This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers. Sign up to get it delivered free to your inbox.
Some five years ago, my health insurance decided to be particularly horrible. Medication that typically cost $5 to $10 suddenly promised to cut a $130 or so hole in my wallet at the usual pharmacy chain. I cursed the American medical system, rationalized the cost, and prepared to bite the bullet. But as I pulled out my credit card, the pharmacist, like some fantastical drug-dealing Robinhood, leaned over and whispered: “Search up GoodRx.”
I did. And like magic, my bill shrank to about $22. Elated, I handed over my card with considerably more willingness. In the back of my mind however, I couldn’t help but wonder: How did that work? After all, there is no such thing as free lunch.
My colleague Erika Fry dove into the topic for her most recent feature “GoodRx helps people afford drugs. But is it improving health care or profiting off of a broken system?” Backed by the likes of Francisco Partners, GoodRx went public last year and is valued at about $15.7 billion in the public markets.
Here is effectively how it works. Before you read, know that PBMs, or pharmacy benefit managers, are middlemen that negotiate how much consumers owe for medication and how much each of the players—insurers, manufacturers, and pharmacies—are paid. They aim to keep drug spending in check, but the debate is still out on their success.
“GoodRx is able to monetize the discounts, somewhat ironically, through its partnership with the various PBMs. When a consumer seeks out a lower-price medication at a particular pharmacy with a GoodRx coupon, the PBM with that contracted price processes the claim and rewards GoodRx with a sort of “referral fee,” explains Hirsch. (These fees account for 90% of GoodRx’s revenues.) It can be a sweet deal for PBMs in that they’re able to elbow their way in and pick up revenue on transactions that they previously had no part in.
‘[GoodRx] is kind of a front for PBMs,’ explains Geoffrey Joyce, a health economist and director of health policy at the University of Southern California’s Schaeffer Center. ‘They provide the benefits a PBM might provide for uninsured consumers.’ Those benefits can be substantial. “Uninsured consumers, they’re a big cash cow for pharmacies,” says Joyce. ‘They pay ridiculously high prices [for generic drugs].’”
I haven’t been the only one to benefit from its model. GoodRx says it has saved Americans over $25 billion on prescription drugs since 2011 (though some critics argue it could be less).
Still, the model is more of a pain reliever than a cure for the messy state of the U.S. Health care system—a sentiment that GoodRx co-CEO and cofounder Doug Hirsch might agree with. “To some extent… our success is a barometer of how broken the health care system is,” he told Erika.
I can’t help but wonder where GoodRx goes in the long, long term. The company is doing a good for many who are dealing with ballooning medication costs, but it also has a vested interest in the confusing state of the health care system. It reminds me a bit of where tax preparation software providers like H&R Block or TurboTax provider Intuit sit today. Certainly, their software made filing taxes easier for many, but the duo have also lobbied heavily to maintain the status quo within the byzantine U.S. Tax system.
But the challenge within the health care system is likely much bigger than that of tax filings. And GoodRx, for its part, has been expanding into other businesses including telehealth and connecting consumers with branded pharmaceuticals. Read more.
Lucinda Shen
Twitter: @shenlucinda
Email: [email protected]
VENTURE DEALS
- MessageBird, an Amsterdam-based software communications company, raised $800 million. Investors included Eurazeo, Tiger Global, and Owl Rock.
- Capsule, a New York-based digital pharmacy company, raised $300 million in Series D funding. Durable Capital Partners led the round and was joined by investors including Baillie Gifford, T Rowe Price, and Whale Rock.
- Paxos, a cryptocurrency infrastructure company, raised $300 million in Series D funding. Oak HC/FT led the round valuing it at $2.4 billion.
- Capsida Biotherapeutics, a biotechnology company focused on gene therapies for multiple types of diseases, raised $50 million in Series A funding from Versant Ventures and Westlake Village BioPartners. It also entered an agreement raising $90 million from AbbVie that provides $90 million in up front and equity investment capital.
