Rx Savings' sale to McKesson: From a startup to an $875M acquisition – Kansas City Business Journal – The Business Journals

In 2008, Michael Rea set out to tackle a daunting challenge: providing transparency in prescription drug costs for consumers. What started as a manual process for helping consumers save money morphed into patented software that now serves 17 million members.
The pharmacist turned entrepreneur found enough success with Overland Park-based Rx Savings Solutions that it grabbed McKesson Corp.’s (NYSE: MCK) attention. The Texas-based health care giant signed a deal to buy the company for as much as $875 million. The deal is expected to close by year’s end.
Rea was content being a pharmacist, and it wasn’t uncommon for customers to complain or ask questions about prescription drug costs. He had become somewhat numb to it. But one customer’s question finally stuck with him. A 65-year-old diabetic struggling with tight finances asked: “Which two of my medicines can I skip this month?” Some of her medications included one for high blood pressure and another for cholesterol.
“That got my attention in a way the previous people were unable to do, and it really got me thinking that I needed to do something to help this woman,” Rea said during a previous interview.  
That night, he spent six hours researching ways she could save money and compiled it into a one-page report that he gave her the next day. She carried out his suggestions, which saved her $250 that month — and every month going forward. It became Rea’s “light bulb” moment, he said, and got the ball rolling on Rx Savings Solutions. In 2009, the then-startup launched its first website.
Rx Savings Solutions directly targeted consumers at first but saw a bigger opportunity in 2011 when Mutual of Omaha voiced interest — using the startup’s contact form on its website. Rea called the company once a week for eight weeks and never heard back. He got through on the ninth try, and it became Rx Savings Solutions’ first big customer. As a result, the startup pivoted its focus to self-funded employers and health plans.
“What we found was that for every $1 we were saving consumers, there was $5.40 in opportunity to save the self-funded employer,” Rea said. “That was the point where we pivoted to say we still need to help the consumer, but we need to do it through the business.”
Until January 2014, Rx Savings Solutions had hummed along with two employees. That year, it landed the state of Kansas as a customer, which set off a flurry of interest from other companies.
By July 2015, its headcount was 24. It raised its second funding round to date that year, a $2.7 million Series A led by two Kansas City-area investors. Rea set a goal of building brand awareness not just locally, but nationally. The funding led to new hires, including a new chief technology officer who previously worked at Cerner Corp. as a managing architect.
Rx Savings Solutions also won a new client: Blue Cross and Blue Shield of Kansas City, the region’s biggest health insurer. At the time, Blue KC CEO Danette Wilson described the company’s technology as a “leading-edge innovation solution.”
Rx Savings Solutions continued to win over big names: American Century Investments, Target, Nebraska Furniture Mart and Petco.
“As Americans, we’re such savvy shoppers … but health care is different because of its complexity; it’s difficult to navigate,” Rea previously said.
Rx Savings Solutions has become more relevant as prescription drug costs continue to soar, even for generics.
“In the past, generic has always been synonymous with cheap. But that’s not the case anymore,” Rea said in 2015. “We’re seeing generic drugs cost $100 a month. Even a 30-day supply of drugs that people take orally are over $1,000 month. It’s just a tremendous kind of market shift that’s happening, and we’re trying to help people through that.”
Although generics previously came in at 40% to 50% of brand-name drug prices, companies that manufacture both brand-name and generic drugs are narrowing that margin.
“It’s a volatile market combined with a lack of information,” Rea said.
Rx Savings Solutions’ software sends alerts to members when it identifies cost savings opportunities or notices changes in how much a prescription costs. It suggests alternatives, and sometimes saving money is as simple as switching pharmacies or finding other effective medications that cost less. Its technology now includes more than 30,000 unique and dose-adjusted drug suggestions.
In late 2017, Rx Savings Solutions closed an $18.4 million funding round led by Omaha-based equity firm McCarthy Capital. By that time, the Overland Park company’s membership base had ballooned to 1.1 million.
Rea sought new capital because he wanted to take the company to the next level.
“We were very diligent about how, when and, most importantly, from whom we raise money,” Rea said. “We never put ourselves in a position where we had to raise money, but we put ourselves in a position where we had options or could wait until we found the right partner.”
The company’s growth continued to soar, including ballooning to more than 100 employees and 4.5 million members in 50 states by early 2019. Rea credited the growth to solving a painful challenge.
“A lot of startups with new ideas come and go, but ones that can invoke meaningful change and deliver on the promises made are sometimes harder to come by, and I think that’s what we’ve been able to demonstrate in the market, and it has propelled our growth,” he said.
Rx Savings Solutions continued paying attention to industry trends and customer requests and built new features to meet those needs.
It rolled out a medication adherence tool and “contact my prescriber,” in which the company does the legwork if a patient wants to switch pharmacies or try a different drug.
It introduced a Google voice assistant feature that allows clients to ask questions such as, “Where should I buy my Crestor?” It leaned into changes brought on by the pandemic, offering new services such as a home-delivery option for prescription medications.
“I think what it does is it drives consumer adoption of our software because it’s not just a savings story,” Rea said of launching home delivery.
It’s a way to address adherence to lifesaving prescriptions. With home delivery, members don’t have to worry about running behind and missing a prescription because the pharmacy is closed. By making prescriptions more accessible, it can lead to healthier people and reduced medical costs, he said. Other tailwinds include new regulations tied to the Centers for Medicare and Medicaid Services that require more transparency, including in prescription medication options.
Rx Savings Solutions now employs 271 people andserves 17 million members. Its 2021 revenue totaled $40.16 million, and it landed on this year’s Inc. 5000 list of the nation’s fastest-growing private companies. It ranked No. 1,093, with a 445% three-year revenue growth rate.
“It’s incredibly exciting,” Rea said last year of the company’s growth. “When I started, my hope was that I could help counsel people and help them save money on their medications and make a living similar to what my pharmacist salary was at the time. … To see what it’s become is very humbling.”
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