IFC Health ™ – “An Independent Formulary Company”


Misaligned Big 3 PBM (Express Scripts, CVS Caremark, OptumRx) business model dependent on retained rebates resulting in PBM national formularies that are far from cost-effective. (see founder’s 15-year analysis of PBM misalignment at nu-retail.com )  

Value Proposition:

Misaligned national formularies of the Big 3 PBMs which are uncritically adopted by plan sponsors

Deliver 10%-plus incremental drug trend dollar reduction via changes to client’s PBM-generated formulary in four targeted therapeutic classes and via exclusion of scores of individual high-priced orphan drugs and off-patent brand drugs.

Total PMPY Rx Spend — $1,100 (source Express Scripts Trend Report 2016)

Our Target 20% trend reduction – $220 PMPY (per member per year)

How to Achieve Target: work with clients to increase formulary exclusions of misaligned Big 3 PBMs national formularies from 154 to 254 without loss in efficacy.


Initial Product-Market Fit:

Product Fit: Redesign four therapeutic classes having a combination of high cost and high misalignment plus other special situations

  • Diabetes
  • Oncology
  • Autoimmune
  • Multiple Sclerosis
  • Hard look at included orphan drugs, moving scores from included to excluded with override procedures
  • Hard look at whole cost-effectiveness of indications-based formularies
  • Exclude remaining small molecule off-patent brands with generic substitutes


CVS Chart — 2018  Without Formulary Exclusion – $1,300 PMPY  — With Exclusion – $1,067

CVS achieved 19%  PMPY drug benefit costs with basic formulary exclusion

IFC Value Proposition — achieve another 20% PMPY reduction by excluding an addition 100 drugs. 






Market Fit: Drug benefit plans of large self-insured entities — Fortune 1000 companies — 20,000 employees

  • Big payers “mad as hell”  with current PBMs but understand “you can’t throw out the baby with the bathwater”
  • looking to carve-out “brains” of benefits management while retaining the incumbents to manage the “plumbing” (what likely drives BezosCare)



Source: Venrock 2018 Survey of Healthcare CEOs



A Virtual P&T Committee of World Class MDs and PhDs:

  • In essence, company is an independent consulting company that is allowed legally in PBM contracts to make modifications to PBM national formularies designed initially for efficacy by PBM P&T (Pharmacy and Therapeutics) Committee but later misaligned by a “Value Assessment Committee” driven by rebate considerations
  • Link to Express Scripts White Paper acknowledging right of client to customize:
    • “Express Scripts’ plan sponsors often adopt Express Scripts-developed formularies as their own or use them as the foundation for their own custom formularies”. (p.4)
  • World class MDs and PhDs with signed affidavits as to no conflicts of interests
  • Company connected with collaborative tools including licenced AI for search and decision-making
  • Outcomes based pay — fractional ownership points for all MDs and PhDs on P&T Committee


Investment and Valuation Considerations:

  • Positive — need only one angel or seed round, profitable in Year 2, with possible exit in Year 3 at 10x ROI to investors
  • Negative — subject to “efficient market hypothesis” — exploiting an inefficient market leads to elimination of inefficiency  
  • Negative — Copyable IP
  • Positive —  early success with Fortune 500 companies at trend management through formulary modification can lead to other opportunities to spearhead innovation  — outcomes-based pricing, patient adherence micropayments, etc.



Established PBM Consultants — opaque business models with brokerage fees paid by Big 3 PBMs

  • Pharmaceutical Strategies Group (PSG)
  • Milliman
  • Burchfield Group

Established Employee Benefits Consultants — too big –no real Rx formulary focus which is “sweet spot” for cost reduction

  • Willis Towers Watson
  • Aon Hewitt
  • PwC
  • Mercer

New Generation of VC funded Startups —No real Rx formulary focus which is “sweet spot” for cost reduction

  • SmithRx — $9 Million total with Series A lead Founders Fund
  • Truvesis — $64 Million total with Series D lead by McKesson Ventures
  • RxAdvance  — funding by John Scully and Centene 


Company Business Model:

Value Proposition in Numbers:

  • Total PMPY Rx Spend — $1,100 (source Express Scripts Trend Report 2016)
  • Our Target 20% trend reduction – $220
  • How to Achieve Target: work with clients to increase formulary exclusion list of misaligned Big 3 PBMs from 154 to 254 without loss in efficacy.

Business Model Revenue:

$20 PMPY

Revenue Projection:

Total revenue per company with 10,000 members = $ 200,000

Total revenue for company with 100,000 members = $2,000,000

  • FYE First Year           1 client — $200,000
  • FYE Second year      3 clients —  $600,000  
  • FYE Third year         8 clients — $3,400,000 including 1 big co.

Valuation Projections:

Valuation — low end of SaaS –  4 times ARR

  • Year 1  —     $800,000
  • Year 2 —    $2,400,000
  • Year 3 —   $13,400,000 –cash flow positive



Published by Lawrence W. Abrams

Economist, Ph.D. WashU StL, B.A Amherst. I write at the intersection of economics, finance, accounting and high tech. I have been a critic of PBMs since 2003. I have received no remuneration writing these papers.

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