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Solving the Medicaid tech problem

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Agentic AI is a moat for pharma

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Driving the day

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The final word

In the era of the One Big Beautiful Bill, Medicaid startups face unforeseen pressure to show their AI-fueled tech can cut costs and improve care.

Why it matters: Investors and customers are clamoring for a clear path to a repeatable return-on-investment. 

What they're saying: "For folks building in Medicaid, the questions are: 'Can you guarantee an ROI in 12 months? Do you have complete control in effecting that ROI?'" says Ellen Herlacher, a partner at Medicaid-focused venture firm LRVHealth.

"The only solutions any health plan is going to adopt are going to be based on, 'How much money did you save me this year?'" says Senan Ebrahim, CEO of maternal care startup Delfina.

What they're doing: Startup leaders are touting the cost-cutting potential of automated messaging, LLM-powered chatbots, voice AI agents, and ambient scribes.

Both Cityblock and Bicycle Health, a startup focused on opioid overuse disorder, are looking at voice AI agents to do high-cost administrative work like appointment scheduling and pharmacy navigation.

Cityblock's voice tool could go live in the next year, while Homeward plans to launch capabilities around nurse triage and benefit design in the next nine months.

Zoom in: New bill-imposed regulations like work requirements will necessitate startups' clever use of automation technology.

"If you're in one of the states that didn't have work requirements before this, it's an opportunity to purpose-build with the frontier of automation in mind," says Herlacher. 

"Complying with the raft of bureaucratic work requirements [in the OBBB] won't be possible without carefully-designed tech," says Jannine Versi, CEO of women's virtual care startup Elektra Health.

Medicaid enrollment company Fortuna Health is already sending its customers automated messages about the timeline of the rollout for the requirements, says CEO Nikita Singareddy. Fortuna has further plans to help navigate requirements as they're instated.

The bottom line: Medicaid companies must re-examine their cost structure and turbocharge automation to convince investors and buyers they can scale, Herlacher says.

1. Solving the Medicaid tech problem

Define Ventures has a shortlist of startups in the agentic AI space it's targeting, says managing partner Lynne Chou O'Keefe. 

Why it matters: Agentic AI is emerging as a bridge for pharma amid continual federal disruptions to clinical research grant funding 

Zoom in: "Now we can have an infinite supply of Ph.D.-trained agents around multiple (therapeutic areas), around multiple areas of expertise," she says.

The firm, which has six funds with $800 million AUM, is also looking at investments using AI to optimize clinical site selection and enrollment, she says. 

Between the lines: There are hundreds of use cases for AI agents to help with pharma's R&D, manufacturing, regulatory and commercial functions.

They can help with tasks like creating trial protocols, simulating cost scenarios and submitting to regulatory bodies. AI agents can also help identify and refine new drug candidates by leveraging data from genomics and historic trials. 

The intrigue: While a federal judge last month ruled to restore hundreds of millions of dollars of NIH grants, researchers still face long waits for restored money — and thus can't return to work.

 "These are the times when we have to do more with less," Chou O'Keefe says.

Zoom out: Define surveyed the top 20 pharma players, all of whom cited reducing administrative burden and improving workforce efficiency as an AI priority.

"That is where you can see ROI immediately," she says, versus more long-game, expensive use-cases like drug discovery.

State of play: Companies using AI to aid pharma research have raised substantial rounds this year. Google's Isomorphic raised $600 million in March, while Pathos AI raised $365 million at a $1.6 billion valuation in May.

The valuation environment for clinical AI generally is frothy, but Chou O'Keefe says Define is able to maintain prudence by leveraging its relationships.

"If we were to invest in a seed stage company, the ability to go to the CTO of Amgen or to go to the head of commercial of Genentech — which are relationships of ours — is just a very different position." 

The big picture: Big Pharma budgets are contracting as they contend with macro challenges. AI spend is a notable exception to that shrink.

Per Define's new report, 85% of the top 20 pharma players plan to increase their AI budgets.

What they're saying: "In contrast to providers and payers, more of that budget is into the P&L unit leaders than, let's say, a more horizontal function like the innovation group," Chou O'Keefe says, indicating broader enterprise-wide coordination on AI within pharma. 

Go deeper: Biotech's AI drug discovery boom

2. Agentic AI is a moat for pharma

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3. Driving the day

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4.  🚨 Deals deals deals

Substack CEO Chris Best quips about the cost of AI research talent in a post today following the company's Series C.

5. The final word

Tweet from Chris Best stating, "We now have enough money to hire one part-time AI researcher," quoting his earlier tweet about raising $100m in Series C funding for Substack on July 17, 2025.