Telehealth companies like Ro and Hims & Hers Health are transforming the pharmaceutical landscape with innovative business models that bypass traditional healthcare delivery systems. These digital-first platforms have developed vertically integrated systems that connect patients directly with healthcare providers, prescribe treatments, and deliver medications to patients’ doorsteps-all without necessarily involving insurance. Both companies have achieved remarkable growth, with Ro reaching a $5 billion valuation by 2021 and Hims & Hers generating $1.5 billion in revenue in 2024, demonstrating the market’s strong appetite for accessible, convenient healthcare solutions that address stigmatized conditions and chronic health needs through subscription-based models and AI-enhanced care delivery.
The Direct-to-Consumer Telehealth Revolution
The traditional pharmaceutical distribution model involves multiple intermediaries-physicians, pharmacies, insurance companies-all of which can create barriers to access. Companies like Ro and Hims & Hers have revolutionized this approach with direct-to-consumer telehealth platforms that streamline the entire process from diagnosis to treatment delivery.
Bypassing Insurance and Traditional Healthcare Systems
Ro’s business model explicitly avoids working with insurance companies, instead focusing on providing affordable cash-pay options. According to Ro’s co-founder and CEO Zachariah Reitano, the company’s mission is to drive efficiency in healthcare and reduce its massive costs. “Healthcare is a $4 trillion market… But that’s the worst thing in the entire world; it’s awful how large it is. And I think that we have the opportunity to cut it in half with technology,” Reitano explained2. Ro believes that health insurance as it exists today doesn’t work as intended, and the system needs to realign its incentive structure to focus on patients themselves2.
This direct-to-consumer model allows Ro to provide same-day or next-day medication delivery via their growing network of pharmacies, with plans to have 15 strategically placed pharmacies across the U.S. by the end of 2022, ensuring nationwide next-day delivery at ground shipping rates2. By controlling the entire process, Ro aims to make healthcare more efficient and affordable.
Patient-Centered Digital Experiences
Both companies have created digital platforms that prioritize patient experience, convenience, and accessibility. Ro’s platform enables patients to fill out dynamic online questionnaires about their health, lifestyle, medical history, and symptoms, which physicians then review to determine appropriate treatments4. This asynchronous communication model fits into patients’ busy lives while maintaining quality care.
Similarly, Hims & Hers has developed a user-friendly platform that handles consultations, prescriptions, and ongoing care through subscription models. Their success is evident in their subscriber metrics-2.2 million subscribers as of Q4 2024, representing a 45% year-over-year increase6. The average monthly online revenue per subscriber reached $73, reflecting a 24% year-over-year growth6.
Innovative Business Models in Digital Health
These telehealth companies have pioneered business models that differ significantly from traditional pharmaceutical distribution channels, allowing them to achieve rapid growth and strong customer loyalty.
Subscription-Based Revenue Models
Hims & Hers has built its business around a subscription model that accounts for over 90% of its total revenue6. This approach creates predictable recurring revenue while fostering ongoing relationships with patients. The model has proven effective, with 82% of customers staying with the platform for longer than three months5.
Their subscription offerings span five primary verticals:
Sexual Health (30% of revenue): Treatments for erectile dysfunction and hair loss
Mental Health (25%): Therapy and anxiety/depression medications
Dermatology (20%): Acne and skincare solutions
Weight Management: Compounded GLP-1 therapies with projected 2025 revenue of $725 million
Primary Care: Expanding into chronic condition management6
This diversified portfolio allows Hims & Hers to cross-sell services to existing subscribers, increasing the average revenue per customer while addressing multiple health needs through a single platform.
Vertical Integration and Cost Efficiency
Ro has pursued aggressive vertical integration, establishing its own pharmacy network to control medication dispensing and delivery. This strategy reduces costs while improving the patient experience through faster delivery times2. The company plans to have 10 pharmacies by the end of 2021 and 15 by the end of 2022, strategically placed to provide next-day delivery nationwide2.
Additionally, Ro has expanded its vertical integration through strategic acquisitions. In December 2020, the company acquired WorkPath, which sends phlebotomists to patients’ homes for blood draws and diagnostic tests4. In 2021, Ro acquired Modern Fertility (a women’s reproductive health company) for over $225 million and Kit, a startup offering at-home diagnostic tests4. These acquisitions strengthen Ro’s ability to provide comprehensive care without patients needing to leave their homes.
Similarly, Hims & Hers has enhanced its vertical integration through acquisitions of Trybe Labs (diagnostics) and a peptide manufacturing facility, reducing reliance on third-party suppliers and improving margins6. This strategy has contributed to the company’s strong financial performance, with gross margins consistently between 80-83% and an adjusted EBITDA margin of 11-12%6.
Technological Integration and Personalization
Both companies leverage technology not only as a communication channel but as a core component of their healthcare delivery models.
AI-Driven Care and Personalization
Hims & Hers has developed an AI-powered system called MedMatch that analyzes over 50 million data points to optimize treatment plans, medication dosages, and health outcomes6. This system enhances the efficiency of care delivery while providing personalized recommendations for each patient. The platform’s AI capabilities reduce provider workload through automation, allowing healthcare professionals to focus on clinical decision-making rather than administrative tasks5.
This technological approach has proven scalable, with Hims & Hers handling over 10,000 visits daily on its HIPAA-compliant system that integrates secure video consultations, electronic health records, and automated documentation5. The company plans to scale further to handle 40,000 daily visits by investing in additional AI decision-making tools and automation5.
Remote Monitoring and Proactive Care
Ro is expanding beyond reactive care to incorporate proactive health measures through remote patient monitoring. Zachariah Reitano expressed excitement about investing in “additional diagnostics, remote patient monitoring – so collecting and distributing devices to patients to go from reactive to proactive care”2. This approach aligns with emerging healthcare trends that emphasize prevention and ongoing management rather than episodic intervention.
