Healthcare is Broken—This Company Wants to Fix It

29:18One, they reacted to the pricing pressure. So we were able to manufacture and compound these vials, personalized for patients, and offer it to them for something like$150. The price of the FDA-approved medication at the time was$1 ,500. And so the pure exposure, the transparency of a model like him's and hers where it says, hey, we're consumer-oriented, we can make this stuff. We have these facilities. It costs us about, you know, 80 bucks all in with all of our stuff. So we're going to put a markup on it. We're going to sell it to you for 150. And it was very transparent about how this all worked.

30:00Resulted in immense pressure on the drug companies to take the blockbuster medicine of this century and bring its price down to what consumers could actually afford. And through all types of regulatory pressure, through corporate pressure, from us through consumer pressure, those medications are now available to consumers for$150, the brand name medications. That has never happened in the history of this country. When the medicine that is brand new, recently approved, and needed by the masses was able to apply enough consumer force and pressure to bring that cost down to something that people could afford.

30:48And I think it was a big part, the administration was a huge part of it through TrumpRx. They did a phenomenal job in applying pressure. And I think the exposure of the fact that we could actually make this medicine for this cheap and we could sell for$150 and have a really reasonable business resulted in people applying that same pressure to the drug company. So that was an amazing transition. So that happened. The second thing happened on the personalization side. the drug companies and we were talking to all of them saw that uh 70 of their patients were stopping right after starting their medicine because of these side effects and these were injections with single dose injections you put in your belly you click a button and you get five milligrams well if 70 of those people are throwing up and stop using it because five milligrams is too much they were coming to hims and hers.

31:37And so now fast forward two years later and the drug companies have done a phenomenal job. Novo and Lilly have adopted it very quickly. They now have vials on Lilly Direct where you can do custom dosing. They've got quick pens where you can adjust exactly the amount of dose for you. And then Novo just put out the Wagovi pill. So low dose pills where you can titrate and adjust your treatment based on side effects, microdose as necessary and get to whatever the outcome is that you need. And so over the course of 18 months or 24 months, our pressure by saying, hey, we've identified something that really matters to consumers.

32:16They need this personalization. And this price point is a fair price point because it's what it costs us to make. The whole industry responded. And so as a result, we've now been able to partner with Nova Nordisk directly, which is fantastic. We recently launched the Eli Lilly products on the platform because now those products are$150 and can be personalized to patients. And so again, through our lens, we push on behalf of people. And the industry has changed dramatically as a result of the pressure in a way that we think is phenomenal for people. And now it really aligns us very well with many of these drug companies to be able to help them get these medicines to millions of individuals.

32:56Such an interesting story because it all happened because of this strange regulatory dynamic where if there's a shortage of the drug, which is what was happening because it was so new to the scene and demand was going just so crazy, then you can do these things, specifically compounding, which is basically a fancy word for let's take different ingredients, put them together in an interesting way and then give it to the public. and you were allowed to do that because of this, I guess, sort of like a regulatory glitch. And it's not even a glitch, Ed. It was created for exactly this purpose. Feature, not a bug, maybe, yeah.

33:37It's a feature, it's not a bug. It's saying, hey, if the drug companies can't make enough medicine, all of you pharmacies around the country, you can make it. Which, to me, brings up questions of how our regulatory system in healthcare actually works. Because if it weren't for the fact that there was a shortage of the supply of GLP-1 drugs, you wouldn't have had the regulatory or the legal ability to go out there and create a different version of the drug at a much cheaper price. And we probably wouldn't be here today where you have essentially forced the hand of the large healthcare companies to offer that drug at a lower price.

34:14And it makes me think, are regulatory restrictions perhaps too stringent? Is it maybe a problem that the only reason that you were even allowed to pursue this model is because there was some issue in the supply chain of the GLP-1 industry itself? I think a lot of people are thinking that. I mean, I think the new peptides conversation that's taking place is another version of this conversation, right? There's a push to deregulate what the administration qualifies as supplements, right? BPC-157, TB-500, Epitalin, all of these peptides during the Biden administration were moved to a Category 2 list, no longer letting pharmacies manufacture them or compound them.

