Ro’s CEO on how GLP-1s built the framework for “pharm-to-table”
Normally, if your insurer doesn’t cover a medication, you would buy it directly from your pharmacy, which bought it from a wholesaler, which bought it from the drugmaker. That’s changing.
When President Trump demanded drugmakers slash prices for Americans, they leaned into a solution that didn’t involve slimming their margins: cutting out the middlemen.
A running theme in large drugmakers’ earnings reports this month has been their push to sell drugs directly to consumers, a practice being dubbed as “pharm-to-table.” Eli Lilly and Novo Nordisk were early to the model, offering discounted cash prices for their blockbuster weight-loss and diabetes shots to patients who weren’t using insurance.
“GLP-1s are really serving as this foil for a lot of the flaws in our healthcare system,” said Zachariah Reitano, the CEO of Ro, a telehealth company that is integrated with both Lilly and Novo’s direct-to-consumer pharmacies.
And it’s not just GLP-1s: Bristol Myers Squibb and Pfizer said they will start selling their lucrative blood thinner, Eliquis, directly to patients. Takeda suggested its depression treatment could work under that model, and GSK said there’s potential for its UTI antibiotics and asthma medications to be sold that way as well.
“This is an opportunity for the pharmaceutical companies to be able to offer their medicines on a platform, cutting out the middleman in the US,” Julie Kim, head of Takeda’s US unit, told analysts on July 30.
But unlike blood thinners or depression treatments, GLP-1s are in especially high demand, and a large share of the population is eligible for them. That means insurance companies have to limit coverage to protect their margins, creating a large pool of people who may be prescribed the drug but can’t afford it.
Normally, if your insurer doesn’t cover a medication, you would buy it directly from your pharmacy, which bought it from a wholesaler, which bought it from the drugmaker. For a GLP-1, that price was upward of $1,000 a month. Now, a provider can send a prescription to Lilly and Novo’s online pharmacies and patients pay about $500 a month.
“Everything that legislators have tried to do over the last 10 or 20 years — increase price transparency, decrease the cost of branded drugs, create competition, increase access — is naturally happening in direct-to-consumer,” Reitano said.
Ro has been able to strike and keep deals to integrate Novo and Lilly’s online pharmacies directly on its platform. Telehealth partnerships are a natural progression for drugmakers, which are not as experienced at marketing directly to patients.
Hims & Hers, Ro’s biggest direct competitor, spends about 40% of its revenue on marketing. Ro — which is privately held and was valued at $7 billion as of its last funding round in 2022 — has partnered with major athletes like former NBA star Charles Barkley. On Thursday, it announced it was partnering with retired tennis great Serena Williams.
But telehealth companies and drugmakers don’t always get along. Many telehealth companies promote compounded GLP-1s, which are cheaper for patients and carry higher margins than offering brand-name products. Lilly and Novo say those products make a mockery of their patents and are eating at their market share.
Hims had a very public and abrupt falling out with Novo, in which the drugmaker accused it of “illegal mass compounding and deceptive marketing.” Lilly, which has said that it would not work with telehealth companies that continue to compound in bulk, cut off its partnership with Noom after it offered microdosed GLP-1s.
“It’s not by accident that companies partner with Ro,” said Paul Cerro, a former strategy analyst at Ro who has since founded his own investment firm, Cedar Grove Capital Management. (Cerro says that he is short Hims, a Ro competitor.)
Cerro said in 2020 he pitched adding ADHD medications to the platform, to which Reitano’s response was, “No.” Pushing a highly addictive medication compromises patients’ safety and doesn’t look good on the industry, Reitano said, according to Cerro. “Zach has specifically designed the platform to be trusted, legitimate, and pharma-partnership friendly,” Cerro said.
Ro doesn’t market or advertise compounded GLP-1s, though its providers are still able to prescribe them. Ro has a free insurance checker, a tool that takes resources to build but doesn’t necessarily promise paying customers. Many of its peers avoid dealing with insurance altogether.
“Ultimately if you prioritize what is best for the patient and can do that in a financially sustainable way, in the fullness of time that’s how you build the largest and most impactful company,” Reitano said. “It might take a little more time, but I think we always like to take the longest view in the room.”
