- A pharmacy startup, ZipDrug, is creating its own network of pharmacies to deliver prescription drugs to seniors in the US.
- The goal is to help seniors get their medicines at a lower price, while also making it more convenient for them.
- Founded in 2015, the startup works with around 200 independent pharmacies. It partners with Medicare Advantage health plans that cover a total of 200,000 members.
- With big players like CVS Health already offering similar services, ZipDrug will have to break into a competitive market.
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In 2014, Stu Libby wanted to do something about the long wait times at pharmacies. He thought there must be an easier way to pick up prescription drugs.
At the time, Libby was an ad-tech executive who had worked with companies like DoubleClick and Google. While he enjoyed the job, he wanted to produce work that made more of a meaningful impact.
He started to think about medication access and thought, if he found going to the pharmacy frustrating on a fairly infrequent basis, how was it for individuals who needed constant prescription refills for chronic illnesses? Or seniors who found the pharmacy visits physically taxing?
“I wanted to address two key issues,” Libby told Business Insider. “How can we improve access and cost to prescription medication?”
In 2015, he founded ZipDrug, initially as a drug delivery service. The company has since evolved to focus on serving only seniors.
How ZipDrug works to deliver a different type of drug delivery experience
ZipDrug is a pharmacy startup that is creating its own network of pharmacies to ship drugs to seniors in the US. The goal is to help seniors get their medicines at a lower price, while also making it more convenient for them.
The company works only with Medicare Advantage plans, which are government funded health insurance plans for seniors. It pairs Medicare Advantage members with their own preferred pharmacy network. The health plan covers the cost, so members don’t pay a fee and the pharmacies do home delivery.
Read more: Obamacare was expected to kill off Medicare Advantage. Now, it’s one of the hottest areas for venture investment.
ZipDrug doesn’t offer same day delivery. It’s delivering medicines for patients who’d otherwise need to make repeated trips to the pharmacy because they need long-term drug treatment for chronic illnesses.
Since ZipDrug decided to pair only with Medicare Advantage around two years ago, Libby said the company has undergone “exponential growth.” He said the company now works with health plans that cover a total of 200,000 members. Still, that’s a relatively small consumer base, compared with the 22 million people who have Medicare Advantage plans.
Since the company was founded, it has raised $14.8 million. Libby said it plans to raise $5 million more this year, to support recent growth. Its last funding round brought in $10.8 million from Notation Capital, Collaborative Fund and Neu Venture Capital.
Read more: 10 pharmacy startups that could be M&A targets after Amazon’s acquisition of PillPack
The company operates in 24 states. ZipDrug is currently based in Manhattan, but plans to move to a new office in Jersey City, New Jersey by the end of the year.
Working with ‘the best’ pharmacies to create their own preferred pharmacy network
Libby said he hopes that what sets ZipDrug apart is the fact that the platform connects Medicare Advantage members with a range of pharmacies that can do a good job of ensuring that they take their medications.
Any pharmacy can join ZipDrug’s platform, as long as the pharmacy complies with ZipDrug’s criteria, like fill rates, delivery completion and ability to move members to lower cost prescriptions. The adherence scores are taken from Medicare data and updated regularly on ZipDrug’s database.
Read more: Amazon is threatening the future of independent pharmacies. Here’s how they’re fighting back.
ZipDrug uses the health plan’s data to target customers who don’t have the most cost-effective prescriptions and flags members who are overspending on medication. The company calls and writes to the customers, telling them to join ZipDrug’s platform where the startup can connect them to ZipDrug’s preferred pharmacy network.
The ZipDrug pharmacy then finds cheaper options of the same drug and also informs customers of cost-saving alternative therapies.
Because pharmacy performance is tracked, if pharmacies aren’t performing well, ZipDrug discontinues the partnership. Right now, the company works with fewer than 200 independent pharmacies.The startup doesn’t work with major chains like CVS, but Libby said he’s open to the opportunity.
A new way to track the performance of health plans to deliver better service
After the Affordable Care Act was signed into law in 2010, the Centers for Medicare and Medicaid Services (CMS) created a star system to rate the different health plans on a one to five star range, five stars being the best rating. One of the areas that is rated is prescription drug coverage. Carriers receive bonus payments from the government if they have high ratings.
Peter Manoogian, a partner at the consulting firm ZS Associates, told Business Insider that the rating system creates a greater incentive for the Medicare Advantage plans to think critically about how they deliver prescriptions to their Medicare Advantage members, making companies like ZipDrug appealing.
But as Manoogian pointed out, big players like CVS already offer Medicare Advantage plans that provide services similar to ZipDrug.
“I wonder from a growth perspective will ZipDrug be able to break into larger plans for people, growing into a large share of Medicare Advantage plans,” Manoogian said. “Can they compete with these behemoth plans?”
ZipDrug’s strategy to compete with the big players like CVS
Libby said the goal of ZipDrug is to offer a range of options to Medicare Advantage members from different independent pharmacies.
“We work with health plans to optimize their existing preferred networks,” Libby said. “There is a lot of opportunity for us to collaborate with any preferred pharmacy if they meet our adherence criteria.”
Viral Shah, ZipDrug’s vice president of pharmacy services, said that because ZipDrug individually contacts Medicare Advantage members, it offers a “personal touch” and provides more treatment options for patients to opt into, making patients more engaged and informed in their drug treatment process.
Shah and Libby also pointed to their digital platform which allows for quicker information processing.
The platform, called Care Control, integrates pharmacies into the ZipDrug software, and allows ZipDrug to be integrated into the pharmacies’ phone systems. When a patient agrees to be matched up with a pharmacy, the patient enrollment team connects the patient and the new pharmacy for the enrollment call.
The transfer is live and the Care Control platform updates the member’s information at the time of the call.
With the online platform, the pharmacy also has access to the patient’s medical history and can see what medications they are currently using, or where there are gaps in their treatment.
“So far pairing up with the pharmacies has been a smooth ride because they see the value in what we’re bringing them,” Shah said. “The hardest part is educating the patient, but we track the progress regularly.”
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