A New Model for Addiction Care w/ Dr. Yusuf Sherwani

Substance use disorder affects millions, yet less than 10% receive treatment. In this episode of CareTalk, John Driscoll speaks with Dr. Yusuf Sherwani, CEO and Co-Founder of Pelago, about a new approach to addiction care. They explore how Pelago is using virtual treatment, data, and value-based care to break down barriers like stigma, access, and cost—reshaping how we treat one of healthcare’s most persistent challenges.


🎙️⚕️ABOUT DR. YUSUF SHERWANI
Yusuf is the Co-Founder and CEO at Pelago, the leading digital clinic for substance use management. He is a Londoner living in New York City.

He likes to back hungry, foolish and humble founders. Occasionally angel investing in category defining companies, with a healthcare bias, including: Curebase, Healthie, Levels, firsthand, Mytos, Finni Health, Anterior, Replit, Safi, Mercury, Sequence and others. 

Previously he bootstrapped two startups (1 modest exit, 1 failed). He was born and brought up in London, UK and studied Medicine (MD) and Management (BSc) at Imperial College London. In 2019, he was named one of Fast Company’s Most Creative Business People and Forbes’ 30 Under 30 entrepreneurs.

🎙️⚕️ABOUT CARETALK
CareTalk is a weekly podcast that provides an incisive, no B.S. view of the US healthcare industry. Join co-hosts John Driscoll (President U.S. Healthcare and EVP, Walgreens Boots Alliance) and David Williams (President, Health Business Group) as they debate the latest in US healthcare news, business and policy. 

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Transcript

John: 0:07

Welcome to Care Talk America's home for incisive debate about healthcare, business, and politics. I'm John Driscoll, the chair of the Yukon Health System, and today my guest is Dr. Yusuf Sherwani uh, who's got a fascinating company Pelago, that is taking on one of the hardest problems in the healthcare system. Which is addiction. Good morning, Yusuf. Thanks for joining me this morning. Good morning. Thanks for having me, John. So, Yusuf, maybe, maybe if you could start with telling us a little bit about your journey. Um, for, uh, to, to this issue, this company and, and becoming CEO, to kinda give us some context before we dig into what's really a novel approach to, uh, trying to solve, uh, one of the most challenging social issues of our, of our, of our time.

Dr. Yusuf : 0:59

Awesome. Happy to. So. My, my journey to, uh, what is today. Pelago really started about eight years ago, um, in the UK where I was, uh, in medical school training as a physician. Um, I had a deep, uh, personal connection as well as a sort of professional. And what I mean by that is, um, this is right around the time, um, as we were reaching the end of medical school, um, I had some people close to me go through a substance use crisis. And right around the same time with my co-founder, um, we were interning on a psychiatric ward, so we had this sort of dual view of just, you know, the, the, the real sort of like family and uh, and uh, broader societal implications when we just don't get treatment to people early enough. Yet at the same time, um, we got to see firsthand how. We were more part of the problem as physicians than, than really part of like a, a truly holistic solution. Um, and what I mean by that, that's

John: 1:55

a, that's a, yeah, that's a pretty tough conclusion. Like what? Maybe dig into that a little bit.

Dr. Yusuf : 2:02

Yeah, so I mean the, the, the crux really came down to the fact that we just very quickly recognized that this version of healthcare that we're learning in the lecture room is radically different to what we're actually delivering on the front lines. We're reactive when we should be proactive, we're sided, when we should be holistic. Um. And, you know, it's a simple example. We, we we're taught that substance use disorders are a chronic condition, yet we treat them episodically. Um, it's almost like managing diabetes, um, with sort of a one-time intervention and then blaming the person when they don't actually stick with the results, as, you know, as so susceptible to doing, um, sort of. Labeling them junkies, uh, sort of addicts. Um, yet not recognizing that this is a real, sort of chronic condition with a genetic, you know, component, environmental component that requires long-term chronic condition management. Um, and that unfortunate reality really explains why today in the us, in the UK as well, um, only 10%, fewer than 10% of people with substance use disorder, um, are actually in treatment. That turns out to be a huge tax on the healthcare system. It's not that they're not costing us money by not being in treatment, but they're. They're turning up to the er, um, or going

John: 3:08

inpatient. Uh, and just contextually in the US you know, just round numbers, around 20 million people have a substance abuse disorder and a substantial amount of people are trying and using illegal or addictive substances that, that, that, that, that grow every year. Even though we've had a drop in, you know, the opioid deaths, which is remarkable and, and a, and a win for the way we do. Episodically treated with things like crisis interventions like Narcan. It is a big and growing problem, and it appears to be a big and growing problem at every demographic use of, and, but I, I think what you're saying is that the way we, uh, have historically approached solving substance abuse disorder is overnight versus over time. Is that the right way to think about the, the, the, the historic clinical approach?

