28 Mar 2024

Our investment in Pelago: Doubling down on Substance Use Management

Atomico is once again partnering with Pelago to lead their $58 Million Series C, having co-led their Series B back in 2021.

In the kaleidoscope of healthcare challenges facing governments, healthcare providers, private employers and individuals, the rise of substance use disorders has remained a persistent and growing concern. From the proliferation of opioids to the sustained high rate of alcohol and tobacco  abuse, substance use disorders cast a long shadow over all national healthcare landscapes and populations.  In the US alone, almost 60 million teenagers and adults each year are prone to substance misuse, in the forms of habitual or excessive use of drugs, alcohol, or tobacco and nicotine products. 

In addition to the challenges posed by specific substances, the landscape of SUDs and their ultimate impact is profoundly shaped by disparities in access to substance use management solutions, themselves predicated on broader social, economic and environmental factors. It is estimated that only 10% of Americans who misuse substances have access to appropriate care. 

Employers have a key part to play in the solution:  70% of people who struggle with substance misuse remain in the workforceNew research from the Centers for Disease Control and Prevention (CDC) suggests that the annual cost of substance misuse disorders is $15,640 per affected employee enrolled in employer-sponsored insurance, totaling more than $35 billion. Ultimately, this means employers bear an outsized share of the financial cost. But they can provide a highly efficient and powerful way to help employees regain control of their lives, enhancing the health and wellbeing across their workforce and in doing so, driving the overall sustainability of their own businesses. Research shows that employer-initiated treatment is more successful than treatment initiated by friends or family members. Accordingly, the CDC recommends that employers develop workplace-supported prevention, treatment, and recovery programs. One thin-reed indicator of this is that employees in recovery programs miss 13.7 fewer work days annually than those who do not receive treatment.

There is an urgent need for coordinated action across employers and providers leveraging tech-enabled solutions to accelerate access to and increase the quality of substance use management. This includes expanding access to evidence-based treatments, such as medication-assisted therapy for opioid use disorder, enhancing screening and early intervention efforts. It also requires a shift in perception, moving away from punitive approaches to drug use and towards a more compassionate and evidence-based approach that prioritises harm reduction and support for individuals struggling with addiction.

Pelago was built to address this. Founded by three physicians with deep experience and knowledge in the causes and consequences of dependence, Pelago is the virtual clinic that puts substance use management at the fingertips of those who need it by partnering with employers of all sizes to provide individualised and discreet substance use treatment at enterprise scale. 

As well as enhancing individuals’ recovery rates, Pelago also provides clear cost savings to employers: firstly by eliminating routine overpayment for ineffectual treatments unsupported by clinical evidence, but, more importantly, by normalising substance use treatment and behaviour modification, so that people can intervene earlier and eliminate the costly health problems that typically cascade from ongoing substance dependence. With their 100% fees-at-risk model, this translates to a reduction in reduced medical claims on an annual basis by $9,367 per participant compared to a control group, delivering a 3.0x ROI, as found by the industry’s first ever substance use management medical claims analysis

Since their Series B, the company has cemented their position as the category-defining company in substance use management. Their visionary leadership in offering treatment as an employee benefit to the world's most forward-thinking companies is reflected in their exceptional growth, with revenue increasing by 287% in 2023 and client retention at 100%, and now covering more than 3.4 million eligible lives. 

We are incredibly proud to have been part of Pelago’s journey thus far, and we are tremendously excited to be doubling down on our partnership now.