2033 – Transforming Patient Care: The Digital Pharmacy Revolution with CaryHealth’s Areo Nazari

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1:05With us right now is Ario Nazari. Ario, you are the co-founder and CEO at Cary Health. You're found on the web at Cary.health. Cary is C-A-R-Y.health. It's great to have you, Ario. Thanks for having me, Josh. Yeah. Well, give us an overview of the work you do, who you serve, your impact in the world. Yeah. So Cary Health serves health plans and manufacturers, and we are a digital pharmacy ecosystem that is B2B2C. So we work with health plans, manufacturers, and their patients. And we really do a lot around data analytics, but with a specific focus around digital pharmacy and pharmacy fulfillment.

1:49Yeah. Well, obviously, this is a world that you've been in for quite some time. For those of us who are a little bit on the outside, do you mind maybe just giving us a little state of the union or kind of what's going on in your world? Because obviously, anything related to drug and pharmacy right now. There's so much disruption, I think, and so much movement going on. So I appreciate your insight. Yeah. I'll give a quick high level. So in the pharmacy space, you have about anywhere from $500 to$600 billion in revenue going through the system. And roughly, I would say about 70 % of that is what's called specialty pharmacy.

2:36And specialty pharmacy specifically is typically high cost drugs. So think about drugs that cost anywhere from$1 ,000 per bottle or unit, and more, and believe it or not, can go up to a million dollars, right, when you started getting the gene therapy. And so, you know, we, we've really started operating in that specialty pharmacy space. And so we are working with manufacturers that have drugs that are called limited distribution drugs, rare and orphan drugs. So these are medications that you probably would not be able to get at your local CVS or Walgreens. They're typically stocked by specialty pharmacies like ourselves.

3:17And so limited distribution refers to the fact that only a few pharmacies can actually service those patients and medications. So that's the space we operate in as far as on the manufacturing side. And on the health plan side, you know, health plans, we typically work with our regional health plans. For the most part, not to say that we can't work with larger, but sort of our sweet spot and the personas we go after operate in the regional health plan space. So, you know, one of our big clients is Care First Blue Cross Blue Shield in the D.C., Maryland, Virginia market. And, you know, they operate different plans.

3:54So they serve as commercial plans, federal employee plans, one of their larger plans, Medicaid. So they do managed care Medicaid. So, you know, working with patients of state Medicaid plans. And they also have Medicare plans. Right now, we're primarily working with Medicaid and Medicare patients. And the reason for that is because a lot of focus goes into what's called quality measures. and quality measures in both Medicaid and Medicare really are benchmarks clinically in how well a health plan is performing as far as patient health. Now, there are also customer service metrics as well that go into these, but we focus primarily on clinical quality measures.

4:42So, and Ario, I'm seeing information, so I'm on your website right now, You're talking about leveraging AI technology and AI models. You claim to have a proprietary AI model. Help me connect the dots there. I just want to make sure I understand exactly where you fit in. Yeah. So our core offering is sort of our digital pharmacy platform, but we do have another product called Claire, C-L-A-I-R, and that's at askclaire.ai. Clare is a clinical reference leveraging our AI model, our proprietary model. And the idea is, you know, you could use ChatGPT to ask clinical questions, right? And the issue there is there are not guardrails in place to ensure you're getting an answer from consistent sources, right?

5:32Like GPT, for instance, uses the entire web. Like it'll scrape Google for answers. The idea with CLER is we have a curated database of clinical documents, 200 million plus clinical studies, 2 million drug interactions, every FDA label. We have clinical guidelines as an example, so I think there's hundreds of clinical guidelines. So the idea is you know every time you're getting an answer from one of those references, and we're providing that reference each time you ask a question so you can validate the answer that we give you. So that's really the core of the work we're doing in generative AI.

6:10And we've taken Claire and have really incorporated it throughout our infrastructure as a co-pilot. So whether we're working with a manufacturing client or a health plan client, Claire lives within our other products as a co-pilot and can not only answer clinical questions, but we have a lot of other nice clinical features to help streamline efficiency. And we also help with just generally helping make tasks like writing responses, clinical responses more efficient. So as an example, we can help streamline responding to questions from healthcare providers, giving that clinical answer, providing a reference.

6:46We also have an AI MTM product is what it's called. And that's basically suggesting medications to add, remove, or modify to a patient's regimen to ensure that they're always taking optimal medication. So we're putting a lot of stock generally in AI and we believe it's going to be better. So, you know, I think really the majority of companies out there, if not every company, has to at least understand AI and be involved in AI at some point and really put stock into it as far as making sure you're leveraging it for efficiency and automation. And so, you know, we're no different. And I think that's what really differentiates us is just, you know, ensuring that we're automating processes and helping our partners as well, improve efficiency and lower costs.