Dr. Yusuf : 4:01

Yep. It's, it's, it, it, it's exactly that. It's, um, uh, you know, we, we haven't sort of created the incentives in some ways that really value long-term, you know, chronic condition management. And you knows some of this is just like fundamental structural problems of whose job is it to invest in prevention. But, um, you know, that's almost been sort of the, um, the, the. The sort of rationale that people have used. What we've actually found to be the case though, is you almost don't have to worry about the ultra long term, simply because the short term treatment costs are just incredibly high. So, as a simple example, you know, today, um. Cancer tends to be for, for for many payers. The number one and number two, sort of overall, um, you know, cost to manage. Um, and two out of the top three, um, causes of cancer, um, preventable causes of cancer are substance use disorder. It's smoking and it's alcohol. And these are things with actually very fast payback periods. So, um, when I talk about incentives, the, the reason I sort of point, so you,

John: 5:00

if you're gonna have to talk more slowly, because those are really important statistics, the most expensive. Cost item, um, is, is is often cancer and the two most likely predictive indicators for cancer are, is smoking

Dr. Yusuf : 5:18

and drinking. Um, uh, the number one and the number three, um, preventable causes of cancer within a pretty shortly defined, uh, period of time. And, and then the number two is obesity. Which we know is very closely linked with cancer. So it's, it's definitely a important point, um, to, to pause on for a moment because, you know, what we find to be the case is, um, simply engaging people earlier in their substance use journey, um, within, uh, a 12 to 18 months timeframe actually helps to reduce their total cost of care, including their likelihood, um, of developing cancer, um, amongst other chronic conditions that we know are the consequences of untreated substance use.

John: 5:59

So is the right way to look at this, the total cost of care? Or does that, or, or, or is it really that substance use disorder, which many people think is just something they have to accept is actually something we can, we can, we can change and fix.

Dr. Yusuf : 6:16

So that's a great question because the, the magic of reframing substance use disorders as a chronic condition inherently also means that there's something that we can do about it. Um, chronic conditions, broadly speaking, can be managed. Yes, there is a genetic predisposition to having a cardiovascular condition as well as having a substance use disorder. But when you recognize that somebody has that diagnosis, you can absolutely even manage it. Um, you can't cure it. Uh, necessarily, but you can put them into treatment. You can think about social determinants of health, and you can also think about clinical methods to treatment. Um, and what we find to be the case is. And total cost of care is exactly the right way to think about it. Because what you find is when you don't, when you sort of kick the can down the road to someone with a substance use disorder, um, you'll typically get an individual that on a population basis is costing three times more than somebody without substance use disorder, but they're not engaging in the root cause of their treatment. They're finding their way in the er. Because of the complication. So again,

John: 7:21

that's, I just wanna double click on that. If you take someone with a chronic condition with a substance abuse disorder, they're, you know, typically three times as expensive because of all of the compounding factors and Exactly, and, and I, I, I guess the question, I guess we we're living in a system where there's like, over 16% of the population has some form of a substance abuse disorder, but even of those only 9%. As I recall or getting treatment. And what you're saying is that conventional treatments are sort of short-term fixes that are, that are longer term failures.

Dr. Yusuf : 7:57

Exactly. Um, and there, there are sort of two, you know, issues with that. One is the short-term fixes, but some short term. What would be

John: 8:05

an example of that? Uh, Yusuf.

Dr. Yusuf : 8:09

People like someone,

John: 8:10

someone, someone, someone's crashing, um, because of, uh, an alcohol or a drug problem. What, what would, what would you t what would you normally see? And then we'd love to get into kind of what you're doing at Pelago.

