‘Cowboys’ of telehealth pushing copycat Ozempic on the vulnerable
Inside Australian laboratories, chemists are creating pharmaceutical replicas of one of the world’s biggest blockbuster weight loss drugs. The phones are ringing off the hook.
Inside laboratories in Melbourne and Adelaide, chemists are creating pharmaceutical replicas of one of the world’s biggest blockbuster drugs, Ozempic.
These are compounding pharmacies and they’re creating a sodium salt version of semaglutide, the peptide therapy that hundreds of thousands of Australians are desperate to obtain.
In the pharmacies’ head offices, phones are ringing off the hook with inquiries.
Compounding drugs is usually done at a small scale, for niche individual reasons or if a rare drug is out of stock. It has never been done on this scale before, for such a popular drug, to supply so many patients, in Australia’s history.
When the copycat semaglutide arrives in the post of the thousands of patients of commercial telehealth company Eucalyptus, it’s in an old-school vial and is injected with a syringe. Doctors prescribing the drug advise patient it is unapproved but insist it is safe. Australia’s drug regulator, meanwhile, is alarmed.
“These drugs are untested, unproven, we don’t know what their safety profile is,” says Robyn Langham, principal legal and policy adviser at the Therapeutic Goods Administration. “We don’t know if these drugs work, we don’t know what’s in them.
“Where we do have oversight of registered drugs, where they’ve been tested for safety and quality and efficacy, we can reassure the public, or we can at least inform the public of what the benefits and the risks might be. We don’t have that capacity to do that with any of these products.”
The sheer nerve of the “tech bro” hustlers who are behind one of Australia’s biggest commercial telehealth start-ups to have a drug cooked by partner compounding pharmacists on a very large scale, circumventing Australia’s entire machinery of drug approvals and rigorous system of post-market scrutiny, has stunned the mainstream pharmaceutical sector and many in Australia’s burgeoning digital health industry.
But they shouldn’t have been surprised: since their inception single-service telehealth start-ups have been pushing the boundaries of regulation and legislation in their relentless marketing to consumers and ready approach to prescribing without ever speaking to a patient, with this model of aggressive telemedicine unashamedly homing in on areas of intense human vulnerability – weight loss, impotence, hair loss and infertility, offering a ready medical solution for each.
“These outfits are not really delivering what I would say is digital health or telehealth, they’re just using a platform to sell branded drugs,” says Brisbane-based venture capitalist Andy Jane, a physicist and engineer who has two decades’ of experience investing in innovative healthcare companies. “They’re really effectively online pharmacies.
“I am always worried about any business model which, when you dig deep into them, are all predicated around trying to find a way around the regulator.”
Now digital health industry insiders are speaking out about what they see as a “cowboy” approach by some start-ups that they fear is sullying the reputation of the wider commercial telehealth and telemedicine industry, which in many cases is delivering truly innovative solutions in healthcare and health technology.
Romain Bonjean is a healthcare entrepreneur, investor and adviser to early stage technology businesses who has founded and run several companies at the forefront of medical innovation, including Australia’s first consumer genetic testing service. He is chief executive of digital health platform RoseRx. Mr Bonjean previously ran a telehealth model similar to that of Eucalyptus, Rosemary, before becoming disillusioned with the model.
“Digital health platforms that create engaging and lasting connections with patients will continue to shape the future of the healthcare system and unlock improvements and benefits for patients, doctors and healthcare companies,” Bonjean says.
“The challenge for the sector is the small number of opportunistic businesses quick to exploit the loopholes in established and highly regulated systems and practices to pursue a business opportunity over a healthcare opportunity.
“There will always be people who push the boundaries of established practices for profit.”
Eucalyptus contends that Mr Bonjean is not a credible commentator and has branded him a disgruntled former competitor with questionable motives.
Since the Covid-19 pandemic forced regulatory change that normalised and widely funded telehealth services, it simultaneously created a ready market for commercial digital health offerings. Entrepreneurs saw healthcare as ripe for disruption, and consumers quickly realised that going online for a script was not only hyper-convenient, especially when many people had to wait weeks for an appointment with their regular doctor, but it didn’t cost much more than a GP visit once gap fees were taken into account.
Millions of Australians now have used commercial telehealth services including InstantScripts, Instant Consult, Doctors on Demand, updoc and Medmate. Some of Australia’s biggest corporations see the expanding market as a sure bet: Wesfarmers acquired InstantScripts last year for $135m.
