Ro, the start-up that started out by shipping generic erectile dysfunction medicine, has a far bigger mission in mind.
The company has been quietly opening up pharmacies across the country in an effort to ship the most common generic medications at a flat rate that most Americans can afford. It's now testing a new medication-delivery service with a small number of its users that offers more than 500 generic medications for $5 per medication per month, according to a document seen by CNBC and a source familiar with the company's plans. The $5 price also includes shipping, and the company does not accept insurance. Ro plans to launch the program to everyone in the coming weeks, a person familiar with the company's plans said.
Until recently, pharmacists were banned from informing patients about a more affordable cash price that was available. President Donald Trump has moved to remove those "gag orders," but many pharmacists can still only talk to patients about their options if they're asked. All of that confusion has paved the way for start-ups like Ro and large retailers to offer consumers greater price transparency around their medications. Walmart offers $4 "lowest of" pricing on its website, and private companies like GoodRx offers discount cards to consumers who don't have insurance or have high-deductible plans.
Ro currently offers two brands catering to men and women called Roman and Rory, respectively. It's backed by more than $170 million in capital so far. It offers treatments symptoms like erectile dysfunction, hot flashes or hair loss, and it has doctors that prescribe medications for these patients virtually. Its drug prices will vary, according to the company's website, but the cost of the physician visit is $15.
The new offerings from Ro include some of the most commonly prescribed drugs by U.S. doctors such as Metformin for managing blood sugar, and Atorvastatin, which is routinely prescribed to people with high cholesterol, the document shows.
Ro has said that it does not take insurance, and instead asks consumers to pay out of pocket. That might be more expensive for people with high-quality insurance for some medications. But according to a 2017 New York Times investigation, it can often be cheaper to pay for prescriptions out of pocket.
"Offering the most affordable way to get life-saving medications delivered to your door brings Ro one step closer to our mission of becoming a patient's first call," said the company's CEO Zachariah Reitano, in an emailed statement to confirm the pilot program.
The company currently has three pharmacies it can ship from, which are listed publicly via state pharmacy boards. It is planning to expand to more than 10 by the end of the year, said a person familiar with Ro's plans. That might also make it competitive with Amazon-owned PillPack if the company moves to ship medications overnight and not just on a 30-day cycle.
Ro is hiring pharmacists and pharmacy technicians, according to its website. But it also has multiple job listings for doctors. That indicates that Ro's strategy is to bring its medical infrastructure in-house. Most of Ro's competitors contract with doctors or use third-party networks, rather than hiring physicians. Very few will own and operate pharmacies. For that reason, start-ups like TruePill have recently emerged to manage the pharmacy layer for other consumer health start-ups.
Ro's challenge will be to serve patients with serious health issues who rely on seeing their doctor in person. The generic medications it plans to ship are often used by patients who might be older and more chronically ill, as opposed to the company's typical millennial customer.
To reach these users, Ro will need to convince these patients' existing doctors offices to use one of its pharmacies rather than sending them to a pharmacy like CVS or Walgreens. Ro doesn't currently offer in-person medical services, meaning that it won't be replacing patients' family doctors any time soon. That could be a challenge, according to pharmacy experts like Stephen Buck, who's also the founder of a website called cancersurvivalrates:
"In order to make this a profitable pharmacy business, Ro will need to scale up to tens of millions of prescriptions to achieve scale-based efficiencies," said Buck. "But if customers like the experience, they may be able to get there pretty fast."
Some doctors have criticized companies like Ro and its competitors, going so far as to deem these services "restaurant menu medicine," according to The New York Times. Their fear is that consumer health start-ups will move medicine into a future where many consumers don't see as much value in a long-term relationship with a medical professional.
But the physicians working in telemedicine say that such technology presents a way for them to care for healthier patients remotely, so they're not flooding overburdened hospitals and clinics. Many argue that there's also an opportunity to increasingly treat patients with chronic illnesses virtually, given that these patients are the most costly for the health care system, according to the CDC. Companies like Omada Health have published clinical studies to show that millions of people with diabetes could see improved outcomes if they have access to doctors and health coaches online.
Ro's CEO Reitano recently made the case to CNBC that virtual care offers a way to reach rural patients, who might be miles away from the nearest doctor.
"It enables a physician to treat patients in care deserts and increases access to care where there aren't enough providers available," he said.