help bring down the total cost of care. We also announced a partnership with Virta Healthto launch Rx Reverse, a program designed to help members reverse type two diabetes and fight obesity without costly medications.
You can read more about JUDI's open-API architecture and modular design, along with the benefits that brings to pharmacy benefits administration, in our blog post here.
The Death of Spread Pricing
In a typical PBM contract, price is defined as the average discount off the average wholesale price (AWP) over the course of a year for drugs bucketed into categories like generic, brand, or specialty drugs. There are no industry standard definitions for these categories, so the current AWP structure forces drug pricing claims to be categorized within these arbitrary buckets. This framework allows traditional PBMs to fluctuate prices and move drugs from one category to another to advantage their profits.
Because PBMs have “two sets of books” and control the flow of money between payers, pharmacies, and pharma, they can charge a higher amount for medications than what they pay for them, and that creates a margin opportunity. This practice is known as “spread pricing.” It works because the parties involved in the transaction cannot see the price of the drug being filled. They aren’t allowed to!
Capital Rx has promoted an aligned financial model since day one. We don't earn revenue from drug spend, we pass through all rebates, and we only charge a flat administrative fee. Our Single-Ledger Model™ eliminates the hidden profitability enabled by spread pricing under a traditional PBM model.
Two employees from the same employer living in different states should pay a substantially similar price to fill the same prescription under the same PBM plan. The artificial price variability that plan members and plans experience is a result of a PBM being able to pay the pharmacy one price and charge the plan another through MAC - maximum allowable cost - lists and other tactics.
In no other industry do we see the kind of wild price variances that we do in healthcare -- and nowhere else is it tolerated. If you didn't know the price of a large pizza, you wouldn't call up and order it anyway without clarifying first, and you certainly wouldn't pay the bill if the delivery driver told you that it cost $2,000.
That's why Capital Rx said "no thanks" to AWP, MAC lists, and multiple books, instead creating a simple Single-Ledger Model™, which encourages the pharmacy to verify charges to the plan sponsor, and enables the plan sponsor to see the reimbursement to the pharmacy. It's also why we've seen state and federal legislators sign and introduce bills that ban spread pricing.
On top of that, Capital Rx owns its own network of 62,000+ pharmacies, leverages the National Average Drug Acquisition Cost (NADAC) pricing framework, and never manipulates prices.
Not only is this a lot easier for us -- one book, one price, one solution -- it delivers the alignment and transparency plan sponsors deserve.
Related Content
- What is NADAC & How Does It Differ From AWP?
- Pharmacy Benefits 101: Traditional vs. Pass-Through Models
- Replay – The Future of Pharmacy Claims Processing: A Deep Dive into a Modern Adjudication System
- Replay – M3P Forum - A Live Q&A with Capital Rx
- Capital Rx Receives Validation for Savings from Validation Institute - New Groups Experience Significant PMPM Cost Trend Improvement
An All-Star Team of Dedicated Healthcare Leaders
Of course, you can't innovate without also leading. Capital Rx went from a tiny office with fewer than a dozen people crammed inside to One World Trade Center. At the same time, we went from a confident belief we were on the correct path to being the administrator for hundreds of plans and millions of lives -- all in less than a decade.
All told, we currently have over 600 engineers, data scientists, designers, analysts, pharmacists, technicians, doctors, actuaries, and managers. Their capabilities and results speak for themselves.
Some of those team members -- like those on our product teams -- work in the background, updating JUDI with new features and refinements that make the platform more efficient, accurate, and reliable. Others, like our Customer Care team, are on the front lines, fielding phone calls from members, helping answer their questions, and solving problems they may face when trying to fill or pick up a prescription from their pharmacy.
AJ will be the first to say that this path was not the easiest one -- but leadership requires a commitment amidst stormy and calm seas alike. He's also the first to say that you can't build a great company without great people, and Capital Rx's leadership team is full of great people.
It's through their leadership that Capital Rx is able to achieve industry-leading Member and Client NPS scores, earn five awards for Customer Service, two CCW Excellence Awards, 2 American Business Awards and 9 marketing awards in 2024 alone. Additionally, Capital Rx maintains a 100% implementation satisfaction rate and retains 99.5% of our clients.
Our team is also the reason we've placed on the DHNY 100 five years in a row, ranked on the Inc 5000 Regional and National lists for three years in a row, andbecame a Certified B Corp™ in 2023.
