Surging Demand for Anti-Obesity Drugs Sparks Battle Among Start-Ups and Pharma Giants

As the demand for anti-obesity drugs surges, particularly for popular treatments like Wegovy and Zepbound, health start-ups are seizing the opportunity to profit from the shortages plaguing these medications. Telehealth companies, notably Hims & Hers, are stepping into the market with cheaper alternatives to these brand-name injections, drawing in customers who either cannot access the originals or are unwilling to pay the steep prices associated with them. Hims & Hers, for instance, offers a compounded version of a GLP-1 weight-loss treatment for $199 a month, significantly less than the $1,349 price tag for Novo Nordisk's Wegovy. Following the launch of their version in May, the company experienced a remarkable 70% increase in its share price, showcasing the potential profitability of entering this booming market. Hims' weight-loss business has rapidly expanded; it reported adding 155,000 users and anticipates $100 million in revenue from this segment this year alone, contributing to an overall expected sales figure of up to $1.4 billion for the company. However, the sustainability of this new revenue stream faces scrutiny. U.S. laws restrict the manufacturing of such copycat drugs to circumstances where the original branded versions are officially classified as being in short supply. This restriction poses a significant risk to start-ups like Hims as pharmaceutical giants such as Eli Lilly and Novo Nordisk are ramping up production to alleviate ongoing shortages, potentially leaving these companies without a profitable product once supply stabilizes. Eli Lilly, who has been proactive in addressing these shortages, recently introduced a lower-cost version of Zepbound in a vial format, aiming to compete directly with the compounded alternatives that have gained traction among patients lacking insurance coverage for these treatments. Both Eli Lilly and Novo Nordisk are investing heavily to enhance their supply chains, and analysts speculate that the timeline for resolving these shortages remains uncertain. The landscape of weight-loss medications is complicated further by the distinction between compounded drugs and generics. Compounded versions of patented drugs, like those Hims provides, do not carry FDA approval and are typically created to address specific patient needs or alleviate supply issues. Critics argue that once the shortages are resolved, the justification for these compounded versions diminishes significantly. Despite the looming doubts about the longevity of their compounded offerings, Hims' co-founder Andrew Dudum insists that the company intends to continue selling a compounded version of semaglutide even after the supply issues are resolved. This will require navigating regulatory hurdles and convincing authorities that they are providing tailored medications, perhaps by modifying dosages or adding other ingredients. In stark contrast, other players in the field are adopting a more cautious approach. Michael Botta, co-founder of health app Sesame, expressed his skepticism about the viability of continuing to offer compounded products once the original medications become available again, emphasizing the patented nature of these drugs. As the competition intensifies, the two pharmaceutical giants are taking a hard stance against illicit compounding practices. They have initiated legal actions against numerous compounders and wellness centers that market potentially dangerous knock-off versions of their drugs. Eli Lilly's heightened efforts to protect its brand include sending cease and desist letters to certain health providers, including digital health apps, accused of producing compounded versions of its drugs after their official shortage status was lifted. Notably, the burgeoning weight-loss market, projected to generate as much as $130 billion annually, continues to attract attention from both legitimate health apps and unscrupulous operators. Experts warn that the presence of unsafe knock-offs poses serious health risks for consumers, prompting calls for greater regulatory oversight. As elements of this unfolding saga play out, the future for health apps operating in this space hinges on their ability to adapt to shifting regulatory landscapes and the evolving dynamics of supply and demand for weight-loss medications. The interplay between innovation and compliance will determine whether these start-ups can thrive amid tightening restrictions and increased scrutiny from established pharmaceutical incumbents.