7:29Yeah. Well, and I think that this is, you know, as consumers, I mean, this is just something that we are going to be seeing more and more. I know recently I went into the doctor and, you know, had a question or concern about something and they were able to enter in all the data, but I thought it was really interesting that the doctor came back with her opinion, But then she said, and we also entered everything through and the AI and everything took every bit of data that we have access to and also agreed with my, you know, my prognosis of this. situation. Like that is exciting, right? Because you think about the limitations of the human mind and the ability to, you know, understand and encapsulate 200 million, you know, documents or pieces of information or journal articles or that sort of thing.

8:21That's impossible to do. And so now it's really going to be fun, I think, to watch the evolution here. Because I think that ultimately, if we can provide better outcomes for patients faster, everybody wins. Reduce cost. You know, we're not making mistakes there. We're not going down rabbit holes. You know, another thing I think a lot of people have concerns about is, you know, just am I getting just this doctor's opinion because they're a big fan of XYZ or is this actual good science? I have relatives that are doctors And they said, you know, they said today, I don't think the medical field has ever gotten so much pushback because everybody with a search engine and, you know, follow their favorite influencers and bloggers all of a sudden has a bunch of great medical advice to come into their doctor with.

9:12I think evidence-based answers are more important than ever because of that reason, right? So, and look, every healthcare provider, right, from physicians to dentists to pharmacists, you go to school to learn how to learn, right? You're not there to memorize and learn how to memorize information. You're there to learn how to learn so you can continuously learn, absorb new information, new studies, and continuously adjust your position on whatever you're evaluating. And so with something like Claire, the idea is not to replace. It is to aid. And to your point, right, there's so much information out there.

9:43You can't possibly memorize everything. And your brain does not have an API connection to every clinical guideline out there or every study, right? So you're not necessarily syncing with the latest in information. Certainly, you're doing continuing education, but not at the rate of what something like Claire can update. So Claire will update instantly when there's a new study available. I say instantly. It's probably next day, but let's just say instantly. But yeah, I mean, in general, I think it's important to have a tool available that can give you all those latest studies, all the latest FDA information, and to present to your patient.

10:15And to some degree, this is great, right? Patients are making informed decisions and really trying to challenge in some ways, right, to make sure that they're getting the best care possible. So I think it's a good thing, right? And so as a physician, if you can come in and say, look, this is the best way to treat your disease, and here's the evidence that suggests that, and you can actually forward them that evidence, I think it's a win-win for everyone. Now, Kerry started off as a B2C, but then along the way, you found, obviously, an incredible opportunity by expanding into B2B. Do you mind sharing a little bit about that evolution?

10:51Because I think there's a lot of us that are like that. You know, we initially like I and I think about like our touches. Right. So most of us are like, I'm a consumer myself and I have these consumer experiences or this is right here in my face. It's part of my world. So, yeah, it can be easier to go to B2C first because we have so much familiarity with it. But then once you get into the world a little bit and you learn who the players are and where the big opportunities are, I'm kind of making some assumptions here. You made the right assumption. But I've seen this life cycle quite a few times.

11:25Yeah, you made the right assumptions. So my partner came from the B2B space. He started a company called Kinetica. It's a geospatial database. And so he had a lot of experiences with go-to-market, product market fit. And I think that was invaluable as we went through our journey with CarryRx initially. And so I'll give you the backstory. But we launched in 2017 as CarryRx. I'm a pharmacist myself. And so I saw the challenges in the space with not just prescription delivery, but generally a lack of digital experiences for patients, but also for pharmacists internally working at pharmacies. That was me, myself, working as a pharmacist.

12:07I just saw the lack of digital infrastructure. And so we launched CarrierX 2017 with the idea of streamlining internal operations in order to give the best possible digital experience to patients. And the idea was to have a same day delivery Uber of pharmacy experience, if you will, for patients so they could get prescriptions delivered to their home within the hour or same day, really up to them. Right. So scheduled deliveries are within the hour. And everything was great, honestly. Right. The experience was amazing. And we still operate that business today. And so we still have that same day delivery capability in the D.C.

12:40metro area. and reviews were amazing. Retention was over 90%. Patients were raving that we were just becoming an important integral part of their lives. And they just love the fact they didn't have to walk into a pharmacy anymore and deal with everything associated with that. However, from a business perspective, and we knew going in, unit economics could be a challenge. The margin was pretty tight and we were fortunate to be running above the average margin. And so industry averages are around 22 % or so. And for the first couple of years, we were running at about 30%. But there was a lot of scrappy work going into making sure that stayed at 30%, right?

13:19Both on the COGS side, so keeping our acquisition costs low, as well as targeted sales, ensuring we're getting high value therapeutics from specific doctors. And so we knew that wasn't scalable. And so I think this is like kind of one lesson for every entrepreneur is, you know, be brutally honest with your business. and if it's scalable, right? Is this something that you can raise capital on or using your cashflow scale, right? Either one, is this a VC investable, number one? Or two, can you use the cashflow to keep expanding? And I don't think with that first business model, we could do either.