Dr. Yusuf : 8:24

Yeah, so, so there are, there are two fundamental issues. One is treatment access, and then the second is treatment mismatch. Um, so the quintessential example is most people don't have access to, uh, qualified provider that can deliver what's called best in class treatment, medication assisted treatment, um, to people with a substance use disorder. So they'll kick the can down the road until things get particularly desperate. When they are ready to get treatment, they'll typically just Google, okay, I need, you know. Alcohol treatment. Are there any rehabs in my, in my area, um, you know, close to me. And what often ends up being the case is those people will be forced to go out of network, sometimes out of state, often to destination facilities that will sort of advertise themselves as being the only real way to solve that problem. Um, when actually. Getting outpatient level treatment in their own home, in their own vicinity would've been the ideal solution, except you are typically waiting anywhere between six, eight, uh, weeks, maybe even longer to access that type of treatment. So that's where you went. And

John: 9:24

just, just to, just, just to pause on that, my recollection, uh, Yusuf, and correct me if I'm wrong, is those, um, uh, uh, beautifully colored, distant. Residential programs that are 30 day inpatient are tens of thousands of dollars, often self-pay and have a 90% failure rate. Is that still the case?

Dr. Yusuf : 9:50

That is still the case because that's where treatment mismatch comes into it. Only a very small p number of people really need to go to rehab. The vast majority of people should be treated, um, while still going to work, while still sort of conducting their personal lives. And where these residential treatment facilities really fail, um, is in long-term treatment because. They treat it as that acute episodic thing, and they, and, and you're really left with no support structure when you're actually discharged, meaning you have 30 days of being drug free. Um, but they also, like the incentives are designed so that they want to create a repeat customer who may be coming back six months later, which

John: 10:28

is unfortunate reality, whether it's intentional or not. And with a 90% failure rate, you've got a high recidivism return. It returns are common. And it's, it's not that the treatment

Dr. Yusuf : 10:40

itself in the acute period is wrong, it's that we haven't really framed addiction as being this chronic, relapsing, remitting condition that needs long-term follow up. Um, and that's really where the model, you know, unfortunately breaks down. And then you have the access problem, which is the people who aren't able to self-pay, the people for whom the stigma is too, the vast

John: 10:58

majority of people can't afford tens of thousands of dollars for a 30 day detox. That, that, that often results in failure. So what, put the number

Dr. Yusuf : 11:08

on it as well. It's, you know, the 95% of that 20 million that you called out is just struggling alone and suffering in silence, but they still have very high costs. Um, they're not managing their chronic condition, their, their, their diabetes, their hypertension, their SK issue. And as a result, they're just continuing to sort of lapse, um, and waiting until things start to get really bad.

John: 11:29

Oh, okay. So we've got a, we've now defined the problem. How did, how did you. So you're what, what, what is your approach and tell us a little bit about the story of you and your company.

Dr. Yusuf : 11:41

Yeah, I mean, the story of, of Pelago, um, was starting eight years ago. Let's take a first principles approach to this. Um. What have we been taught in medical school to be effective? And, um, and, and, and let's rethink how that gets delivered. And in, you know, in practice, what that means is, um, when we went back to the problem, it wasn't that we don't have effective. Therapies and solutions to treat people with a substance use disorder. There's more evidence, um, that cognitive behavioral therapy and medication management is effective for SED than there is that Tylenol works. And we don't find ourselves sort of re-litigating whether or not we should take Tylenol for a headache. Um, the challenge is just giving people access to the evidence-based therapies that we know to be effective and doing so in an evidence-based manner that. Largely it's treating people in their own homes. And we found it came simply down to a supply and demand, you know, mismatch, but also rethinking the care delivery model. So what do I mean by that? Um, you know, unfortunately we're episodic, but it's not just episodic. Well, you, you'll meet for, with your provider for maybe, uh, you know, 15 minutes a month at the most. And then, you know, the rest of the time you're on your own. Um. And with, with Pelago, what we try to do is turn that, sort of, flip that model on its head where we designed a digital clinic approach where you could give people instant access, um, during the golden moments of motivation when they feel like that urgency, that they're in a state of mind, that they want to actually make a change. Um, so the way the program works today is on average people who are eligible, but you're

John: 13:16

setting up effectively a parallel access digital, a, a parallel access digital path. To evidence-based therapy that would. Provide, and I, and I love the way you've described it, those golden moments of motivation, that there's, uh, that everybody, that, that, that every person who's suffering here has moments when they really do have, whether they are motivated to, to get the help they need. Um, absolutely. How, how, how hard was that to set up? I mean, it's, it, it sounds like almost too good to be true, given. The fact that we have a very high level of addiction, a persistent level of failure. The incentives, honestly, like a lot of parts of the healthcare system are about crisis and crashing to kind of throw a lot of money at that. And then, and then for chronic conditions, hope that people can make a change. And, and obviously folks with substance abuse disorders have the hardest time, by definition making change. Um, how, how, how did you come to this, set it up and, and how's it working?

