As part of my series about the “How Business Leaders Plan to Rebuild in The Post COVID Economy,” I had the pleasure of interviewing AJ Loiacono.
AJ is a serial entrepreneur with over 20 years of experience in pharmacy benefits, finance, and software development. As the CEO of Capital Rx, his mission is to create the first efficient market for prescription prices and provide employer groups with the highest standard of patient care. To achieve this goal, AJ has spent his career studying the pharmaceutical supply chain and producing engineering solutions that have continually redefined the pharmacy benefit industry.
Prior to Capital Rx, AJ was a co-founder of Truveris, where he served for eight years as CEO, CIO, and Board Member, leading the company to record growth (Deloitte FAST 500 and Crain’s Fast50). Before Truveris, AJ co-founded SMS Partners, a joint venture with Realogy (RLGY), and in 2010 exited the partnership with a buyout. In his first venture, AJ started Victrix, a pharmaceutical supply chain consultancy, and successfully sold the company to Chrysalis Solutions in 2007.
Thank you so much for your time! I know that you are a busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Sometimes, the small things add up and push your life in a particular direction. Twenty years ago, I started to work in pharmaceutical manufacturing. Working on various software systems I noticed that as the years went on, the number of active shipping locations (hospitals, pharmacies, etc.) in the database decreased from 80,000, to under 1,000. This trend signaled a massive consolidation effort by wholesalers and other purchasing groups. At the time I didn’t think much about it, but on one of our last projects I had a similar discovery. We had just finished a three-year project to covert an old MRP software system, but the week after we completed our work, the pharmaceutical manufacture shuttered the plant. Thousands of jobs were lost, but what stuck with me was the futility of trying to fix the US supply chain, when global economics simply outweighed every domestic option.
Fast forward to our current pandemic, the government is suddenly questioning not only the safety and quality of our medication, but our overreliance upon the international supply chain. As the US pharmaceutical industry chased lower prices to offshore partners, we blindly forfeited our domestic manufacturing capabilities, overlooked safety for margins, and fostered a pricing system that has no reflection of quality. I didn’t realize it at the time, but these small events were writing the thesis to my current business venture. Today, as the CEO of a pharmacy benefit manager (PBM), I try to reconcile the decisions of the industry’s past, while creating a pathway to balance lower prices with better quality of care.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
In my first company we were trying to land a large contract with a pharmaceutical client. At the time, we were located along the waterfront in Brooklyn and the office was a bit of a fixer-upper. Our building was fairly nice, but the bathroom on our floor was an absolute nightmare (please note, our landlord at the time was unmoved by our pleas for help).
The good news was, our meeting went great, but on the way out one of their team members asked to use our bathroom. We tried to warn the person, but the lifetime New Yorker assured us she was ready for anything. We didn’t stick around; we knew the bathroom would destroy whatever goodwill we had created. The next day, I received an email from a friend at the prospective client and the title was “Bathroom?!?!!?” Thankfully, we persevered and won the account, but every time we consider a new office location, I personally inspect the bathrooms!
Is there a particular book that you read, or podcast you listened to, that really helped you in your career? Can you explain?
Once a year I read “Meditations” by Marcus Aurelius as a reminder that there will always be obstacles in life, but I have the control on how I respond to these setbacks. My grandfather recommended the book to me years ago and I finally found the time to read it during a flight without wi-fi. After the first dozen pages, I was overwhelmed as I started to question everything in my life. It made a book like “Beyond Good and Evil” read like a light-hearted episode of Curb Your Enthusiasm. However, as you move beyond the middle-aged emperor’s twilight reflections, you understand the true message and wisdom of his words.
The most important message to me as an entrepreneur was: “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.” This is relevant for an emerging business challenging the status quo or even fairly evaluating the worth of your own service offering.
Extensive research suggests that “purpose driven business” are more successful in many areas. When you started your company what was your vision, your purpose?
Spending twenty years working within the pharmacy supply chain provided me with a front row seat to identify the potential for improvement. I started my career working in pharmaceutical manufacturing, where every drug that comes out of the plant has a price. A decade later, I moved to the employer (payer) end of the supply chain where I quickly discovered all of the drug prices had magically disappeared. Employers are given pharmacy benefit manager (PBM) agreements that are 50–100 pages long, but not a single price is listed in the contract. Why would anyone use words to describe pricing? Nothing in the country is bought this way, and we knew there was a better way.
It was during this time I recognized the only way to truly fix the problem was to become the PBM. That was when we founded Capital Rx to change the way prescriptions are priced and serviced in the US. We believe so strongly in our purpose that we ask every employee why they want to join Capital Rx. We can hire the smartest or most experienced people in industry, but if we don’t hear genuine enthusiasm about our mission, we pass on the candidate. Changing a $500B industry is large undertaking, but you only have a shot if your team has a unified vision.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
There is a reason why I tend to quote Stoics, because you need to create an emotional bulwark to cope with misfortune. My guiding principle is you must maintain your fortitude, mental (meditation, philosophy, etc.) and physical (exercise, diet, etc.), to endure all the setbacks you will experience growing a business. You can’t ignore a crisis, but you can control how it impacts your mind. It is a difficult skill to master, but by separating emotion during a crisis, you are ultimately removing the stress that can destroy your life. It is a lesson I am constantly learning.
Thank you for all that. The Covid-19 pandemic has affected nearly every aspect of our lives today. For the benefit of empowering our readers, can you share with our readers a few of the personal and family related challenges you faced during this crisis? Can you share what you have done to address those challenges?
