Hims & Hers Health (NYSE:HIMS) experienced a notable share decline of 12% on Wednesday following the filing of a lawsuit by the U.S. Federal Trade Commission. The complaint, which was brought jointly with Los Angeles County and the state of Utah, accuses the telehealth company of sharing sensitive health-related data with online advertisers and of engaging in deceptive billing methods.
According to the complaint, Hims & Hers allegedly transmitted users' health information to digital advertising companies including Meta Platforms (NASDAQ:META) and Snap (NYSE:SNAP). The lawsuit says this data transfer occurred through user interactions on the company's website and via tracking technologies, and that it ran counter to privacy assurances provided to customers.
In addition to the data-sharing allegations, the complaint asserts that Hims & Hers charged customers for prescriptions before they had an opportunity to consult with healthcare providers. The agency states that most customers are billed for prescriptions shortly after completing an intake form and before receiving a consultation with a provider.
The FTC also intends to allege that Hims & Hers makes it difficult for customers to cancel subscriptions, according to the complaint.
Hims & Hers operates a telehealth platform that facilitates appointments and provides prescriptions across multiple categories, including erectile dysfunction, hair loss, mental health medications, and weight loss drugs. The company ships products directly to consumers and is described in the complaint as one of the largest telehealth participants in the market for weight loss drugs.
The regulatory action and the specific allegations of data sharing with advertising companies, pre-consultation billing, and subscription cancellation hurdles underpin the stock reaction. The complaint names particular third-party advertising firms as recipients of sensitive information and details the firm-level practices that the FTC and its local co-plaintiffs say are deceptive or unfair.
Context and implications
The lawsuit frames its concerns around user privacy commitments and billing transparency. While the complaint outlines alleged pathways for data sharing via tracking and website interactions, it also emphasizes the timing of prescription charges relative to provider consultations and the reported difficulty consumers face when attempting to stop recurring subscriptions.
At this stage, the allegations are those set out in the complaint by the FTC, Los Angeles County, and Utah.