Dr. Yusuf : 14:25

Yeah, so maybe starting with the, the last question, um, sort of the model briefly. You know, it, it works by getting people instant access within a few hours to, um, uh, a substance use disorder specialist who can complete a full assessment and see where they are in the continuum of care, enroll them in clinical treatment through telemedicine. Um, we'll send medication and devices directly to people home so they can measure their outcomes, um, and start engaging in medication management. And then for the first three months. We will treat them, um, we'll stabilize them and treat them, um, you know, pretty intensely. Um, seeing them multiple times a week through telemedicine. But the most important part is when we get them stabilized into treatment. Um, for long-term care management, we're going to be meeting them, whether it's synchronously or asynchronously in a virtual environment, um, uh, on a regular cadence. Um, whether it's weekly, monthly, or quarterly, or even annually for some of our most stable patients. And I think, um, you know, in. In answering your question, how do we get adoption for this model? When we took a first principles approach, we knew that the outcomes for this model was going to just vastly, you know, be so much better than, uh, that acute episodic, um, uh, version of treatment. Wouldn't it be great if we were reimbursed on the outcomes and the savings that we were able to generate from this form of treatment, um, instead of just from the number of actions and sort of sessions that we had with, with a member. So you're going from

John: 15:50

fee for service

Dr. Yusuf : 15:51

to paid for outcomes. Exactly, and, and pretty much from day one, we, we've never been fee for service. It's always been outcome based. We've always had 100% of our fees tied to generating clinically meaningful outcomes and now try tied to generating real cost savings. Um, and when we went to the market, what we found with that self-insured employers were towards a more innovative end of the spectrum where they said. On day one, this is a real problem for us because we are left holding the bag when people go out of network or out of state to these rehab facilities. Um, let's give this a try. And then over time what we found is as employers have adopted it and seen real savings, where we see a 33% reduction in total cost of care for our model versus treatment as usual. Um, increasingly

John: 16:33

just to be clear, when you, if folks who, who with substance abuse disorders are in this. If there's a 33% reduction in total cost of care for substance abuse disorder, or in total cost of care for that, you know that that patient, you know, for let's say on an annual basis.

Dr. Yusuf : 16:55

So it's, it's, it's total savings, not just for substance use disorder. And what we find is actually 80% of the savings are non substance use disorder savings. It's improved, um, it's reduced inpatient spend, outpatient spend and ER visits. Um, so there is re very real implications on medical savings when you actually get the behavioral health condition, um, the treatment that it needs.

John: 17:17

Well, and I've gotta think it also has a big, it, it is a big, a big impact on employees being able to show up at work and do their best work. I mean, it's, uh, this is a burden. This is a burden that really is an un a, a, a, a painful undertow to folks who aren't getting the care they need. So, Yusuf, I'd love you to comment on how hard it is to engage folks digitally when the conventionally people would naturally engage in person. Or telephonically how hard, how, tell us a little bit about the, the, the, your, your success in, in, in, in engaging some of the hardest to reach patients in the healthcare system.

Dr. Yusuf : 17:57

Yeah, I mean, so, so it's, it's been a real journey to, um, better understand what prevents people from engaging in substance use disorder treatment. And, you know, we found it's, it's, it's two primary, two or three primary things. It's access, cost, and stigma. Um, so on the access side, you know, what we've really focused on is capturing people Exactly. During those golden moments of motivation. If we can give people that. Ability to have same day appointments. Um, when they flag that they most need it, which on average we do, um, then you're really helping to find those, those moments of motivation. Um, from a cost perspective as a telehealth solution, we've really focused on educating our customers, um, that. You really want to remove all financial barriers to people accessing this car is so expensive for you to do it, that the right financial decision is to just have it available without deductibles or copays. And broadly, we've been very successful at that. And then from a stigma perspective, that's probably the hardest, tough, you know, the, the tough nut to crack. Um, and what we found to be effective is. Just, you know, simply having a candid conversation as an organization, our clients range from the Fortune 10 companies through to, you know, um, a a couple thousand, uh, employee group. Um, and what we found is when the benefits team, the HR team, even leadership, announced the program and talk about how important it is, um, to make sure that. You know, people who need help are access to, are able to access that treatment. And there's no fear of repercussion. It's not going to impact your job. Your employer isn't going to know about it. This is really, um,

John: 19:29

a problem. Do the employees actually trust that? If I was an employee, the first thing I'd do is like, uh,

Dr. Yusuf : 19:35

it's a tough thing to understand because you go from an organization that might have a zero tolerance policy and mandatory drug tests most,

John: 19:42

yeah. I mean, you, you, you drug test people. You, you drug, particularly in healthcare, you drug test people on the way in. And then you ask for a commitment of zero tolerance. And you know, one of the, one of the un un un undercovered stories in the healthcare world of healthcare professionals is how many doctors and nurses and clinicians and uh, techs really suffer from substance abuse disorder.