Three kids, two dogs, and two working parents makes for a hectic household during a normal work week. Now close the schools, add shelter-in-place, and you have the makings of a crazy sitcom. Not Tiger King crazy, but maybe Shark Tank meets Fuller House. To be fair, comedy is a critical part of a successful show and the only way I can make it work in our household is to laugh at the chaos. Dogs barking during client calls and children running through web conferences would have made me turn red with shame a year ago. Now, I simply laugh at the absurdity. More importantly, the present crisis has made me put into perspective what is truly a big issue and what is inconsequential. Rather than barricade myself in a room, I invite the circus into my business life and I find that it makes me smile.
Can you share a few of the biggest work-related challenges you are facing during this pandemic? Can you share what you have done to address those challenges?
As a student of history, I would often question the impact of generals like Julius Caesar charging into battle to turn the tide of battle at Munda or Alesia. However, over the last few weeks I have come to understand the importance of making sure our leadership team is both visible and active within our virtual workforce. To improve our company morale, we expanded our health care coverage, sent care packages to all employees, scheduled weekly video happy hours, which has included everything from team versions of Family Feud and Jeopardy. I am starting to believe that leading from the front during a crisis might be more than a myth.
Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty, fear, and loneliness. What are a few ideas that you have used to offer support to your family and loved ones who were feeling anxious? Can you explain?
Communication is critical to remain connected with family and friends. I made a point to call every employee in our company and spend time to not only see how they are doing, but also ask if they had any suggestions to improve how we collaborate or function as a team. In addition, we count four hospital systems as clients, and we sent breakfast to the ER teams to demonstrate our appreciation for their extraordinary courage. A group of our employees felt so strongly about honoring our frontline workers, they expanded the idea and created a campaign to help local hospitals near our office in NYC. I feel that our greatest support can be our own workforce if we stay connected and provide avenues to help our local communities through this crisis.
Obviously, we cannot know for certain what the Post-Covid economy will look like. But we can of course try our best to be prepared. We can reasonably assume that the Post-Covid economy will be a trying time for many people across the globe. Yet at the same time the Post-Covid growth can be a time of opportunity. Can you share a few of the opportunities that you anticipate in the Post-Covid economy?
I often describe Capital Rx as a software company that improves healthcare. With the current pandemic, our organization started to embrace our healthcare expertise.This crisis challenged not only how we operate as a company, but also how we interact with clients and service their employee populations. We were forced to test the resiliency of our mobile workforce and discover novel ways to assist with care delivery. An unintended biproduct of our teamwork was the development of a new product, that should prove helpful in diversifying our revenue in a Post-Covid economy. Like most organizations, we will emerge with some scar tissue, but we should be a stronger company because of our agility and tenacity.
How do you think the COVID pandemic might permanently change the way we behave, act or live?
Prior generations had the Great Depression and WWII to define their era. Similarly, I believe COVID will reshape our society with the same magnitude.To be clear, I believe science will ultimately triumph, but the specter of the next pandemic will isolate nations, cause companies to rethink workspaces, depopulate urban centers, and create the need for greater domestic manufacturing and supply chains. If an organization does not substantively evolve from this crisis, it could be an extinction level event for that business.
Considering the potential challenges and opportunities in the Post-Covid economy, what do you personally plan to do to rebuild and grow your business or organization in the Post-Covid Economy?
I was inspired by Marc Andreesen’s recent essay, “It’s Time to Build.” I don’t know Marc, but I do agree with him that this is a turning point for the United States and an opportunity to reawaken the sleeping giant. As much as Marc’s comments were about documenting our broad failures in education and healthcare, it was rallying cry to reimagine our world and dare to tackle the projects deemed too lofty or risky to succeed. This crisis has taught me to double-down on our company’s vision and create the pharmacy benefit system that future generations need for affordable and accessible drugs.
Similarly, what would you encourage others to do?
It’s time for everyone to build, not just manufacturing plants or future cityscapes, but our own personal development. I recommend that everyone learn a new skill, regardless of age or management level. Going forward, I believe the future will require our workforce to become smarter and more agile.
Can you please give us your favorite” Life Lesson Quote”? Can you share how that was relevant to you in your life?
When you attempt to change an entire industry, the words “compromise” and “consideration” come up quite often in conversation. To be fair, a good manager will make concessions to any business model, but you can’t sacrifice your vision. Specifically, I find appalling the general indifference to the failings of the pharmacy benefit system in the US. Many of these apathetic spectators are actually trusted advisors that have turned a blind eye to a woefully incapable pharmacy delivery system. I call these people, “the enablers of bad behavior,” because their unresponsiveness fails the systems, as much as the system itself. Whenever I hear that our current pharmacy benefit model isn’t that bad, I remember the words of Ayn Rand.
“…the man in the middle is the knave who blanks out the truth in order to pretend that no choice or values exist, who is willing to sit out the course of any battle, willing to cash in on the blood of the innocent or to crawl on his belly to the guilty, who dispenses justice by condemning both the robber and the robbed to jail, who solves conflicts by ordering the thinker and the fool to meet each other halfway. In any compromise between food and poison, it is only death that can win. In any compromise between good and evil, it is only evil that can profit.”
How can our readers further follow your work?
Please follow our journey on LinkedIn (linkedin.com/company/cap-rx), Twitter (@cap-rx), and our company website (cap-rx.com).