Returning Pharmacy Benefits Administration to its Roots
Another oft-used AJ quote explaining why he co-founded Capital Rx is, "In order to fix the problem, I felt like we had to become the problem -- become the PBM. And that's exactly what we did."
But when we arrived on the scene, Capital Rx wasn't exactly welcomed with open arms by traditional PBMs. Pharmcy benefits is one of the most notoriously consolidated industries in the United States, with the "Big 3" PBMs collectively owning ~80% of the market. That made our mission, at the outset, an inherently disruptive one.
But disruption wasn't a negative term for us. The PBM industry had lost its way, chasing rebates and brand-name drugs at the detriment of plans and their members. Even while brand-name prescription drug net prices fell year-over-year, plan sponsors were watching their costs skyrocket, sometimes by double digits. Put simply: the math wasn't adding up.
So, was it disruptive when Capital Rx entered the scene, refused to make money on drug spend, charged a flat administrative rate, passed through all rebates, and helped clients cut their drug spend? Was it disruptive when we identified the current state of healthcare infrastructure and built a platform that was more attuned to the industry's modern needs? Sure. But it finally gave plan sponsors an idea of what is possible when they are given the opportunity to work with an aligned PBM -- one that is looking out for their best interests above all else.
Some call it disruption. To us, it was simply doing what was right and necessary.
How to Unbundle Pharmacy Benefits
It's through JUDI that we are able to provide plan sponsors with the opportunity to unbundle pharmacy benefits while retaining a supportive and modern infrastructural foundation. That solution, Never Move Again™, is possible because of JUDI. The platform acts as a central hub, giving plan sponsors the power to adjust their plans as they see fit to meet their members' needs while eliminating the disruptions that come with changing ID cards, moving call centers, and swapping out patient portals.
Put simply, with Never Move Again™, self-funded plan sponsors with 10,000 lives or more can perpetually access the best drug prices without ever having to reimplement a plan. And that's all possible because of our focus on innovation.
Leveraging Our Resources to Make a Meaningful, Industry-Wide Difference
Going from ten employees in a small office to a 600+ employee organization was not something that happened overnight. Nor was the creation of JUDI, which took years to build and is still consistently updated with new features and capabilities. Accomplishing these feats -- including going from 0 lives to millions in 7 years -- required trust and support, both of which have been earned.
In mid-2022, Capital Rx received a massive $106M Series C investment to support our aims to build JUDI and to improve prescription drug management. Then, in 2023, Capital Rx received a strategic investment round totaling over $50 million with participation from more than 10 of the leading health systems in the nation, including Atlantic Health System, Banner Health, Hawaii Pacific Health, Inova Health, Memorial Hermann Health System, Nebraska Medicine, Novant Health, Ochsner Health, and WellSpan Health, among others, as well as Transformation Capital.
It was with this support that we were able to grow JUDI into the platform it is today. Now, operating a multi-billion dollar P&L with large cash reserves, we are able to provide our clients with the peace of mind of financial stability while remaining focused and committed to R&D, growing JUDI so that it is able to meet tomorrow's needs, as well as today's.
Delivering Meaningful Results to Clients and Their Members
We all know that results matter -- especially when we're talking about cost savings, financial alignment, and fiduciary responsibilities. Additionally, no two plans are alike -- members have unique needs, and plans have different goals. Here at Capital Rx, we are uniquely positioned to provide solutions for any scenario and deliver measurable results.
When CDPHP chose Capital Rx as their PBM for its 400,000+ members back in May 2022, one of the reasons they did so was because of the alignment and transparency we offered.
That alignment paid off, too. In July, CDPHP sat down with BenefitsPRO and revealed they have seen costs drop 9% for commercial members under the contract.
Similarly, The Teamsters Health and Welfare Trust Fund of Philadelphia and Vicinity revealed in an article withThe Wall Street Journal that switching to Capital Rx has helped them save more on drug spending each year than initially projected, including 17% the first year.
Other organizations have shared similar stories about their experience after switching to Capital Rx.
The Future of Pharmacy Benefits Is NOW
Pharmacy benefits don't have to be exorbitantly expensive or oppressively opaque, or mired in the past. This benefit can be affordable, transparent, aligned, and future-proof -- if the right team and the right technology are implemented and leveraged.
We began this article with AJ's note about where PBMs started: administrating without bias or conflicts of interest. At Capital Rx, we believe in that model still, and we're taking it into the future.
The best part? That future is available now -- today. And when it comes to PBMs, there is only one Capital Rx.