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A.J. Loiacono serves as the EVP of Sales and Marketing. Prior to co-founding Truveris, A.J. was an SVP and Partner with SMS, a software development firm specializing in software-as-a-service (SaaS). He also served as the President of Victrix LLC, an information technology company providing support and implementation services for enterprise resource planning (ERP) systems.
Truveris is a health information technology company delivering pharmacy data validation, analytics and pricing solutions to clients such as consulting firms, unions, self-insured corporations, pharmacy benefit managers (PBMs) and health plans. Through a SaaS (software-as-a-service) platform, Truveris adjudicates prescription claims and provides clients with valuable insights on drug spend.
MO: How did you come up with the idea for Truveris? Was it a concept you considered developing for a long time or did you have a moment of realization?
A.J.: Developing Truveris was a fortunate accident. My co-founder, Leon Greene, and I were vetting a business idea with a healthcare executive, and while we were chatting he started lamenting about all of the issues he used to have managing his company’s pharmacy benefits. Specifically, he ran a regional health care company and each week he would blindly pay the invoice from his pharmacy benefit manager (PBM). Due to the volume and complexity of the pharmacy claims, his company had no way to verify his PBM’s invoice. Furthermore, his PBM required payment within 24-48 hours of receiving the invoice.
After listening to his story, we immediately realized our original idea wasn’t our future. Instead, we decided to create a company to validate PBM transactions and tackle this $400 billion market. This was a great idea, but Leon and I are interlopers in the health care industry. We have backgrounds in finance and technology, so we needed to find an industry expert. Thankfully, we were introduced to Tom Staloch, our other co-founder, who provided the necessary experience and gave us the confidence to found Truveris.
MO: Can you talk a bit about the development process from having the initial concept for Truveris to getting it to market? What were some of the challenges you faced along the way and how did you overcome them?
A.J.: To frame my response, you need to understand the PBM industry was an oligopoly controlled by three companies: Medco, Caremark and Express Scripts. With the merger between Medco and Express Scripts in 2012, the oligopoly is now a duopoly. In short, you have a completely unregulated industry controlled by a duopoly. Furthermore, these companies have enjoyed no one looking over their shoulder for twenty years. Approximately one in 200 plans (companies, unions, health care companies, etc.) audit their pharmacy benefits in a given year, and many auditors rely upon outdated sample methodologies.
So, Truveris shows up in 2011 and starts telling potential clients that is has the ability to not only review 100 percent of all prescription claims for cost accuracy, but also to do so in real time. Early on, we had a few interested parties, but when a potential client would discuss the idea with a PBM the response was always: “No Way!” They felt threatened. If a $50 billion company keeps a dossier on your company and staff, you know you must have them worried about the potential impact of your technology. Truveris had a service (TruGuard) that could review prescription costs before payments would be issued to the PBM, but the PBMs would point to their contracts and say, “According to your contract you may only audit once per year.” We tried to explain that there was a distinct difference between an audit and an ongoing bill review, but most PBMs wouldn’t listen to our logic. Only a very large benefit plan could push a PBM into making the necessary contractual concessions, but the reality was the entire small-to-mid-sized market was suddenly off limits.
What defines a great company is its ability to transform adversity into opportunity. We realized the source of all of our headaches was the PBM contract, and that the only way to correct the situation was for Truveris to become involved in the RFP process. In 2012 we released a SaaS platform (TruBid) for brokers and consultants to run pharmacy benefit RFPs. By being involved with the RFP process, we could ensure the PBM contracts provided clients with the appropriate data and audit rights. Suddenly, the mid-to-small market was reopened and we, TruBid, became an overnight success.
MO: How did you know when to seek investment?
A.J.: I sought investment when I became sick of eating Ramen Pride for lunch and we finally had a half-dozen paying customers using our technology. The founders had reached their financial straining point, but thankfully we had simultaneously proven the viability of our business model. To tackle the inefficiencies of the PBM industry, we recognized it could be a long battle and that we would require an appropriate level of financial reserves. Thankfully, we partnered with VCs that shared our vision and recognized the long-term potential of our organization.
MO: How does Truveris work? Who is your target market?
A.J.: Every two weeks in the US, $12 billion in prescription claims are processed, and everyone–including the Federal Government–pays their invoices blindly. Companies, unions, health insurers–they all pay their PBM bills without any oversight. The reason this bizarre process occurs is because: 1) this is the way it has always worked, 2) the PBMs enjoy the cash-flow of this business model, and 3) until Truveris, there wasn’t a technology capable of providing a concurrent validation of PBM claim processing.
The easiest way to understand what Truveris does is to check out these fun and insightful videos developed by our team:
MO: During your first year of business Truveris validated nearly 250,000 claims. In your second year, that number grew to 10 million claims. This year you will clear 300 million claims. Can you share how you’ve properly scaled and executed your business model to accommodate such remarkable growth?
A.J.: When we discuss the scalability of our platform, Bertrand, our lead developer, and the rest of his extraordinary team deserve all the praise. We utilize elastic computing to ensure that we have the necessary processing and storage capacity, but it is our proprietary technology and innovative architecture that enables us to handle and grow our demand.
From a business perspective, our sales and operations teams needed to find harmony to survive. There are times when the sales team is extraordinarily busy, but the operations team is enjoying a lull in the implementation process, and vice-versa. Through cross-functional training, the operations and sales teams have learned to provide secondary support for each other. For the most part, our yin-yang relationship has enabled us to tackle difficult goals with modest resources.
MO: What’s the most exciting thing on the horizon for Truveris?
A.J.: We continue to innovate at Truveris and we recently released our analytics and re-pricing platform (TruReport) for the health care plans. By listening to our clients we have developed some great products, but more importantly we continue drive efficiencies. Our goal is to process over 600 million claims in 2013, but I believe the most exciting news is we are starting see the industry change. When I see companies, universities, unions, and health plans seeking our validation or analytics services, I know our message is being heard. Even more exciting, is when we see a prestigious institution, such as the University of Michigan, issuing an RFP that requires biweekly reviews of PBM invoices. Just a year ago, the industry never saw requests like this. In the end, we still stock Ramen Pride in the break room at work, but we do it because it tastes good, not because it is a fiscal necessity.