13:54I don't think it was investable. Although a few in the space have invested very large funds and you're just deferring the same problems. But from a cashflow perspective, there wasn't enough cashflow to continue scaling. um, just based on free cash. So, um, you know, we took a step back, we were honest as a team and saying, Hey, like this was a great idea and patients love it, but this might not be the right way to approach it. And so we took a step back and just like you said, we looked at the space, follow the money, right? Like we looked at the space. And like I said earlier in the call here, um, you know, 70 % of the space is specialty pharmacy.

14:30And, um, if you can't beat them, join them. Right. So we started working with the people that dictate margin. Let's go work with manufacturers. And let's go work with health plans who are, you know, heading up reimbursement. But then we saw a bigger opportunity, not just to do pharmacy fulfillment and patient experience, but also to offer other SaaS products. And so I, you know, I touched on some of our products, but we do have other offerings that we give to those enterprise customers. And around 2019 is when we started this pivot, it's gone well. You know, a lot of our thesis, I guess you could say, has been proven right and that, you know, it's just a big space.

15:06There's a lot of opportunity. And that same kind of initial problem we recognized with digital experiences for patients and pharmacists, it held true also on the other side for those enterprise customers. Just a lack of digital pharmacy infrastructure at scale was really the big problem we were going after and able to solve. So, you know, we're very fortunate that we have a great team. We came together. We could have wrapped up shop and just said, all right, we gave it a good try. but this is not a great business scale up. We could have also just tried to stick it out to the end and just eventually gone out of business just because cash flow wouldn't have been there.

15:40But we had the foresight to kind of take a step back and pivot and it's turned out well. So a lot of folks who listen to this podcast, they're researching you. They're researching, Kerry. They found you. They found this conversation. So obviously there's several ways that you engage, but particularly kind of in the B2B world, should that person be listening? Who should be reaching out? And what do those initial conversations generally look like? Yeah, I mean, as far as who we look to work with, it's manufacturers, so pharmaceutical manufacturers. We work with small, medium, and large manufacturers for fulfillment.

16:22You know, really, we're focusing on rare and orphaned limited distribution drugs, so small and medium size really fit well. Some of our generative AI products include Claire and another product called OnLabel, which could be a fit for small to large manufacturers. This is a product that works with MetAffairs teams, MetInfo teams, sales teams, and field teams. And on the health plan side, we work with, like I said, regional health plans, oftentimes managed care entities. We're usually working with personas like, you know, a director or VP of pharmacy, a chief clinical officer, CFOs as well. Right.

16:58So, you know, our program, our platform's excellent at really helping lower expenditure, but also get a nice consolidated view of all your data in one place and understanding how you're allocating expenditure. So, yeah, as well, we're now working with health systems. We're working on bringing our first health system client. And this is for our product, Claire. And using it as a clinical reference for your team. One of the leading products today in the space is UpToDate. And the idea is to use Clare as something that can give you an answer more on the fly. So it's a quicker answer. It gives you references quickly.

17:34You don't have to dig and dig for that right clinical question and answer. So it's a more efficient tool. And we also are able to integrate Clare into workflow. Kind of like the example you gave about your doctor saying they incorporate all that into place. And so we can do the same thing. We can incorporate Clare into workflow. whether it's for AI MTMs, which could play a great role in ICUs, right? So as you're doing rounds and you want to make sure you have the right pharmacotherapy on a per patient basis, this can help, Claire can help streamline it with AI MTM and say, hey, like these medications should be modified for dosing or removed, or this medication should be added.

18:09And in the ICU, removing medications is the way you get patients out of the ICU. So it could play a huge role there. We also have a product that can help streamline how we do antibiograms. So getting resistance data and implementing the latest. But yeah, there's a lot of different use cases. I don't have to go into all, but we're really looking to talk to health systems as well. We've got all the URLs for the websites. Because the main website is cari.health. And from there, and again, that's cari.health. And from there, you'll see the various products. Obviously, we talked about Claire, Terry RX.

18:47Those are all linked there. And so, again, great, great conversation. Ario Nazeri, congratulations on your success. Congratulations, by the way, on your significant ranking on the Inc. 5000. So it's great to see the growth and thank you for continuing to make the world a better place, both kind of behind the scenes and ultimately for consumers. Thanks so much. Yeah, we were surprised and very, very excited to reach 82 on the Inc. 5000 and also be the fastest growing company in Washington, D.C. So and number two, which is amazing. So we're really excited about that and hope to keep it going. Awesome.

19:28Ario Nazeri, co-founder and CEO at Cary Health. Ario, thank you for joining us. Thanks, Josh. Appreciate it.

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