35:02Now there's a meeting in July pushed by RFK to see if those can be then reintroduced into a Category 1 list to allow access to consumers. Now, the traditional industry doesn't want this to happen at all, right? Because by doing so, you are, frankly, educating consumers that peptides, which are just chains of amino acids that are found in the body, can be sourced, produced, safely manufactured, and delivered to consumers for, let's say,$50 to$100. Well, the drug industry would love for that knowledge not to be known because if you can patent those, if you can take those amino acids and throw something on the side of that chain and patent it, well, now you've got blockbuster pharma medications at 80 % or 90 % margins, where the population is either forced to pay that out of pocket or the insurance companies are forced to cover it.

36:08So again, the system is set up to make a ton of money. And so I do think there's a real conversation that should happen around consumer empowerment in healthcare. And that doesn't undermine, I think, the importance of the FDA's oversight in making sure things are safe and things are manufactured right from the right facilities with the right regulatory frameworks. and that the risks of those are mitigated. But there also has to be an opportunity for consumers to have empowerment and get access and ultimately have more choice. So there's no question that the FDA and the regulatory oversight to make sure medicines are safe is required and needs to be respected.

36:56Yet at the same time, consumers have to be able to have empowerment to work with their provider and work with their doctor and explore what's right for them. And that could be adjustments to dosing, that could be combination therapies, or that could be exploring things like peptides. And so I think we as a business sit at a really interesting intersection because I think we can lead by both empowering customers to have access to this level of innovation, but establishing what doing it the right way means. And to me, you know, peptides as an example, what doing it right means is always doing it hand-in-hand with the provider.

37:36So making sure the clinical oversight is there, the understanding of you is there, and that a doctor is involved and active in that decision-making so that you have informed understanding of your choice. And then second, making sure that the actual supply and manufacturing and sourcing is entirely gold standard. So when you look at the compounding of weight loss medications in the last couple of years, just like when you look at the compounding of peptides right now, almost all of it is coming from unregulated imported sources overseas. and uh people say oh it's made in america compounded america it's not right we know the same five facilities that manufacture all this stuff um and so there is a real gray market and there's a black market for these therapies that is dangerous um there's there's there is lack of understanding of the purity and the the exposure and when you're talking about sterile pharmacies like people are injecting these things.

38:42Like the oversight of these facilities from an FDA standpoint needs to be very high. And so I do think as we enter this world where there's more consumer empowerment, there's more interest in things like BPC-157, it will be critical for hims and hers to establish that gold standard of quality. Say, hey, this is actually made in America. The APIs are manufactured here. This is how you do third-party testing. This is how you do certificates of authentication so people know exactly what they're getting. And this is how you do doctor and clinical oversight to make sure you're thinking about this the right way.

39:18And we're putting a ton of effort into making sure that the approach for all of our categories looks like that. And that doesn't mean it's going to be the cheapest, but I think it's going to be done right. And I think companies are going to need to find that middle ground. We'll be right back.

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40:58We're back with Andrew Dudham. The peptide conversation, the GLP-1 conversation, you're sitting at one of the most interesting fulcrums between how everything should be regulated. I mean, it's such a perfect example of the pros and the cons of regulation on both sides. Because on the one hand, over-regulation, the stringent regulation around these drugs has resulted in an ecosystem where a lot of these companies. There are huge barriers to entry, and these companies have essentially established these maybe monopolies, maybe you'd say oligopolies. They have unbelievable pricing power. There is no price transparency.

41:41They're ratcheting up these prices to extraordinary degrees, and it's having real adverse effects on the actual health of the American people. And it's probably worse in the United States than in any other nation when you just look at the amount of money that we're spending per capita on healthcare costs. And there is a really good argument, as you say, and I think that your story really brings it out, in how over-regulation that has actually been lobbied for by a lot of these large corporations has led to that outcome. At the same time, though, in a world of healthcare, in an industry where we're talking about the actual biological health of human beings, the idea of being loose with regulation and sort of letting everyone kind of do whatever they want to do is also a very scary game to play.

