At lool we strongly believe in the power of vertical SaaS, leveraging software to modernize more traditional industries and address trillions of dollars in inefficiencies. Perhaps the most inefficient industry in the world today is the US healthcare system, creating huge opportunities for entrepreneurs who have the rare combination of domain expertise and product vision.
A few months ago we were fortunate to connect with David Zilberman, a true healthcare industry insider, who spent the past six years working with McKesson, the world’s leading pharmaceutical wholesaler. After being involved in hundreds of millions worth of transactions with large pharma buyers (health systems, pharmacies, and clinics) and manufacturers, David identified significant gaps in today’s direct medication procurement process — which he is now on a mission to solve.
In the US alone, over $450b of pharmaceuticals flow from suppliers to health systems, pharmacies, and clinics, before being dispensed to patients and consumers. $300b of this volume is dominated by the “Big Three” wholesalers, McKesson, Cardinal Health and AmerisourceBergen, who have developed software to streamline the procurement process for supplier and buyers alike. By digitizing the procurement process for their customers, The Big Three have given providers gains in productivity (no need to learn each supplier’s specific way of transacting), increased visibility (tracking each order through a unified dashboard), better compliance (complex regulations can cost health systems millions in fines if pharma procurement lacks an audit trail), and IT efficiency gains (no need to allocate internal R&D resources to create a management tool).
Unfortunately for providers and consumers, the remaining $150b is not managed by purpose-built software. $100b falls into the high-volume, low-price category, and flows through less sophisticated wholesale channels that lack the R&D resources to build effective software, while $50b falls into the low-volume, high price category — including specialty, shortage, compounded, or other limited distribution drugs, for which no aggregator exists. The $50b piece is extremely fragmented, resulting from recent scientific advances that have created hundreds of “boutique” manufacturers specializing in a specific condition or therapeutic approach and prefer to avoid wholesale channels for financial reasons. Across the board, this $150b in flow is managed largely via fax 🤯, email, phone, spreadsheets and disparate portals, increasing the cost of procurement and distribution while decreasing access to medicine (often life-saving) for patients. Both buyers and sellers are feeling the pain of a broken and inefficient direct supply chain, which is ultimately impacting the cost of healthcare and patient access to critical medications. Enter GraphiteRx.
GraphiteRx’s marketplace already aggregates more than one hundred direct (non-wholesaler) suppliers and provides health systems with a SaaS platform that increases efficiency, visibility control, and compliance for the entire procurement cycle. With GraphiteRx, providers can improve patient access to medication while reducing the cost of healthcare through supply-chain efficiencies.
GraphiteRx’s solution hit such a nerve that even several sophisticated buyers who were building their own custom solutions to tackle this see the advantage in migrating to the GraphiteRx platform. Take for example an Academic Hospital and Regional Health System which works with over a hundred direct vendors outside of their primary wholesaler relationship. Until meeting GraphiteRx, this Health System was using internal IT resources to maintain its own direct procurement management software. After evaluating GraphiteRx, this leading Health System is scrapping its home-grown system project and using GraphiteRx as its platform for direct pharmacy procurement for over 10 sites of care.
After launching commercially a few months ago, GraphiteRx is currently working with a number of leading health systems (including one of the top 10 largest IDNs), academic hospitals and multiple community care hospitals, which collectively operate hundreds of sites of care and over $250m in direct (non-wholesaler) drug spend. Just in the past few months, the company has built an active pipeline of opportunities, which collectively represent over 500 sites of care and $1.25b in GMV.
Even more important than the multi-billion dollar market opportunity to disrupt a large and stagnant supply chain with a SaaS and fintech-enabled marketplace approach, we were really impressed by the team that David was able to build around his vision. GraphiteRx team members and advisors have deep domain expertise working with leading organizations in healthcare including, McKesson, Cardinal, AmeriSourceBergen, Change Healthcare, MedAssets, Vizient, Model N and HMS.
We’re excited to support David and his team in growing GraphiteRx into a leading marketplace platform for pharmaceuticals to decrease healthcare costs and improve medication accessibility.