This Startup Hit A $3.25 Billion Valuation Building Software To Fix Drug Pricing

AJ Loiacono, CEO of Judi Health, pivots from tackling hidden drug prices to addressing broader medical costs with a fresh $252 million funding infusion.

AJ Loiacono recognized the potential of his medical benefits administration software after successfully utilizing it within his own business. This led to an impressive 11% reduction in year-over-year medical costs for 1,800 health plan participants, which included employees and their families. Furthermore, the efficiency of claims processing was dramatically improved, with turnaround times reduced from over six months to a maximum of 18 days—achieving this while enhancing employee benefits.

“We achieved a decrease in costs per member per month by eliminating unnecessary fees that were burdening the health plan,” Loiacono shared with Forbes.

Now, following successful initial trials, Loiacono’s company, which originally focused on pharmacy benefits and went by Capital Rx, is expanding its offerings to include medical claims administration. Rebranded as Judi Health, it has successfully secured $252 million in equity funding, led by Wellington Management and General Catalyst. This round brings total capital raised to $607 million and values the company at $3.25 billion—more than double its previous valuation of $1.5 billion from March 2024. Noteworthy investors like Goldman Sachs Asset Management and Generation Investment Management, headed by former vice president Al Gore, have also participated. The demand for this round of funding was so robust that it included a secondary purchase of over $150 million worth of stock from early investors. Loiacono is set to address this new investment during a Wednesday segment at the New York Stock Exchange.

In the U.S., medical and prescription benefits are processed through separate systems, invariably leading to redundancy, increased expenses, and significant dissatisfaction among doctors and patients alike. The intricacies of drug pricing, filled with rebates, clawbacks, and hidden charges, complicate things further. This inspired Loiacono to develop modular, cloud-based software termed Judi (short for “adjudicate,” which encapsulates its claim adjudication process) to streamline operations and reduce costs. With employers increasingly seeking to manage escalating drug expenses, the firm has cultivated a robust pharmacy benefits management business, projecting revenues of $3.7 billion for the year—up approximately 75% from $2.1 billion previously. Judi Health specializes in administrative claim processing but does not bear the financial risk associated with payment responsibilities, behaving similarly to Fidelity’s recordkeeping services in 401(k) management.

“AJ has been tirelessly addressing this issue for an extensive period,” remarked Jonah Surkes, an investor at Generation. “This industry is notoriously convoluted, holding many powerful players who fiercely battle for market share. AJ has demonstrated remarkable resilience throughout these challenges.”

Loiacono, 53, a seasoned entrepreneur often spotted donning his trusty Costa trucker hat, previously co-founded the pharmacy benefits consulting firm Truveris, where he held executive roles for eight years, including CEO. He witnessed firsthand the pervasive problems in American drug pricing. Together with his former colleagues Ryan Kelly, now serving as chief technology officer at Judi Health, and Joseph Alexander, who has since departed, he founded Capital Rx in 2017. The aim was to leverage software to craft a more transparent pharmacy benefit management system.

“We found that rather than a smoothly functioning system, we encountered a disheveled machine riddled with inefficiencies,” he explained.

“Once you’ve experienced simultaneous processing of both medical and pharmacy claims, you won’t ever want to revert back.”

Healthcare expenditures in the U.S. are staggering, with annual spending approaching $5 trillion, with administrative costs estimated around $1 trillion a year. Drug spending alone surged by $50 billion last year, climbing to $487 billion, according to PwC. This increase is attributed to the launch of innovative cancer and immunological therapies as well as heightened usage of GLP-1 drugs such as Ozempic for diabetes and Wegovy for weight management. Total medical expenses have consistently risen at about 8% annually in recent years, a trend expected to persist at least through 2026.

“The mission of our organization is to establish the necessary infrastructure to secure the healthcare that our nation deserves,” Loiacono stated. “Unless we take charge of and modernize this infrastructure, we cannot make progress in enhancing healthcare across the country.”

Rather than engaging in pricing manipulation, Capital Rx generates revenue from straightforward administrative fees, allowing clients to choose between a per-member/month plan or a per-claim model. Drug prices are determined using the National Average Drug Acquisition Cost (NADAC) database, maintained by the federal Centers for Medicare and Medicaid Services, which reflects actual costs incurred by a sampling of pharmacies nationally.

This constitutes a significant paradigm shift in a sector marked by convoluted pricing methods and undisclosed charges that have led to Congressional hearings and a bipartisan movement towards legislative reform, notably the bipartisan PBM Reform Act of 2025, introduced in July. “Drug pricing in the U.S. has become a standard case study of how a lack of transparency drives inequity,” Gore remarked to Forbes via email. “Real change is contingent on transparency, innovative business practices, and advanced technology that places patients at the forefront,”

Loiacono expressed openness to legislative reform but emphasized that Judi’s business model does not hinge on regulatory changes for success. “While I welcome any beneficial momentum, our success does not rely on it.”

Having transitioned from the complex domain of pharmacy benefits, the scope for medical benefits presents an even larger opportunity. The integration of medical and pharmacy claims is often viewed as the “holy grail” of healthcare, a straightforward adjustment that could eliminate redundancies and reduce administrative clutter. “They are developing what we believe to be the first unified claims system, representing a significant shift in benefits administration,” remarked Holly Maloney, a managing director at General Catalyst, who spearheaded her firm’s investment. “We believe this could evolve into a $20 billion market.”

Loiacono revealed that Judi Health has already secured contracts with several major employer plans, although he declined to disclose names. Additionally, a third-party administrator has licensed its technology, encompassing approximately 40,000 lives for the new health administration service.

“Once medical and pharmacy claims are aligned and processed together, one would never wish to revert,” Loiacono noted. “The claims are tied to the same membership, plan sponsor, and regulations.”