- Warren, a Brazil-based financial institution, raised 300 million reals ($55.6 million) in Series C funding. GIC invested.
- Alchemy, a San Francisco-based blockchain platform, raised $80 million in Series B funding, valuing it at $500 million. Coatue and Addition led the round.
- ElasticRun, an India-based e-commerce platform for mom-and-pop stores, raised $75 million in Series D funding. Avataar Ventures and Prosus Ventures led the round and were joined by investors including Kalaari Capital.
- OpenClassrooms, a French education tech startup, raised $80 million in Series C funding. Lumos Capital Group led the round and was joined by investors including GSV, the Chan Zuckerberg Initiative, and Salesforce Ventures.
- Viva Wallet, a Greek banking services company focused on small and medium merchants, raised $80 million. Investors include Tencent, the European Bank for Reconstruction and Development, Hedosophia, and Breyer Capital.
- Kaia Health, a New York-based physical therapy company, raised $75 million in Series C funding. Investors include Optum Ventures, Eurazeo, 3VC, Balderton Capital, Heartcore Capital, Symphony Ventures, and A Round Capital.
- EasyMile, a French maker of shuttles, raised €55 million ($66 million) in Series B funding. Searchlight Capital Partners led the round and was joined by investors including McWin and NextStage AM.
- Merama, a Mexico City-based e-commerce startup, raised $60 million to a $200 million valuation. Valor Capital and Monashees Capital led the round and were joined by investors including Balderton Capital and Triplepoint Capital.
- IRP Systems, an Israel-based maker of electric powertrains, raised $31 million in Series C funding. Clal Insurance and Altshuler Shaham led the round and were joined by investors including Samsung Ventures, Carasso Motors, and Shlomo Group, as well as Entrée Capital, Fosun RZ Capital, and JAL Ventures.
- Yousician, a Finnish music learning platform, raised $28 million in Series B funding. True Ventures led the round and was joined by investors including MPL Communications and Amazon's Alexa Fund.
- Arturo, a Chicago-based AI-powered analytics provider of residential and commercial property predictive analysis, raised $25 million in Series B funding. Atlantic Bridge Capital led the round and was joined by investors including RPS Ventures, Crosslink Capital, and IAG Firemark Ventures.
- Manna, an Ireland-based food delivery startup using drones, raised $25 million in Series A funding. Draper Esprit led the round and was joined by investors including Team Europe, partners of DST Global, Dynamo Ventures,Atlantic Bridge, and Elkstone.
- CareStack, a Florida-based platform for the dental industry, raised $22.5 million in funding. Investors included Steadview Capital and Delta Dental of California, Accel Partners, Eight Roads and F-Prime Capital.
- Pactum, a Mountain View, Calif.-based company using A.I. And chatbot interface to automate contract negotiations, raised $11 million. Atomico led the round.
- Opsera, San Francisco-based maker of an orchestration platform, raised $15 million in Series A funding . Felicis Ventures led the round and was joined by investors including HMG Ventures, Clear Ventures, Trinity Partners, and Firebolt Ventures.
- Logixboard, a Seattle-based customer experience platform for freight forwarders, raised $13 million. Redpoint Ventures led the round and was joined by investors including Social Leverage, F-Prime Capital, Founders Co-op, and Techstars Ventures.
- Sensei, a Portugal-based computer vision startup, raised $6.5 million (€5.4 million) in seed funding. Seaya Ventures and Iberis Capital led the round and were joined by investors including 200M Fund and LeadX Capital.
BoostUp.ai, a Santa Clara-based revenue insight platform, raised $6 million in Series A funding. Canaan Partners led the round and was joined by Emergent Ventures and BGV Ventures.
- SunRoof, a European solar power-based roof tile maker, raised €4.5 million ($5.5 million) in extended seed funding. Inovo Venture Partners led the round and was joined by investors including SMOK Ventures, LT Capital, EIT InnoEnergy, FD Growth Capital and KnowledgeHub.