42:32Because there is a world in which, you know, maybe let's just assume that there was a GLP-1 shortage and then you were compounding these drugs and maybe you guys got it wrong. You didn't and you delivered great medication for a lot of Americans. But if you had messed up in some way, then suddenly that's a moment where you'd say, well, why did we let this guy who's kind of new to the healthcare game get involved in these drugs and sell these things to people. So I guess at a sort of very high level, how do you think about regulation? Like, what is the right balance? And what should we be pursuing from a policy level, even from a company level, to deliver low-cost healthcare to Americans without making them potentially more sick?

43:22You know, I think the administration right now is doing a great job pushing the right balance, to be honest. I think the government applying pressure to the drug companies to come to the table with regard to government-negotiated drug pricing was an incredible step. We're the only country in the world that doesn't do that. Any established country in the world that doesn't do that. Which is why, you know, people could buy Wagovi in Canada and the UK and Australia and Japan for$100,$150 for the last few years. And here in the U.S., where there's a massive, massive obesity epidemic, the medications were 10 times that.

44:05And so I think it was a great first start for the administration to say, hey, these are important to people and we're going to force change. Nobody wanted to do that. No drug company wanted to do that. And it was only possible because, frankly, the president made that happen. I think that's a great start. And I think that should continue. I think that should continue as precedent for the mass market therapies that are needed by the American people. I don't think there's any reason that the margins of these companies need to be so exorbitant. I believe that pharma needs to get paid back for their innovation.

44:42No question. I'm a huge believer in that. And I think the U.S. has benefited from that innovation. But there is a middle ground there, right? There's a way to also make it accessible to people as well. You guys are one of the leaders, I would say, in GLP-1 drugs at this point. I mean, of course, it's Novo Nordisk and Eli Lilly who are manufacturing the stuff, but you're getting it out to a lot of people. How large is the GLP-1 opportunity? Like, is it that some people are going to be skinnier and that's kind of how you see it? Or does it? I mean, I could just tell you that my co-host, Scott Galloway, he thinks that GLP-1s are more important than AI.

45:28I think GLP-1s will have more impact in global society over the next five years than AI. No question. And it's not just because, you know, somebody's losing 10 pounds, right? The science at this point, the price points of them coming down overseas, they just went generic in Canada. This year, you know, semi-glue time will go generic in the U.S. in about four years. right it's already it's it's already expanding into new form factors with novo in the pill which unlocks a completely different customer audience um the impacts of these are monumental dropping general obesity like for the first time you're actually seeing you know like early obesity curves turn that's going to then have downstream on on diabetes deaths all metabolic resistance.

46:17You're seeing cancer data come out in the last few weeks, which is just tremendous. You're seeing fatty liver and kidney. I mean, it's just like, I think you essentially have a population that is metabolically ill that then results in all of these perverse outcomes, whether it's heart attacks, cancer, and the body just going astray, even neurodegenerative diseases. from what we can tell from the science is that when you metabolically fix somebody all of these other things meaningfully reduce and so i think it's going to have massive implications for people's health it's already having massive implications for for things like smoking and drug addiction and alcoholism.

47:04I mean, it's, um, I would be surprised if, um, fast forwarding four or five years from now, uh, GLP ones were not a part of north of 50 to 60 % of every American's daily habit, whether that's through a vitamin that they're taking a compounded vitamin orally or through a weekly combination injection that also helps them manage their hormones or cardiovascular risks. But I think it's going to be a staple in the global healthcare society, no question. Do you think that big pharma and large healthcare companies are concerned about this? If we have a drug that systemically resolves many of the root causes of all of these symptoms, You know, obesity leads to all sorts of things.

47:59I mean, if we see cancer rates going down, smoking cessation, alcoholism going down, all of these things that, I mean, in a dark way, large healthcare companies, healthcare insurance companies, big pharma companies benefit from because they're making money solving those problems. Do you think those companies are worried about what this could do? I think there's no question, and you see it this year with the GLP-1 pressure on pricing, that the age of unrestrained pharma margins is gone. It's gone. It might still be there quarter to quarter, but the culture has caught on. government has caught on everyday people have caught on and whether or not hims and hers is here any longer players like us expose the reality right and i think hims will continue to do that now what i hope will happen is uh they will adapt they'll adapt to what consumers want and i think there's a tremendous opportunity consumer biotech that that i think hims and hers is at the forefront of and were able to go, you know, earlier on in the process of actually starting to work with these drug companies and making these therapies because now there's actually a way to get them to hundreds of thousands, you know, millions of people quickly.

