A growing number of US employers are removing GLP-1 obesity drugs from health plans, a shift that benefits Hims & Hers Health Inc. as patients seek cheaper alternatives.
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Hims & Hers climbs as employers drop obesity drug coverage, sector up 6%
US employers are dropping coverage of costly GLP-1 obesity drugs from health plans, a shift that threatens Novo Nordisk A/S and Eli Lilly & Co. while creating an opening for telehealth provider Hims & Hers Health Inc. to capture price-sensitive patients.
"In the short term, we have this program that will be helpful for people, but it comes at a cost to the federal government and doesn't really represent a sustainable approach to longer-term Medicare coverage of drugs used for weight loss," said Juliette Cubanski, program director on Medicare policy at KFF.
The healthcare sector has gained about 6% over the past month, the best-performing group in the S&P 500. Hims & Hers, which offers compounded semaglutide through its telehealth platform, has benefited as employers have restricted or eliminated coverage for drugs including Wegovy and Zepbound. The shift comes as Medicare launched a pilot program July 1 offering the medications for a $50 monthly co-pay, with the government covering about $250 per month — a cost that could run into billions annually depending on enrollment.
The employer pullback represents a structural threat to Novo Nordisk and Eli Lilly, which have built two of the most valuable pharmaceutical franchises on GLP-1 demand. For Hims & Hers, the dynamic creates a counter-cyclical tailwind: the more employers restrict access to branded drugs, the larger the addressable market for its compounded alternatives. The company's ability to sustain that advantage will depend on regulatory scrutiny of compounded GLP-1s and whether it can maintain supply.
Employer Cost Pressures Reshape Coverage
US employers have grown more aggressive in managing pharmacy costs as GLP-1 spending has surged across commercial plans. Many are adopting prior-authorization requirements with strict BMI thresholds similar to Medicare's new criteria, which require a BMI of 35 or above, or 30 with conditions such as heart failure or uncontrolled hypertension, or 27 with pre-diabetes or a prior heart attack or stroke.
Hims & Hers Captures the Spillover
Hims & Hers has positioned its platform to capture patients priced out of branded options. The company's compounded semaglutide offering costs a fraction of branded alternatives, a gap that widens as employer coverage shrinks. The company has not disclosed exact enrollment figures for its obesity-treatment program, but the employer-coverage dynamic is expected to drive new consultations.
The sustainability of Hims & Hers' advantage hinges on two factors: whether the FDA tightens restrictions on compounded GLP-1s, and whether Novo Nordisk and Eli Lilly respond with lower-priced alternatives or expanded patient-assistance programs. For now, the employer pullback is creating a market realignment that benefits the lowest-cost provider.
This article is for informational purposes only and does not constitute investment advice.
[1] As Employers Drop Obesity Drug Coverage, Hims & Hers Could Be the Winner[2] Healthy Returns: Walmart, CVS step in to help seniors navigate Medicare coverage of obesity drugs[3] Medicare will help pay for weight-loss drugs Wegovy, Zepbound. What to know[4] Johnson & Johnson Is Walking Away From a $100 Billion Obesity Market. Could That Actually Make It the Better Long-Term Buy Than Eli Lilly?[5] Medicare's new $50 weight-loss drug program: Who qualifies and what are the concerns?
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