Hims & Hers shares drop 14% as FTC suit exposes telehealth risk

The FTC's July 29 lawsuit against Hims & Hers Health over data-sharing and billing practices sent shares down 14 percent, exposing the regulatory risk embedded in the telehealth platform's rapid growth model.

"When you're changing the fundamental understanding of how a traditional system like healthcare works, and you're rebuilding it in the digital ecosystem, I think it takes time for people to understand how to do that the right way," Chief Executive Andrew Dudum told CNBC's "Squawk Box." "I think ultimately they wanted more of a headline than a real agreement here."

The FTC, joined by Los Angeles County and Utah, accused the company of sharing user health information with advertisers including Meta Platforms and Snap, charging for prescriptions before customers spoke with healthcare providers, and making subscription cancellations difficult. The agency opened its inquiry in October 2023, and settlement talks began after it relayed conclusions in April. Hims & Hers recorded a $15 million probable-loss accrual in May and proposed a settlement without admitting wrongdoing, but the FTC proceeded with litigation.

The lawsuit lands as Hims & Hers navigates a strategic pivot. The company sold lower-cost compounded GLP-1 weight-loss drugs during supply shortages, then shifted to branded medications after Novo Nordisk dropped a patent-infringement suit in March. Dudum said he expects cash-paying patient costs to fall to $40 to $50 per month from roughly $150 to $200 currently. Meanwhile, Hagens Berman, a national shareholders rights firm, opened an investigation on August 18 into whether the company's conduct violated U.S. securities laws.

FTC Alleges Data Sharing With Meta, Snap

The financial picture complicates the defense. Hims & Hers reported a net loss of $86.3 million in the second quarter of 2026, compared with net income of $42.5 million in the same period a year earlier. Revenue rose 38 percent to $753.2 million, and the company raised its full-year revenue guidance to a range of $3.1 billion to $3.3 billion.

The $15 million accrual recorded in May suggests the company anticipated a financial settlement, yet the FTC's decision to sue indicates the two sides could not bridge their differences. Dudum framed the company's approach as consumer advocacy. "We are active disruptors. We take that head on, and we're willing to do it. But it is always when we believe that it's in the best interest of people and their access," he said.

Dudum also said the company is investing to become "AI native," moving away from third-party AI agents to build technology internally. "The closed loop data that you have within a healthcare system like Hims & Hers, that is the asset," he said.

GLP-1 Pivot Tests Regulatory Boundaries

The GLP-1 transition illustrates the company's willingness to push regulatory boundaries. During the shortage of obesity medications, Hims & Hers sold compounded versions at lower prices, drawing a patent-infringement lawsuit from Novo Nordisk. After supply recovered, the Danish drugmaker dropped the suit in March, and Hims & Hers agreed to sell Novo's branded drugs on its platform. Dudum said the episode demonstrated that these medications can be brought to consumers at affordable prices.

The shareholder investigation adds another layer of legal exposure. Hagens Berman's probe focuses on whether Hims & Hers engaged in unlawful business practices and whether such conduct violated U.S. securities laws. If the investigation produces a securities class action, the company could face additional penalties beyond any FTC settlement, and the reputational damage could weigh on subscriber growth.

The broader telehealth sector may face increased regulatory scrutiny as a result of this case. The FTC's willingness to pursue litigation against a high-profile digital health company suggests data privacy and billing transparency will be enforcement priorities. For Hims & Hers, the path forward depends on resolving the FTC action while maintaining the growth trajectory that has made it one of the most visible names in telehealth.

This article is for informational purposes only and does not constitute investment advice.