49:21But I think what's going to happen is consumer biotech is going to start making medicines that people actually want, not necessarily the things that just keep them treated and sick but stable. So good example, Eli Lilly has a new medication, early phase trials where single injection a year removes cardiovascular risk. This came out just about a few weeks ago. So you don't have to take a statin every single day. You don't have to take Repatha, which is$500 a month, twice a week. you can take one injection that probably costs about$30,$30 to$50 to make that one injection, and it removes your cardiovascular risk.

50:03It just drops your LDL to like obliterates it. Now, when that drug comes to market, there's going to be 10 other versions of it also. And HIMSS is going to be, and hers is going to want to get that to as many people as possible. Right. And people are going to want that because they don't have to be sick any longer. They can actually be proactive. It's like a vaccine for heart disease, right? If you could take a vaccine for cancer or a vaccine for heart disease, a lot of people would do that immediately. And so I think there's going to be a new wave of demand for therapies, but I do think without question, traditional pharma is going to have to adapt very quickly because I think the age of unrestrained margins and just treating illness ongoing is gone.

50:44I think a big part of this is also just like the gene therapy dynamic, the gene editing capabilities actually allows you probably five years from now to fix issues instead of just treat the symptoms of the issue. And that is another reason in which I think the whole economic framework is going to have to be changed. Obviously, you guys are offering way more affordable pricing as exemplified in the story you told about your compounded semaglutide drug, and you're sacrificing larger margins, essentially, what's stopping you from eventually becoming like the rest of big pharma and the rest of healthcare where you adopt these unrestrained margins?

51:27I mean, ultimately, you have to return value to your shareholders. I mean, why should people trust that you will not do that at some Yeah, I think it's just, you know, we'll walk the walk, period, right? Like we, I fundamentally believe that you can build with this company, and this is really rare, I think, something that helps the entire world and is a great business. and that's because when you look at the reasons people are sick and you look at the reasons people are dying and the reasons they're they're depressed or like these it's it's an a lot of it is an access problem that in many ways this is not a scientific problem right you have to leave your house and take off work and get a babysitter to drive to then wait in line at the doctors to then talk to a doctor who's super tired and barely paying attention to you, who's spending four hours a day writing notes to get bottom-of-the-barrel service, you're not even getting proactive, you're just treating the thing that's most urgent.

52:37That's not a system that is loved, and that's a system that's extremely costly. And so what you've seen hims and hers do in the last 10 years and you'll see us keep doing it, is verticalize each part of the infrastructure that's costly and then give that right back to consumers. So instead of having brick and mortar facilities, we have a telemedicine platform. Instead of having doctors in the office, we've got a digital provider group. Instead of having to pay Epic a ton of money for their EMR, we build our own. Instead of having to partner with a compounding facility and drug manufacturing that's going to have huge margins.

53:14We're just going to invest hundreds of millions of dollars and build our own facilities so that these treatments can be 50 bucks. So I think you're going to see us just continue to invest in a better experience, a more efficient experience. And ultimately, that's because I think the only reason we're building this thing is because we actually think that's possible, right? We think it is possible that people could have a world-class state of health and be empowered to feel awesome. And it only costs maybe 50 to a hundred bucks a month. You guys like, that's what I really think is possible. Like you think about Netflix, you're playing 15 bucks a month for some movies.

53:55You should be able to pay a hundred bucks a month. And you are getting preventative screening, the medicines you need to feel great. And a doctor watching over you, making sure you're on the right track. Like, I really believe that's possible. When you look at the healthcare industry, I think a lot of people listening to this podcast, a lot of people in this country are just fed up with how the whole system works. And every time we try to dig into this industry, oftentimes the answers that I get are it's super complex and there are all these different players and it's hard to know who is the problem or what the problem is actually stemming from, I mean, there's the pharmacy benefit managers and there's the insurance companies and there's the actual pharmaceutical companies themselves.

