Pharmacy benefit management startup Capital Rx closed a strategic investment round totaling more than $50 million to invest in research and development to support its enterprise pharmacy platform.
Ten major health systems backed Capital Rx's latest funding round comprising Atlantic Health System, Banner Health, Hawaii Pacific Health, Inova Health System, Lehigh Valley Health Network, Memorial Hermann Health System, Nebraska Medicine, Novant Health, Ochsner Health and WellSpan Health, among others. Previous investor Transformation Capital also participated in the round.
The investment brings Capital Rx's total funding up to $225 million, following a $106 million series C funding round in June 2022.
Capital Rx has invested significantly in building out JUDI, a digital platform that unites operations under one roof. The platform includes plan design, implementation, adjudication, prior authorization and billing offerings, among others, through a single tool.
The platform aims to drive better patient care alongside greater efficiency for health plans, PBMs and providers. The company says its enterprise platform services more than 2.4 million members for Medicare, Medicaid and commercial plans.
With the JUDI platform, the company can administer pharmacy benefit programs with efficiency and customization across commercial, Medicare and Medicaid plans, according to Jared Kesselheim, M.D., managing partner at Transformation Capital.
Those capabilities make Capital Rx "an ideal strategic investment or partner for health systems," Kesselhiem said.
The funds raised in this round will support R&D related to JUDI's modules and capabilities along with the growth of Capital Rx's member and client service teams as well as hiring in other key areas, according to the company.
"We are humbled and appreciative of the confidence our investors and partners have in our technology," AJ Loiacono, Capital Rx co-founder and CEO, said in a statement. "Legacy infrastructure lacks operational efficiency to reduce costs or enable the delivery of a best-in-class experience for members. I'm thankful for the hundreds of colleagues who have contributed to JUDI and continue to develop new solutions to deliver superior savings and a better healthcare experience for plan sponsors, payers and patients across the country."
Health systems are coming together to improve transparency in the pharmaceutical supply chain, according to the company.
The executives of the health systems involved "recognize the need for change in the pharmacy benefit management (PBM) industry, with a focus on aligning toward a more transparent, next-generation enterprise health platform like Capital Rx's JUDI, according to Health Management Academy's senior vice president of strategy Matt Gunther.
"The clear pricing, operational efficiencies, control over pharmacy spend, and ability to refocus resources on patient care to drive better outcomes are aligned with every health system's core mandate," Gunther said.
"Inova makes strategic investments in healthcare companies that have the potential to drive meaningful transformation," said Alice Pope, Inova's chief financial officer, in a statement. "Capital Rx's ability to leverage technology to bring clarity and consistency to drug prices for its clients and to broaden access to medication for members while providing exceptional service represents a paradigm shift in the PBM industry."
Capital Rx's growth comes as regulators and federal lawmakers are stepping up scrutiny into PBM business practices and pushing forward PBM reform bills.
PBMs have been a major target for reform in recent months, and a central concern is the level of concentration in the industry both in terms of market share and integration with major payers. The three largest PBMs—Caremark, Express Scripts and Optum Rx—dominated 80% of the market.
The Federal Trade Commission launched an investigation into major PBMs last summer, issuing letters to six of the largest firms: CVS Caremark, Express Scripts, Optum Rx, Humana Pharmacy, Prime Therapeutics and MedImpact Healthcare Systems. This probe has expanded to include several major group purchasing organizations.