Ro, a telehealth start-up, hitting record sales monthly amid pandemic

While stuck at home during the pandemic, consumers are buying more Viagra, birth control, hair-loss treatments and many other medications over the internet. Ro is looking like one of the big winners.

Ro, a start-up that says its product suite spans “diagnosis to delivery,” has reached record revenue for four straight months through May, according to a person familiar with the matter. Its pharmacy delivery service, which it piloted in March, has been growing 130% a month, said the person who asked not to be named because the numbers are confidential.

The company, which has been in business for just three years and started out by focusing on men’s health, is generating $250 million in annual revenue though it isn’t yet profitable, the person said. Hims, its main rival, expects to hit that revenue number as it moves into 2021. The broader category of telehealth is surging this year, with remote health provider Teladoc’s stock price more than doubling and rival Amwell confidentially filing for an IPO.

Ro is using the opportunity to beef up its executive team. The company has just hired Stephen Buck, a veteran of the drug supply chain, as a vice president of pharmacy strategy. Buck, who previously worked at GoodRx and McKesson, said he’s focused on getting more Americans to order their medications by mail.

“No one has done mail-order pharmacy in a way that consumers can say is above and beyond what they get today,” said Buck, in a phone interview. “So for me, this was a once-in-a-lifetime opportunity.”

Ro’s pharmacy service delivers more than 500 generic medications at a flat fee of $5 each. It currently has a distributed network of pharmacies across the country, and is live in 23 states. Competition is stiff, with Walmart offering affordable prices for generic drugs and Amazon beefing up its PillPack online pharmacy. Ro, backed by more than $176 million in venture capital, also has to take on traditional retail pharmacies, where most consumers still shop for their drugs.

Ro CEO Zachariah Reitano acknowledges that people will still need to go into a physical pharmacy for acute problems that require medications right away, but he said his company can send scripts overnight. The average Ro customer, he said, is in their mid-40s, and orders pills for high cholesterol, hypertension, birth control or diabetes. Ro is trying to make the experience similar to the way consumers buy other things.

“We have subscription everything,” Reitano said. “Except this recurring, almost weightless thing that can save our life.”

The market is big and getting bigger.

Spending on U.S. prescription medications is approaching $500 billion a year and growing up to 7% annually, according to IQVIA, a provider of health data. Roughly 60% of American adults have at least one chronic illness, such as heart disease, cancer or diabetes, and 40% have two or more, according to the Centers for Disease Control and Prevention.

Ro’s pitch is that it offers affordable prices and a simple user experience, which includes access to pharmacists by text message. The company says it doesn’t currently take insurance because the vast majority of prescriptions — about nine in 10 — are for low-cost generics that can be cheaper than a co-pay that comes with health coverage.

“Generics are for the most part very affordable,” said Buck. “So we could remove insurance entirely and work directly with manufacturers and wholesalers to bring down prices.”  The company already has such a deal with pharmaceutical giant Pfizer.

By working directly with drug makers, Ro is navigating around pharmacy benefit managers, which manage prescription drug benefits on behalf of health insurers. PillPack and CareZone, whose technology was acquired by Walmart, have had to battle with pharmacy benefits managers in the past, primarily related to contract disputes.

Ro is also making a conscious effort to expand its image outside of men’s health. It now has a separate women’s health brand called “Rory,” as well as services for weight management and smoking cessation. The direct-to-consumer market is resonating with investors like Alexis Ohanian, the co-founder of Reddit and an early backer of Ro through his venture firm Initialized Capital.

“Every time they did the extra work to build more software to improve the patient experience, they set a new and higher standard for the entire industry,” Ohanian said.

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