54:46As someone who's in it, who's the problem in your mind? Where is the problem coming from? All of it. The ways in which the money flows is messy and deeply entrenched where everybody is the problem. Like, there is no single issue. You can't point a finger and say it's the PBMs. It's everybody. And it's obvious because at the end of the day, they'll all lobby against a system that breaks the system, if that makes sense. Like, they'll fight each other internally to try to make five bucks here and there, 5 % more within the system. But if somebody attempts to break the system, all of them are on the same team and say, hey, we're going to shut that down.

55:37And I think that exposes very clearly what's going on. And so, you know, we chose very early to frankly not really try to integrate into the existing system. And that's why we built our own provider group. We built our own pharmacies. We have our own drug sourcing. We buy directly from raw ingredients, or we actually, in the peptide side, buy our own manufacturing to make our own raw ingredients in the U.S. because we don't believe we can buy them anywhere else high quality. So I think the system itself has been established for so long and so entrenched, it will be impossible to iterate its way to a great outcome.

56:22I think what will force a great outcome is a new system that delivers for consumers, that shows that it can be priced affordably, that shows it can deliver great care and on-demand care and price-transparent care and proactive care and things people actually love. And then as a result, the legacy system will be forced to change. My final question. I think Hims and Hers is a really good case study in entrepreneurship because you guys have entered into a system or broken into an industry which from the outset desperately did not want you to exist. And we've heard multiple stories in this podcast as to how that has played out and as to how you have overcome that.

57:08And I think that that is really the story of starting a company in a lot of different industries. Usually, if you're the new entrant on the scene, the incumbents do not want you to succeed. So my final question to you, what would be your advice based on your experience starting this company to founders, entrepreneurs, people who are starting up in their careers, who are trying to break into a system, a system which does not want them to win. One of my old co-founders, he used to say this, and I think maybe Peter Thiel used to tell him, I don't remember the exact source, but it was something like, don't underestimate toys that can become big companies.

57:54and you think of something like Snapchat. It was written off. It's like a disappearing photo. It's a feature. It's a toy. Or Facebook. It's a way to see other men or women on your college campus. You're single. It's a toy. It's a joke. It's silly. If we had launched 10 years ago and talked about today, you know or back then what we talked about today right the ambition to disrupt the health care system it would have been impossible um and the ambition hasn't changed it's been consistent the whole time but i think our approach was what's the wedge like what's the toy what's the thing that keeps the existing system unaware of what we're doing completely naive to it and for many years the health care system laughed at him's and hers right like i'd go to jp morgan health care conference and people are like, why are you even here?

58:50Right. Don't you guys just like, aren't you guys like the cactus? Like you said, you guys like cactus advertisements in New York. That's not healthcare. That's like, that's Viagra. And now I think the conversation has really changed. And so I think, you know, I would push founders to identify the consumer truth that is deeply misunderstood in the legacy system and start there and don't be too greedy about, and don't have a big ego about like needing to say how you're going to go disrupt this whole system. You know, I think founders often like to do that. That doesn't matter. Like what matters, like understand the consumer truth that the system is missing, figure out the purest implementation to prove that and go after that.

59:36And if you can figure that out, if you can unlock the consumer love because you've actually understood them better than anybody else, just keep growing from there, or slowly keep going from there. And it's to your advantage that the legacy system thinks you're a toy and thinks you're a joke and doesn't pay attention to you. And eventually they'll start attacking you. They'll make fun of you. And then you'll go through the phases, you know, they'll go through the phases of grief and then they'll fight you. And then you're actually onto something. But in the early days, like just find that consumer insight.

1:00:07Andrew Dudham is the co-founder and CEO of Hims and Hers. Andrew, really appreciate your time. Thank you. Thanks for having me on.

1:00:18This episode was produced by Alison Weiss and engineered by Benjamin Spencer. Our research associates are Dan Chalon and Chris Nodonogu. And our senior producer is Claire Miller. Thank you for listening to the Profit Markets Founder Series. We'll see you next month with another founder story.

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