The COVID-19 pandemic accelerated adoption of these telehealth models, proving that remote care can effectively handle many primary care needs, particularly when supplemented with remote monitoring and proactive health measures2. Industry observers note that healthcare is unlikely to revert to the old, inefficient model of primarily in-person care, suggesting that companies like Ro and Hims & Hers are well-positioned for continued growth2.
Growth Strategies and Market Expansion
Both companies have demonstrated remarkable growth trajectories through strategic funding, targeted marketing, and continuous expansion of their service offerings.
Funding and Valuation Growth
Ro has secured substantial funding to fuel its growth, raising $500 million in a Series D round in March 2021, bringing its total funding to more than $876 million since its founding in 20172. This funding round gave the company a $5 billion valuation, reflecting investor confidence in its business model4. Previous rounds included $200 million in Series C funding in July 2020 (at a $1.5 billion valuation) and $88 million in Series A funding in 201834.
Hims & Hers, now a publicly traded company, has also shown impressive financial growth. In 2024, the company generated $1.5 billion in revenue, representing a 69% year-over-year increase6. More importantly, Hims & Hers achieved profitability in 2024 with $126 million in net income and $177 million in adjusted EBITDA (11.8% margin)6. Their 2025 guidance suggests further growth to $2.3-2.4 billion in revenue (59% growth at the midpoint) with continued margin improvement6.
Strategic Marketing and Customer Acquisition
Hims & Hers employs sophisticated marketing strategies, heavily investing in digital advertising across platforms like Instagram and TikTok6. The company utilizes a proprietary customer segmentation algorithm with a 93% targeting accuracy, enhancing the efficiency of its marketing campaigns6. Despite rising customer acquisition costs ($929 in 2024), the company maintains 85% retention rates and generated $198 million in free cash flow, indicating strong unit economics6.
Ro has taken a different approach to brand building, securing sponsorships with major sports organizations including the College Basketball Invitational tournament, Major League Baseball, and NASCAR4. These partnerships help build brand awareness and credibility in a competitive healthcare market.
Service Expansion Beyond Initial Offerings
Both companies started with narrow focus areas and gradually expanded their service offerings. Ro launched in 2017 as Roman, focusing primarily on men’s health issues like erectile dysfunction and hair loss-conditions where patients might feel stigma or shame discussing with doctors in person34. The company subsequently introduced Rory for women’s health, Zero for smoking cessation, and Ro Pharmacy for medication delivery3. By 2020, Ro was generating $250 million in annual revenue and had facilitated 5 million doctor-patient interactions3.
Similarly, Hims & Hers has expanded from its initial focus areas to encompass a broad range of health services. The company’s weight management program, featuring compounded GLP-1 medications, has emerged as a significant revenue driver with projected 2025 revenue of $725 million6. The company’s expansion into primary care represents its latest move toward becoming a comprehensive healthcare platform.
The Future of Pharmaceutical Distribution and Healthcare Delivery
The success of Ro and Hims & Hers points to broader shifts in how healthcare and pharmaceuticals will be delivered in the coming years.
Redefining the Role of Insurance in Healthcare
Ro’s model challenges conventional wisdom about insurance-based healthcare. While not against insurance entirely, Ro believes that health insurance as it currently exists doesn’t function optimally2. By offering affordable cash-pay options with transparent pricing, Ro aims to demonstrate that direct payment can be viable for many routine healthcare needs.
The company argues that the insurance system effectively masks individual costs, making it less clear that much of what a person pays in healthcare comes out of their pocket anyway-through taxation or employers allocating more compensation to healthcare rather than take-home pay2. This perspective represents a fundamental challenge to traditional healthcare financing models.
Hybrid Care Models Gaining Traction
Both companies embrace hybrid care models that combine telehealth with in-person care when necessary. Ro’s approach emphasizes remote care and telehealth appointments for most day-to-day needs, with follow-up in-person care delivered to the home when required2. This generates efficiencies while ensuring that older patients and those with mobility issues don’t need to make unnecessary trips to physicians’ offices.
As these models mature, we’re likely to see further integration between virtual and physical care delivery, with telehealth companies potentially partnering with traditional healthcare providers to create seamless patient experiences across care settings.
Democratizing Access to Specialized Care
These platforms are making specialized care more accessible to broader populations. In 2024, Ro partnered with the National Institute on Aging to create a registry of patients for future Alzheimer’s disease research and clinical trials, demonstrating the potential for telehealth platforms to advance medical research4.
Ro has achieved remarkable geographic reach, with at least one patient in every county in the continental United States and utilization in 98% of primary care deserts4. This ability to reach underserved areas represents a significant advancement in healthcare equity and access.
Conclusion
The rise of telehealth companies like Ro and Hims & Hers represents a fundamental shift in pharmaceutical distribution and healthcare delivery models. By embracing direct-to-consumer approaches, subscription-based revenue models, vertical integration, and technology-enabled care, these companies have achieved remarkable growth while improving access to healthcare services.
Their success challenges traditional assumptions about healthcare delivery and financing, suggesting that patient-centered, technology-enabled models can provide efficient, affordable care without necessarily involving insurance intermediaries. As these companies continue to expand their service offerings and refine their business models, they are likely to exert increasing influence on the broader healthcare ecosystem.
The COVID-19 pandemic accelerated adoption of telehealth services, and the efficiency and convenience demonstrated by companies like Ro and Hims & Hers suggest that this shift will persist long after the pandemic ends. Traditional pharmaceutical companies and healthcare providers would be wise to study these innovative business models and consider how they might adapt their own strategies in response to these disruptive new entrants.
