Pelago has recently secured $58 million in a series C funding round aimed at expanding its offerings tailored for payers and employers in the healthcare sector. This capital infusion will be necessary in the company’s efforts to broaden its care programs, particularly targeting earlier stages of substance use disorders. Pelago also intends to advance its clinical research initiatives and explore expansions into additional substance areas, highlighting its commitment to innovation and growth within the healthcare landscape. Notable new investors in this funding round include Eight Roads and GreyMatter Capital, alongside existing backers such as Atomico, Kinnevik AB, Octopus Ventures, and Y Combinator.
Pelago’s core focus lies in providing integrated SUD management solutions for employers and payers, offering specialized treatment for tobacco, alcohol, and opioid use disorders. The company’s expansion efforts also extend to supporting teens aged 15-17 years across these three areas, reflecting an in-depth approach to addressing substance-related issues within various demographics. Laura Connell, a partner at Atomico, emphasized Pelago’s ability to enhance clinical outcomes and reduce costs for employers, highlighting the clear return on investment (ROI) that Pelago’s services offer.
Substance use disorders impose financial burdens on employers and payers, with alcohol- and opioid-related disorders being particularly costly. Pelago’s 2023 trend report revealed that nearly half of all U.S. workers have encountered personal or family problems related to substance or alcohol use, outlining the impact of these issues on both individuals and workplaces. Recognizing the immense financial and productivity implications, Pelago aims to address these challenges through its innovative virtual clinic model, which operates entirely at-risk, ensuring that the company is compensated only upon successful achievement of clinical outcomes. Pelago’s CEO and co-founder, Yusuf Sherwani, emphasizes the importance of aligning incentives from the outset to drive effective care delivery. By shifting away from the traditional fee-for-service (FFS) model towards risk-based contracts, Pelago seeks to revolutionize the approach to SUD treatment, prioritizing quality outcomes over volume-based incentives. Sherwani highlights Pelago’s focus on the commercial population initially, leveraging their openness to innovative care models, with plans to eventually support Medicaid populations as well.
The success of Pelago’s model is evidenced by its growth trajectory, with a 287% revenue increase and 100% client retention in 2023. The company’s client roster includes major corporations like AT&T, GE Appliances, and Philips, along with regional Blue Cross Blue Shield plans and Cigna Evernorth. Pelago’s program has demonstrated cost savings, with claims analysis indicating an annual reduction of $9,367 per participant compared to control groups. Pelago’s impact extends beyond financial metrics, with its program validated in 13 peer-reviewed studies, including randomized controlled trials. These studies affirm Pelago’s efficacy in helping to reduce alcohol, tobacco and opioid use, and improving mental health outcomes and overall functioning. The company’s commitment to evidence-based care shows its dedication to providing high-quality, effective solutions for individuals dealing with substance use disorders.
Pelago remains focused on growth and product development, with plans to expand into other therapeutic areas beyond substance use disorders. By leveraging technology and data-driven insights, Pelago aims to continue driving positive outcomes for both individuals and employers, ultimately reshaping the landscape of SUD treatment and prevention. As the company continues to innovate and expand its offerings, its impact on improving healthcare outcomes and reducing costs will make further progress, bringing in a new era of virtual care in the area of substance use management.
