Venture capital firm LRVHealth recently invested in LucyRx, which was founded in 2023 and describes itself as a “next-generation” pharmacy benefits manager (PBM). The investment brings the startup’s total committed capital to more than $500 million. LucyRx CEO David Blair recently sat down with Healthcare Innovation to describe how he sees his company disrupting the old model.
Healthcare Innovation: Could you talk a little bit about your background and how the idea came together to found this company?
Blair: I’ve been in healthcare services my entire career, for 30 years. Previously, I was CEO and chairman of a company called Catalyst Health Solutions that is now part of United Healthcare’s Optum. Then we started another business, Gateway Health Partners, which was a provider of rebates and formulary management service. That business was combined with a PBM five or six years ago.
Why LucyRx? I think it starts with the fundamental observation that innovation in the PBM industry has stalled, and the prescription care delivery model in this country is broken by almost any metric. Individuals are struggling to pay for their copayments. I read an article recently that said many newly diagnosed cancer patients will deplete their life savings within two years just because of the exorbitant out-of-pocket expenses. We see our employers cutting back benefits because they can't afford it. But even more importantly, the country as a whole can't afford this, right? We spend two and a half to three times more on prescriptions per person than any other comparable country in the world.
HCI: There has been a lot of criticism of large PBMs. You see politicians criticizing them and state governments trying to rein them in. How did we get to that point? What are some of the issues that the PBMs face criticism over and are they legitimate concerns? Does it have to do with conflicts of interests in the space?
Blair: I think there are a couple things that I've seen over the last 10 to 15 years. One is vertical integration. Through the consolidation of the PBM industry, and then through vertical integration you have organizations that are managing drugs, they’re selling drugs, they're manufacturing the drugs, and they're insuring the population, and they can't keep their priorities straight. So absolutely there's a conflict. This is the fox watching the hen house.
The other thing is the rebates. Rebates, by themselves, are not necessarily a bad thing, right? We wouldn't think twice if Ford Motor Company offered a rebate to move last year's inventory. Rebates can drive loyalty. They can drive bulk purchasing or drive particular consumer behavior. But the way I've seen rebates morph into the PBM sector is now it's really like this financial juice that pads the pockets of players. Now if you introduce a new drug, it doesn't necessarily need to be better than the predecessor drugs. It just needs to have a high list price and a high rebate, and I can get the big three PBMs to promote it, and then I'll have a blockbuster drug. So the way we've seen the PBM industry evolve, the scrutiny is very much deserved.
HCI: So what are some things about LucyRx's model that are different?
Blair: When I think about Lucy, I think about innovating. Let’s talk about specialty pharmacy. The traditional approach is central fill. If you're with a big PBM, or even some of the mid markets, they're going to steer your members to a central fill. We know that there are better health outcomes if people receive their drugs where they're receiving their care. So we have an integrated specialty network of over 100 hospital systems where they have specialty pharmacies within their cancer centers, so that we know that a patient can get their drug where they're getting their care.
An individual sees their oncologist for the first time, and they’re confused. If they can meet with the pharmacist right there, they're much more likely to get on the med. They're going to have a relationship with that pharmacist. If there is a side effect, the pharmacist might say you should do this before you take the drug, or here's an alternative drug. They're more likely to be adherent; they’re more likely to stay on those drugs. The time to get their first fill is much quicker.
So when we think about innovation, that’s a great example. It's completely different than what the big guys do. It makes complete sense for our health plans. And if you ask why LRVHealth invested in us, well, they're comprised of health systems with specialty pharmacies. Just imagine the outrage when they look at their reports and see that their employees and their employees' family members are going to a central fill facility in a different state, when there's a pharmacy downstairs that they could just walk to.
These health systems, have spent tens of millions of dollars building these facilities for their patients, only to have a big PBM steer patients away from them. But not only can we drive the health system’s employees and family members to that specialty pharmacy, we have other employers in that area. We have other members in that community who can benefit from that local specialty pharmacy.
