GRAND ROUNDS

23andMe’s New GLP-1 Service: Exploring Compounded Medications

We’re entering an era where GLP-1 medications have become the make-or-break factor for digital health companies as they rush to add these drugs to their weight management platforms to stay competitive—or face potential closure.

Now, more companies are offering compounded GLP-1 medications, with 23andMe being the latest to join the trend.

In this article, I’ll explore 23andMe’s new GLP-1 service, explain the role of compounding pharmacies, and share insights on the revenue potential for compounded GLP-1 drugs.

The Deets: 23andMe Launches GLP-1 Program

23andMe made two big announcements regarding the now infamous treatment class of anti-obesity and anti-diabetic medications, GLP-1s:

1. Research: 23andMe will perform a large-scale study analyzing the relationship between genetics and GLP-1 efficacy and side effects.

2. Weight loss program: 23andMe’s telehealth platform, Lemonaid Health, will launch a weight loss membership program offering semaglutide (brand-name and compounded) along with clinical consultations.

23andMe’s announcement comes when the company is struggling financially, with declining revenue and market cap. Anne Wojcicki, the CEO, even tried bringing the company private again but was vetoed by the board.

Is the addition of a weight-management vertical enough to save 23andMe?

Maybe. I’ll talk more about this below in Dashevsky’s Dissection.

What’s important to note, though, is how they’re offering GLP-1s:

• Brand-name semaglutide (Wegovy)

• Compound semaglutide

I’ve noticed this pattern with digital health companies: open up a weight-loss membership program and offer a brand name GLP-1. Once they realize how difficult it is for customers to access brand name GLP-1s (cost prohibitive and drug shortage), they pivot to compounded semaglutide.

So, let’s talk about compounded GLP-1s.

Five Things to Know About Compounded GLP-1s

Since more and more direct-to-consumer digital health companies are offering compounded GLP-1s (Sesame is the latest to announce they’re offering compounded GLP-1), let’s learn a bit about “compounding.”

First, a compounded medication is a custom-made medicine prepared by a pharmacist to meet specific needs that aren’t met by standard, commercially available drugs. There are two examples:

1. If someone has an allergy to an ingredient in a regular medication and needs it removed or needs a different dosage form (like a liquid instead of a pill).

2. If the drug is on the FDA’s drug shortage list.

Second, there are two types of compounding pharmacies:

1. 503a pharmacies: state-regulated, can create tailored medications for individual patients (this is what the direct-to-consumer digital health companies use).

2. 503b pharmacies: FDA-regulated, can make larger quantities of medications without individual prescriptions.

Third, compounded medications are not “generic,” “alternative brand name,” or “FDA-approved” versions of medications. Yes, read that again. Compounded medications merely contain the same active pharmaceutical ingredient as the FDA-approved version. Making any claims about the safety or efficacy of the compounded drug may be illegal under the Food, Drug, and Cosmetic Act.

Fourth, compounded medications may often be cheaper than the brand name version, as we see with semaglutide. Direct-to-consumer digital health companies offer these compounded versions much cheaper than the brand name. Sesame, for example, offers their compounded GLP-1 at $249 per month compared to ~$1,000+ for brand name semaglutide.

Lastly, the FDA has issued an alert regarding dosing errors with compounded injectable semaglutide products, leading to overdoses. Since the compounded products differ from FDA-approved versions, with varying concentrations and instructions, there’s an increased risk of errors. Additionally, one study published in JAMA indicated that semaglutide products sold online without a prescription are often from illegal pharmacies, with significant risks of counterfeit and contaminated products.

Dashevsky’s Dissection

The motto is GLP-1 or bust.

But simply offering GLP-1 medications won’t guarantee revenue. Digital health companies, like Lemonaid Health, jumping on the GLP-1 bandwagon, need to be cautious. The focus should be on maximizing the long-term value (LTV) to customer acquisition cost (CAC) ratio.

First, CAC is currently high, especially with many companies offering GLP-1s. Attracting customers to choose one platform over another is expensive.

Second, companies solely offering brand-name GLP-1s face challenges with LTV. These drugs are costly, and with studies showing that about 50% of users stop after six months and 30% after one year, profitability becomes a concern. The best way to increase LTV is by offering multimodal interventions for weight management.

However, offering compounded semaglutide could drive revenue. Compounded medications are much cheaper than brand-name drugs, allowing companies to mark up the price and offer more affordable options, like $250 per month compared to $1,000 for brand-name GLP-1s. This approach could work similarly to how prescribing generic Viagra (sildenafil citrate) has been successful.

But I have three concerns:

1. Once the GLP-1 supply meets demand and the FDA removes it from the drug shortage list, business models relying on compounded semaglutide may collapse.

2. Dosing errors, though infrequent, are a significant concern for compounded semaglutide. Companies like Sesame are addressing this by manufacturing prefilled, single-use syringes, avoiding the risks associated with patient-drawn doses from vials.

3. The potential for significant revenue from compounded semaglutide could create conflicts of interest, leading providers to overlook the risks involved in compounding.

Something to consider!

In summary, the rise of GLP-1 medications is a critical factor for digital health companies, highlighting 23andMe’s recent entry into the market with both brand-name and compounded semaglutide offerings. There’s potential revenue from compounded medications, but they raise concerns about sustainability, dosing errors, and conflicts of interest. While compounded GLP-1s could be profitable, companies must navigate these challenges carefully to avoid long-term pitfalls.

OUTSIDE THE HUDDLE

Some of my favorite content from this past week

• California lawmakers are on track to pass a bill that will allow the state to ban private equity firms from acquiring physician groups and healthcare facilities. Notably, California has some of the strictest corporate practice of medicine laws.

• A federal judge struck down the FTC’s ban on noncompetes. The ban on noncompetes is a bit more nuanced for healthcare professionals. Either way, this ruling will likely be appealed.

• Walgreens and the federal government are partnering to help diversify clinical trials. The government will pay Walgreens $100 million for a 5-year contract to help run clinical trials. Retail clinical trials are an interesting space. I covered CVS Health, Walmart Health, and Walgreens clinical trial ventures. Give it a read.

• Here’s a fascinating LinkedIn post by Morgan Cheatham about how AI agents won’t lead to an immediate reduction in costs. “…automating a single task is not equivalent to automating an entire job,” he says. I found his perspective interesting. Check it out here.

• Short and sweet article on 10 states tackling prior authorization.

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