- Barkyn, a Europe-based subscription service for pet owners, raised €3 million ($3.6 million). Five Seasons Ventures led the round.
- Actuate, a New York-based maker of automation and intelligence software for security camera systems, raised $8 million in Series A funding. Tribeca Venture Partners led the round and was joined by investors including Scribble Ventures, OCA Ventures, Context Ventures, Bling Capital, Upside Partnership, and Tensility Venture Partners.
- Sweep, a Paris-based carbon reduction management startup, raised $5 million. Investors included New Wave, 2050, and La Famiglia.
- Wunderite, a Boston-based maker of a customer-facing platform for independent insurance agencies, raised $3 million in seed funding. Spark Capital led the round and was joined by investors including Boston Seed.
- VISO Trust, a San Francisco-based cyber risk assessment company, raised $3 million in seed funding. Work-bench led the round and was joined by investors including Sierra Ventures and Lytical Ventures.
- Sencure, a Dutch medical chip company, raised €1 million ($1.2 million) from Cottonwood Technology Fund.
PRIVATE EQUITY
- A consortium led by Bain Capital plans to acquire Hitachi Metals, a Japanese metals company, for 817 billion yen ($7.5 billion).
- Alinda Capital Partners acquired ACL Airshop, an Oceanside, N.Y.-based provider of air cargo unit load device logistics. Financial terms weren't disclosed.
- Len The Plumber, a portfolio company of Thompson Street Capital Partners, acquired Larry & Sons Plumbing, Heating, Cooling, Drain, and Electrical Services, a Hagerstown, Md.-based plumbing and HVAC company. Financial terms weren't disclosed.
- Tailwind Capital merged portfolio companies National Trench Safety, Trench Plat Rental Company, and Support of Excavation under the National Trench Safety brand. Financial terms weren't disclosed.
EXITS
- Humana ( NYSE: HUM ) agreed to acquire an additional 60% stake in Kindred at Home, a Louisville, Ky.-based at-home care provider, for $5.7 billion from TPG and Welsh, Carson, Anderson & Stowe. Altogether, the deal values Kindred at $8.1 billion.
- Near acquired UM, a Pasadena, Calif.-based mobile location platform backed by Blue Chip Ventures. Financial terms weren't disclosed.
- SmartBear agreed to acquire Bugsnag, a San Francisco-based error monitoring platform backed by investors including Benchmark and Matrix Partners. Financial terms weren't disclosed.
OTHER
- Verizon is weighing a sale of its digital media assets, including parts of Yahoo and AOL, per the WSJ.
- Life360 agreed to acquire Jiobit, a Chicago-based provider of wearable location devices, for up to $54.5 million.
IPOS
- Zomato, an Indian food delivery startup, filed to raise $1.1 billion in an IPO in the country. Ant Financial backs the firm.
- Del Monte Philippines, a maker of pineapple products, filed to raise as much as 38.3 billion pesos ($791 million) in an IPO in the country.
- Allbirds, the shoe brand, is weighing an IPO, per The New York Times.
SPACS
- Enjoy Technology, a Palo Alto, Calif.-based mobile retail stores, agreed to go public via merger with Marquee Raine Acquisition. A deal would values the duo at $1.2 billion.
- Shapeways, a 3D-printing tech firm, agreed to go public via merger with Galileo Acquisition. A deal values the firm at $410 million.
F+FS
- Iconiq Capital, a San Francisco-based investment firm, is targeting nearly $3.8 billion for its sixth fund, per the WSJ.
- Valor Equity Partners, a Chicago-based private equity firm, closed Valor Equity Partners V with $1.7 billion fund.
- Pendulum Holdings, a venture capital firm led by one of President Barack Obama’s financial advisers, is in the process of raising $250 million to invest in founders of color, per Recode.