The start-up is now integrated into a new division of the retail behemoth, Wesfarmers Health. Earlier, Woolworths’ HealthyLife platform had already begun offering telehealth consultations through a partnership with ASX-listed digital health company Global Health. The ventures bring prescribing what some say is uncomfortably close to dispensing: Wesfarmers Health was created following a $1.02bn acquisition of wholesaler and retailer Australian Pharmaceutical Industries, which owns the major pharmacy chain Priceline, and HealthyLife patients have the option of having scripts delivered to their door through SuperPharmacy, whose technology and warehouse assets are owned by Woolworths. SuperPharmacy has now been rebranded HealthyLife Pharmacy.
But it is the flashy starts-ups that have demolished the long-observed medico-pharma separation of powers between prescribing and dispensing virtually completely that is now under the spotlight.
These outfits, notably Eucalyptus and Mosh, are what is known as vertically integrated telehealth platforms, in that they have partnerships to supply the drugs that their own doctors prescribe.
Eucalyptus’ digital clinics service weight loss patients (Juniper), hair loss and impotence for men (Pilot), reproductive healthcare patients (Kin) and skincare (Software). Eucalyptus has attracted a host of venture capital investors, notably Blackbird, which was the funder behind the wildly successful software giant Canva, and Woolworths’ venture capital arm W23. Mosh, heavily backed by the founders of the Tinder dating site, provides online clinic services for men suffering erectile dysfunction, hair loss, obesity and mental health problems.
Health insurer NIB has acquired a vertically integrated online doctors’ platform of its own, Midnight Health, which has a network of online doctors and pharmacies that supplies medications direct to the patients’ door. Weight loss and the provision of GLP-1 agonist drugs similar to Ozempic is also big business for this commercial telehealth provider.
Vertically integrated services such as these raise issues not only of perverse incentives to prescribe drugs in the pursuit of profit but also concerns of overprescription – already a significant problem in Australia, particularly in the field of antidepressant drugs.
Critics are scathing of the therapeutic model, which spams suitable patients on social media with emotional advertising and directs them to take an online quiz. If they are suitable for a drug, say, they will receive a phone consultation with a doctor that virtually always results in a prescription that rolls over month by month under subscription.
Eucalyptus also offers a suite of other digital services including access to dietitians and exercise advice. That’s partly what justifies the high sign-on price per month of $275, which includes supply of semaglutide.
“A core responsibility of a doctor is to make informed decisions for and with their patients, families and loved ones, not to capitulate to demands for prescriptions driven by patient-led diagnoses facilitated by a superficial online process,” says Mei Ling Doery, a Melbourne doctor and strategist.
“The rise of platforms enabling patients to effectively dictate their treatment, including essentially self-prescribing chronic medication like Ozempic, is a perverse inversion of medical practice.
“We’ve never been more medicated, and depressed, and chronically diseased in our lives. Big tech strategy leads with dimensioning areas of human vulnerability and weaponising that insecurity. And they’re also exploiting prescribing loopholes. They’re vertically integrating, so whether it’s explicit, like they’ve got pharmacy directly connected to doctors, the net effect of this is reducing checks and balances and violating that prerequisite of separation of power.
“The therapeutic relationship is abstracted, asynchronous, fragmented, it doesn’t dovetail with mainstream GPs. We are eroding the fundamental tenets of safe, independent, upstream primary care. The whole model pushes the majority of the risk on to the patient. There are serious consequences for inappropriate or delayed diagnosis, which are pushed on to the public purse.
“I think basically the doctors are used as a loss lead for pharmacy, and that is recurring revenue, that’s what they’re hoping to create profit out of, but the mark of a healthy society is not how medicated people are.”
Eucalyptus founder Tim Doyle has found himself constantly in the frame as the human lightning rod for much of this criticism. Raised in Sydney’s eastern suburbs and educated at the elite private school Cranbrook, the early-30s commerce-arts graduate made his name as a marketer for the e-commerce platform Koala, selling box mattresses. He has been open about his desire to transfer that model to healthcare. He also has been quoted saying he was considering launching a start-up in subscription dog food before landing on digital healthcare.
He now bristles at the suggestion that Eucalyptus is essentially an e-commerce model of healthcare focused on signing up as many people as possible and keeping them subscribed to a drug for as long as possible to deliver the greatest amount of “payback” to venture capital backers.
“I think trying to box telehealth with a lazy analogy is dangerous because it often infantilises the conversation around what is the emergence of a new model of care,” Doyle tells Inquirer. “In an ideal world, every patient on the day that they need to can get in to see a GP that they’ve seen for 20 years, and that GP can manage all of their health. And that’s a wonderful solution. But that solution is an illusion in modern Australia.
