Meet Tabula Rasa HealthCare, The Top Publicly-Traded Digital Health Company

At a recent digital health conference in San Francisco, participants bemoaned the lack of initial public offerings in the sector. “There have been zero IPOs in 2017 and 2018,” said Bill Evans, managing director at venture capital firm Rock Health, and the conference’s host. “That’s an easy number to remember.”

Amazon’s $1 billion purchase of PillPack and Roche’s $1.9 billion acquisition of Flatiron have grabbed headlines instead, with entrepreneurs and their investors eyeing M&A as their potential exit of choice.

Still, one of the last health technology companies to go public two years ago has done pretty well. Since its IPO in October 2016, Tabula Rasa HealthCare’s stock has risen fivefold-beating more high profile players, such as Evolent Health and Teladoc. Its market value stands at $1.5 billion. Last year, the company earned $14 million on $134.5 million in revenue.

Calvin Knowlton and his wife Orsula, both pharmacists, founded the Moorestown, N.J. company in 2009 to deliver tailored medication regimens. Tabula Rasa’s software analyzes multiple drug interactions simultaneously. It also takes into account a patient’s genetic makeup to find out, for instance, how quickly a person can metabolize a drug-a field known as pharmacogenomics. “Historically drugs are given on administrative ease, not using science,” says Calvin Knowlton.

Midland Care, a healthcare system in Northeast Kansas, was relying on a local pharmacy for guidance with drug interactions before switching to Tabula Rasa six years ago. “They couldn’t provide the level of expertise and support,” says David Wensel, Midland’s chief medical officer. Prescribers now receive a patient’s medication risk score based, among other factors, on flagging drugs that compete for the same genes involved in metabolizing compounds.

For example, if a cholesterol drug binds faster to a metabolizing enzyme than a painkiller, the latter has to wait its turn. It can become less effective and more toxic, because the body is not eliminating it in a timely manner. That information helps physicians and pharmacists avoid adverse effects by adjusting the timing of medications or find an alternative-especially in a place like Midland, where patients take multiple medications.

Wensel says that lowering risks associated with side effects, such as sedation, dry mouth and abnormal heart rhythms have reduced hospitalizations and emergency room visits. “We’re going from general prescribing to precision prescribing,” he says.

Tabula Rasa is not the Knowltons’ first healthcare company. In 2005, they sold excelleRx, a hospice medication management service, to Omnicare for $269 million. (The couple’s first choice was to go public, but the market was down; the Knowltons say their VCs “pushed” them to sell to another company.)

Not long after the sale, Calvin Knowlton’s father suffered a heart attack. Knowlton knew from the DNA results of a cheek swab, years before the infarction, that his dad’s drug-metabolizing gene, CYP2D6, was slow, and relayed that information to the cardiologist. “I don’t think the cardiologist service knew what that meant; the genotype was ignored or not understood,” he says. The hospital discharged his father with a slew of medications, including 25mg of the beta blocker carvedilol-the typically prescribed dose, but too high in this case. It can dangerously slow down heart rate. Doctors had to subsequently lower the dose and change the timing.

The incident inspired Knowlton to develop software that tallies the negative impact of a patient’s drug regimen-including metabolism, drowsiness and changes in heart rhythm-and calculates a composite risk score on a scale from 0 to 50. “I said, let’s quantify all this stuff,” says Knowlton. “No other company does that.”

Drug database vendors, such as First Data Bank and Wolters Kluwer provide prescribers with different tools to track contraindications and side effects. Others, such as Mirixa and OutcomesMTM (part of Cardinal Health) offer medication therapy management, as mandated by the Centers for Medicare & Medicaid Services (CMS), for people who take multiple medications because they suffer from chronic diseases. Mirixa guides pharmacists through a review of a patient’s drug regimen with the help of an interactive questionnaire.

By chance, the Knowltons visited a friend who ran a CMS program in Philadelphia, called PACE (Programs of All-Inclusive Care for the Elderly) which helps those eligible stay out of nursing homes. Medicare pays PACE centers, such as Midland Care, a set amount to provide healthcare, transportation, a community center and assistance at home. PACE members take on average nine drugs per month. “We went to the medication room, they had bags of pills for everyone; it was a mess” says Knowlton. “We thought here’s an opportunity to do something. “

Because they carry financial risk, PACE centers were receptive to the Knowltons’ pitch of reducing medication errors and hospitalization, which allowed the startup to scale. More than a quarter of the 250 PACE centers now use Tabula Rasa software. “That’s our future, value-based,” says Knowlton.

The Knowltons are now diversifying Tabula Rasa’s revenue. The company is part of a Medicare pilot to improve medication therapy management with Blue Cross and Blue Shield Northern Plains Alliance. Early next year, it plans to launch a direct-to-consumer medication risk score app.

As for their exit strategy, the couple is pleased they were able to do it on their own terms and go public this time. Although they raised $15 million in venture capital, they picked their investors carefully and protected their equity to avoid dilution with the help of an advisor. “It (an IPO) was our only route for growth,” says Knowlton.


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