Dr. Yusuf : 20:09

Absolutely. Um, and, and that often surprises people, um, that, you know, somebody who should know better in, in theory yet who has, you know, such easy access to, to, you know, substances and opioids, um, you know, can have that. Um, and in simple terms, I mean, what, what we find to be the case is. It takes time for that message to be heard. There is skepticism when you come out with that message. But over time, as you share sort of testimonials, you know, people are willing to talk about their experience, their journey. You can really destigmatize on a local level, um, in enrolling in

John: 20:42

care. Can you, can you really give me, you know, hope to employees who are suffering from substance abuse disorder who are worried about that stigma?

Dr. Yusuf : 20:53

I, I think I can. And you know, with, with some of our clients who've been with us for multiple years, we, we really do see this happening. Um, we, we see enrollment into the Pelago program really approaching the 16 or so percent of people who are affected by substance use disorder. And I think it's just a consistent message. Repeated over time with those success stories sprinkled throughout, that really helps people understand that this is just a normal thing that people will go through. And what's really important is you hold your hand up, you engage in care, and that's how everybody gets the best outcome through it. And there really are no repercussions, um, that are negative for doing so. And we, and we see this happen for some of our, you know, traditional manufacturing clients and logistics clients, where we're really getting people enrolled in care. Of course we're improving the health outcomes. Yes, we're reducing healthcare costs, but some of the other ancillary benefits that we found is, you know, people are engaged in their job better. Presenteeism improves, absenteeism, improves, um, job retention improves. Some of our clients have really high churn employee bases, and what they found is when people engage in Pelago, they will stick around for multiple, multiple years in an organization where the average tenure is fewer than 18 months. So there are real global benefits to just having a. Much more under real

John: 22:08

economic benefits, even beyond the, the care, beyond the medical. Yeah. So what's, what, what's your, what, what's, what's the, your NGO's message to the rest of the healthcare system about substance abuse disorder?

Dr. Yusuf : 22:22

I, I, I think if there's one takeaway, it's that, um. There is an opportunity cost to doing nothing. Um, when you have 90% not in treatment, they are costing the healthcare system somewhere. Um, and it requires that sophisticated analysis of what is underlying the ER visits, what is underlying the sort of cardiovascular diabetes spikes, um, uh, that we can do something, but

John: 22:46

it's three times the cost of conventional treatment for those folks who've got those chronic conditions. It's a real cost.

Dr. Yusuf : 22:53

And the hope in the message is when you recognize and you reframe the problem as a chronic condition and you actually start to think about how you can engage people in their care as you would any other chronic condition, um, across your, you know, claims line items, then there is a real opportunity to bend that curve And, you know, we've demon. We'll, actually this week release the largest, uh, return on investment cost effectiveness study, um, ever done on the commercial population, um, for any type of digital intervention. And what we found is that for every single member that enrolled in the PEDAGO program, there was a six and a half thousand dollars savings on their total cost of care. And not just FED care for

John: 23:31

every, every enrollee a 6,000 plus.

Dr. Yusuf : 23:35

Six and a half thousand dollars, which was equivalent to a four and a half XROY on on every dollar invested. So there is something you can so care, talk,

John: 23:44

care talk, care talk. Listers can figure out the math on how much you're charging. So there is hope.

Dr. Yusuf : 23:50

There is help available. Um, but you know, I'll be the first to say we're not, uh, a magic bullet. It also requires having an honest conversation as an organization of do we want to penalize people for something that, um, uh, is a chronic condition or do we want to do something about it by providing the right tools, um, and having an, an honest discussion and changing the culture of our workplace.

John: 24:12

I think that's a, a great way to finish with a little bit of hope and a and, and a, and a modest dose of reality. Um, so that's it for Care Talk. If you like what you heard or you did, we'd love you to subscribe on your favorite service. Uh, and Dr. Sherwani It's been a pleasure to, to hear about one of the few hopeful, uh, paths. I've, I've, I've, I've heard, and, uh, and congratulations on your success, and I hope that you have a lot more.