“People are using the internet to get information and access and advice and all these types of things. And so the world of how patients first step into healthcare has changed reasonably fundamentally. So there is an opportunity and probably a necessity (for businesses) to step into that space.”
Eucalyptus was valued at the height of the tech bubble before the 2022 market crash at a buoyant $560m. It’s bleeding tens of millions of dollars a year and insiders say, despite a recent flat valuation, the company’s true value is likely orders of magnitude lower.
“These venture capital-backed vertically integrated telehealth companies are under enormous pressure to meet their high valuations,” Bonjean says. “These guys know the economic principles of e-commerce. It’s all about how much do we need to advertise for you to purchase one mattress? Can we increase the margin by selling you a side table, a bed base? That is the e-commerce model.
“The focus of these e-commerce companies in healthcare is prescribing and extracting more money out of a disease-burdened patient population. This is a terrible business model for healthcare. It is the antithesis of good clinical practice.”
Doyle rejects criticisms of vertical integration as “strange and completely unfair criticism”.
“It’s laughable to me, it’s completely ridiculous, because it implies that healthcare as a whole has to be an entirely non-profit driven space,” Doyle says. “Practitioners make decisions around prescribing, the patient has a choice around routing, pharmacies have a responsibility for fulfilment. And make money by connecting all of those parties. I just don’t see how that is fundamentally different to a radiology facility being included in a GP clinic for convenience, which happens all the time. And so it just strikes me as strange that this criticism is levelled without kind of any looking at other parts of the healthcare system where incentives overlap. It’s all very well to be like, ‘whoa, capitalism’, but the reality is we run a combination public-private health system and have done for a long time.”
Doyle emphasises that if Juniper were not providing compounded semaglutide to many of its 20,000 active patients, they would be unable to access the weight loss drug at all and their therapeutic weight loss journey would come to a cruel halt. He insists the impossibility of obtaining supply of Ozempic from pharma giant Novo Nordisk amid a global shortage of injection pens prompted his company’s shift to compounding. Eucalyptus commissioned several of Australia’s biggest universities to test and approve the quality and efficacy of the replica drugs its partner pharmacies were manufacturing.
“In times of shortage, the compounding legislation says that you can compound medications. And so the next question is, can you do this safely,” he says. “Patients have had really great outcomes on that medication. I haven’t yet heard a compelling argument from anybody as to why the absence of any medical alternative for these patients is better than scaling it safely (through compounding).”
Bonjean remains sceptical. Compounding semaglutide costs the company about a third of the wholesale price of Ozempic. Yet the price charged to patients has not changed.
“This is a story of greed,” Bonjean says. “Australian venture capital over-invested in these players as miracle, high-growth companies. This over-investment at the top of the market has created an indispensable need to make the business work at very high valuations.
“You could argue the pressure to maintain high valuations has led to the lowering of clinical safeguards for patients. This includes safeguards like doctor independence, to surfing as close as possible to the advertising and marketing code of practice, to exploiting the compounding loophole. All the normal safeguards have been removed and these companies have churned through patients like fodder in order to sustain a high valuation for their investors.
“The behaviour of some of these companies risks discrediting the many good people in healthcare as well as the pharmaceutical companies that have spent decades and invested billions of dollars in building the manufacturing and quality infrastructure to ensure the safe delivery of their medications to the highest possible standards.”
Bonjean is one of many in the industry who agree with the medical lobby’s major concerns around a “tick-and-flick” prescription model. Asynchronous prescribing without speaking to a doctor at all has now been cracked down on by the Medical Board of Australia. But problems remain.
“The focus is about maximising sales which for these companies is the prescription,” Bonjean says. “The problem is the economics and the measures of success for the venture capitalist backing these telehealth businesses is volume and script lift. They make no money on the consult.
“There’s technically no consult as such. It’s an approval to therapeutic access disguised as a consult. There is no other option once you see a doctor to get on that drug. On top of that, patients are not given drug choices. There’s only one drug at the end of the funnel. And we are in an obesity crisis and so there is an infinite supply of patients.
“If they lose their patient at the point of consultation, they lose way too much money. So the biggest problem with this business model is it distorts good clinical practice by design.
“On top of that, they are removing the most rigorous and established safety mechanisms used by the manufacturers of the molecule by compounding. This is cowboy behaviour that’s endangering patients, period.”
The TGA has announced its intention to carve out semaglutide from the ordinary compounding pharmacy rules to halt this latest brazen challenge to established medical regulations posed by the radical edge of a growing digital health sector.
After this battle has been fought, there will surely be others. In the end, however, amid inflated valuations, ongoing losses and growing similar business casualties internationally, the future of these start-ups may lie in brutal market economics.
More Coverage
