How does Ro make money?

Steven Loeb · June 24, 2021 · Short URL: https://vator.tv/n/528d
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Revenue comes from selling software to physicians, and filling prescriptions on Ro Pharmacy Network

It's been said that healthcare changes slowly due to the sheer size of the space, making up nearly 18% of GDP, not to mention how vital it is to so many people. Yet, in recent years, there have been some real, fundamental changes happening, including the shift from fee for service to value-based care, as well as the rise of telemedicine and the social determinants of health, which have expanded the definition of what healthcare even is. 

Perhaps the most important change, though, is the shift toward putting care into the hands of the patient, thanks to the rise of digital health with apps and wearables. 

That's part of the idea behind Ro, a telehealth startup that operates digital health clinics for men's and women's health, along with smoking cessation. The idea it to build a new kind of healthcare system, one that's patient-centric, putting them back in control of their health.

The company started out as Roman, with its first product centered around men’s health and, specifically, erectile dysfunction, before expanding to 25 different conditions. It also launched into women's health, with Rory, as well as smoking cessation, with the launch of Zero in 2018.

The company has now seen over 6 million digital healthcare visits, and it has 46 million patient touchpoints. 

A patient-centric service

As part of its patient-centric philosophy, Ro doesn't take insurance; it instead charges patients a $15 plat fee per visit. 

"If you look at the healthcare industry today, people generally pay for their healthcare not directly, they pay indirectly, either through taxes or through their employers. The result is  when you go to doctor’s office, or you go into a pharmacy, you may be the patient, but you're not actually the customer, because the customer is the insurance company," Ro's co-founder and Chief Product Officer Saman Rahmanian said on a recent podcast with VatorNews.  

That results in a situation where patients can have a terrible experience, and still come back to the same place just a couple of weeks later, something that doesn't happen in any other industry. Healthcare services are disincentivized to innovate, or to make anything better for the patient. 

"The flipside at Ro, we believe that cash pay is an important characteristic of a patient-centric healthcare system. The reason why we believe that is that if the patient and the customer are one and the same thing, that sets the right structures and incentives," he said.

"If the patient has a bad experience, then they would not come to us again. We would stop having a business. But if they have a great experience then we would continue having value and building on our patients."

(On July 14, Vator will be holding an event centered around this topic, specifically in regards to mental health, featuring K Health, Bind, BetterHelp, and JustAnswer. Register and get tickets here) 

How does Ro make money?

Ro, however, doesn't take anything from that $15 that the patient pays; the entire sum, minus credit card transaction fees, goes directly to the physician, or their practice. 

Instead, Ro's revenue comes from two different sources: first, by providing software and administrative services to providers.

Physician practices pay to use Ro’s software, which collects information about a patient’s medical history and their symptoms, as well as their medications, most recent physical, and allergies. It also includes patient information and patient images that are stored and forwarded to their physician.

The software analyzes patient responses in real time, highlights important information, flags potential risk factors, and then pings a national third-party database to get additional information about that patient and their medication. All of that is then given to the physician.

"Using this software, providers are able to offer high quality care via telemedicine. In addition, Ro also handles other non-medical, administrative tasks to make their lives easier — e.g., software maintenance, payment processing, background checks, provider credentialing, and malpractice insurance procurement," Zachariah Reitano, co-founder and CEO at Ro, wrote in a blog post.

"In essence, Ro provides the backend operations of running a digital health clinic 'as a service' to providers."

The second way Ro makes money is by fulfilling patients’ prescriptions if they choose the Ro Pharmacy Network, through which is mails prescriptions to members. 

For example, on Roman, patients can pay for ED drugs; generic Viagra costs $34, while branded Viagra costs $70. Finasteride and minoxidil, which are used to treat hair loss, cost $35 per month together. On Rory, treatment for hot flashes can cost $30 or $35, while treatment for an outbreak of cold sores costs $14, or $48 if suppressive therapy is required. The company currently offers over 1,000 generic medications.

While most members choose the Ro Pharmacy Network "because it is often less expensive, it gives patients complete control over scheduling, it’s discrete, and it’s convenient to have their medication shipped to their door," Reitano wrote, members can also choose to have their prescription sent to another pharmacy, such as CVS, Walgreens, or Walmart. Patients can also switch from Ro Pharmacy to another pharmacy if they choose to.

The fact that Ro doesn't get paid if their patients use another pharmacy incentivizes Ro to pursue the type of innovation and patient-centric quality that is often lacking from the healthcare experience.

"Ro must compete on quality, convenience, and price with every single pharmacy across the country. It is on us to make sure we always provide value to our members. We must earn their business every single day."

In all, Ro is said to have made $230 million in revenue in 2020.

The company recently raised a $500 million round of funding, bringing its total fundraising to $876 million. When the company raised a $200 million round in July 2020, it was reportedly valued at $1.5 billion; it now said to be valued at $5 billion.

(Image source: ro.co)

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