Pelago Secures $58M to Expand Substance Use Management as an Employee Benefit

What You Should Know:

  • Pelago the leading digital clinic partner to U.S. businesses and health plans for substance use management, today announced $58 million in new funding on the strength of customer growth and validated ROI
  • Existing investor Atomico doubled down to lead this Series C investment on the back of Pelago’s impressive growth, with participation from all existing investors Kinnevik ABOctopus Ventures, and Y Combinator plus new investor Eight Roads.

Advancing Substance Use Management: Pelago’s Impact on Healthcare Costs and Treatment Efficacy

The raised additional capital will enable Pelago to expedite its product roadmap, expand its continuum of care, enhance digital engagement strategies, and progress its clinical research initiatives. In conjunction with this funding round, Atomico Partner Laura Connell will join Pelago’s board.

Pelago was established with the fundamental belief that substance use is a manageable chronic condition. The company is actively tackling the escalating rates and expenses associated with substance misuse through its 100% fees-at-risk model, which not only yields improved outcomes but also demonstrates a return on investment (ROI). Given the escalating healthcare expenditures, employers and health plans are increasingly prioritizing value, cost-efficiency, and outcome-driven care for their employees and members. Surveys conducted by consulting firms Mercer and WTW indicate that workplace health plan costs are projected to surge by over 6% in 2024. Furthermore, recent research from the Centers for Disease Control and Prevention reveals that the annual minimum direct cost of substance use disorders stands at $15,640 per affected employee enrolled in employer-sponsored insurance, totaling over $35 billion annually.

In a groundbreaking analysis of medical claims focusing on substance use management, Pelago’s program demonstrated a yearly reduction in medical claims of $9,367 per participant compared to a control group, resulting in a 3.0x ROI. Over 80% of the cost savings identified in Pelago’s analysis were attributed to decreased medical expenditure, with the remainder linked to reduced behavioral health costs.

Research indicates that in non-specialized substance use disorder (SUD) treatment environments, up to 89% of adults with SUDs may remain undetected, leading to treatment delays, relapses, and increased expenses. Moreover, for those who do receive SUD treatment in mental health settings, the treatment provided often fails to address their specialized SUD needs. Meanwhile, the adverse financial and productivity impacts persist hidden within medical claims and absenteeism, significantly affecting a company’s bottom line through costly health issues, inpatient and outpatient care, inefficient utilization management, and diminished productivity.

“I’m so proud of the work we have done to improve lives and expand access to substance use care that works. We empower employers and payers to bring our solution to their members struggling with tobacco, alcohol or opioids, from prevention to treatment and recovery.” said Pelago CEO and Co-Founder Yusuf Sherwani, M.D. “We’re addressing a gap in the market left by employee assistance programs and mental health benefits providers who are unable to detect and treat substance use disorders. Customers are resonating with our solution as evidenced by a tenfold growth in revenue and eligible lives since our Series B two years ago.”

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