A staggering $453 billion will be spent on pharmaceutical products in 2018 in the United States per Statista analyst estimates. Ten years ago, that amount was $291 billion. With 326 million Americans, that is nearly $1,400 per capita. Into this marketplace enters Aspen Health, our most recent “semi-stealth” investment which is focused on enabling pharmacists to practice to their fullest potential.
Much has been made about the devastating opioid crisis, and appropriately so. What has come to light in this current raging debate has been greater scrutiny of the various pharmaceutical distribution channels and whether the role of the pharmacist can be expanded to play a more meaningful patient-centric role. The increased complexity of the mix of therapeutics as increasingly more of them move to biologics and specialty drugs (now 42% of pharma revenues) necessitates the need for competent clinical pharmacy practices.
Aspen Health is founded by David Medvedeff, who has an unrivaled background in the pharmacy field, having received numerous industry awards and led many of the relevant trade associations, in addition to having started multiple successful companies. David exemplifies the profile so many of the Flare Capital CEOs embody which is a profound industry depth, giving them a set of product / market insights that allow them to see around corners. Success in the healthcare technology sector is absolutely driven by CEOs who understand the “voice-of-the-customer” better than anyone else.
Another critical element of this investment, and a common occurrence in the Flare Capital portfolio, is that our co-investor is one of our strategic LPs in the fund. In the healthcare technology sector, having strategics as early stage investors can be very powerful and drive important early product revenue.
According to the Bureau of Labor Statistics and the Occupational Outlook Handbook, there are 312,500 pharmacists in the United States. This is expected to grow by more than 6% per year through 2026, driven in large measure by the rapid opening of pharmacist schools in the last decade. There are over 130 accredited pharmacist colleges in the country, graduating nearly 15,000 each year. Arguably there are now too many pharmacists entering the field. In 2017, annual compensation was $124,000 and anecdotally, new graduates are being offered starting salaries less than $100,000, causing many of them to look for other platforms to practice. The road to becoming a pharmacist is hard: four years of college, followed by four years to earn a doctorate, and then at least one to two years of residency (not counting another one to three years to receive a fellowship). And all of that just to walk into a haymaker as salaries are dropping precipitously.
Over 65% of pharmacists operate in the retail setting, while 22% are in hospitals and the balance in supply chain or on-line organizations. The acceleration into value-based contracting and supply agreements, increasingly dependent on a depth of robust data sets, underscores the complexity now in the field. The aging population and more treatments being sent directly to the home exacerbate the need for high quality, consistent pharmacy practices. Complex therapies are at risk of overwhelming the community retail pharmacist. A more dynamic and coordinated pharmacist network will help bridge gaps in care. David’s insights revolve around how best to leverage the pharmacist in this rapidly changing marketplace.
The goals to improve patient compliance, reduce medication errors and improve chronic care management are only more pressing now. Improved interoperability and more coordinated care networks allows the pharmacist to better “plug in” and serve as a cornerstone of the patient’s extended care team. And as is well-understood by all, the pharmacist continues to be the first line of contact with patients. Making that capability “always on” and of high quality is essential.
Over 130 years ago, two other pharmacists changed the world. In 1885, the young pharmacist Charles Alderton brewed Dr. Pepper in Waco, TX to drive foot traffic to his counter. One year later, John Pemberton, who was wounded in the Civil War, concocted Coca Cola in Columbus, GA as a substitute for his morphine habit. Flare Capital is excited to partner with David and the Aspen Health team as they work their magic to build an equally important (and healthier) company.