HCI: Your press release mentions advanced analytics and AI-powered tools. How did those come into play?
Blair: They come into play in a couple different ways, mostly through patient and prescriber engagement. We want to engage with patients and give them real-time information. If you think about how the traditional model works in pharmacy, everything’s reactive. We wait until after there's a medical event; we wait until after there's a prescription written, but most of the time, we actually wait until after someone's on an expensive prescription to make an intervention.
We can use our tech to engage a patient sooner, to say, OK, you’ve been prescribed this drug. Here's an alternative or here's a cheaper policy. But then, as importantly, our clinicians use it to meet with top prescribing doctors, because what we know is physicians want to do the right thing, but oftentimes they don't have the information. If specialty spend is, let's say, 50% at pharmacy, but it's only 2% or 3% of the population. The same thing is true with doctors, right? So you have 2% or 3% of your doctors writing scripts that are costing you 50%. So we can use those analytics to get real information, and we can meet with the physician and say you've been prescribing these drugs. This is what your health plan is trying to do, and here's why. The drug they are prescribing costs $11,000 but the biosimilar costs $2,000. They may not know that. They've got enough on their plates.
HCI: As a startup, how do you build the big network in partnership with the pharmacies? How do you build these relationships?
Blair: Well, we have a team that's been doing this for decades, so the individuals who run our network have done this before, and they have their relationships. We also acquired a platform company, because when we started, we wanted to make sure that all of the underpinnings were sound — claims processing, eligibility, help desk, network. The platform company we acquired [Integrated Pharmacy Management] has been in business for 14 years. We have over 100 clients that have been with us for more than 10 years. Lucy has invested significant amounts of money in technology and talent and clinical programs on top of that platform company. But the network was largely in place when we acquired it, and obviously we've enhanced it since then.
HCI: I read something on your website about rural pharmacy deserts and an initiative called the Sustaining Pharmacy Access & Rural Care (SPARC) program. Can you talk about that?
Blair: Sure. The country is facing a crisis with the closure of pharmacies. Thousands of stores have been closed and they disproportionately impact independent pharmacies. Because of antiquated reimbursement models and regulations, we've limited the pharmacist to essentially counting pills, and they've got six to eight years of experience. They're probably the most trusted and underutilized resource that we have in the healthcare delivery system, so we've got to empower them. In many rural areas, that might be the only healthcare provider. We think about a pharmacy desert as one pharmacy within a 10-mile radius. It’s much more than just a place to pick up your prescription — whether it’s over-the-counter products, vaccinations, wellness screenings, chronic condition management, that pharmacist is a local resource, and we can't lose that individual.
Through our program, we actually reimburse those independent pharmacies more money. We promote their other services to our members, so that our members know that there are other healthcare options available with that pharmacy, to try help drive additional revenues to that pharmacy.
We also advocate at the state level for smart changes. States like Idaho have relaxed the rules they allow pharmacists to prescribe certain medications. New Mexico is another good example of that.
HCI: What are some next steps for LucyRx, looking ahead to the rest of 2025?
Blair: It’s getting the word out and meeting with self-funded employers and health plans. Health systems represent a very interesting opportunity, because health systems have unique assets that other employers don't have. We talked about their specialty pharmacies. They also have access to 340B drug programs. They also have, I'd say, a better understanding of specific drugs. And then last, I would say they have probably the most trusted name in the community that they're working in. So for LucyRx, we will white-label our services. We will drop into a health system. We want a local solution with pharmacists and account managers on site, and we'll adopt their name, right? It will have the health system’s name and they will add Rx after it, or something. From the community's perspective, they don't see this disjointed approach to healthcare.
The other big initiative for us is Medicare Part D. We don't serve very many retirees today. We mostly serve the commercials segment. Over the next several years, you'll see us move more into the health plan space and then a more balanced portfolio of commercial lives and retiree lives.
