Digital health platforms have established themselves as a more affordable alternative for highly popular and expensive GLP-1 weight loss drugs. But providing compounded versions of the drugs can heighten product liability exposures and make obtaining the optimum insurance more challenging.

Amid soaring demand and shortages of highly popular GLP-1 (glucagon-like peptide-1 receptor agonists) medications for weight loss, digital health platforms have become an alternate and more affordable source of the drugs for consumers. Demand for the medications, originally developed to treat type 2 diabetes, has outpaced the manufacturing capacity of major pharmaceutical companies that initially developed the drugs, providing an opening for digital health companies to offer compounded versions. While this strategy can prove highly profitable, it can also lead to risk management complications such as heightened product liability exposure and difficulties in obtaining adequate insurance.

To manage their own risk, insurance market appetites for compounding operations are shrinking. Added exclusions and restrictions for digital health companies may also make the coverage inadequate for the scale of the risk. Navigating this complex landscape requires deep knowledge of the life science industry and the excess insurance markets willing to provide coverage.

TELEHEALTH GROWTH ACCELERATES WITH WEIGHT LOSS DRUGS

Telehealth has been a rapidly growing sector of the healthcare market since the COVID pandemic, and more recently, as an alternative source for compounded versions of the blockbuster GLP-1 drugs such as semaglutide (Ozempic and Wegovy) from Novo Nordisk and tirzepatide (Mounjaro and Zepbound) from Eli Lilly. In the case of GLP-1 medications, digital health firms have been able to offer compounded versions—at much lower cost to consumers—after the drugs were put on the FDA shortage list in 2022.¹

The shortages reflect the skyrocketing popularity of the injectable drugs. Global sales are forecast to rise to above $150 billion annually by early 2032.³ Investment bank UBS estimates 40 million people may be using GLP-1 drugs by 2029, with 44% of users in the U.S.⁴ However, the GLP-1 compounding picture became clouded in February 2025 when the FDA declared that two of the drugs, Novo Nordisk’s Ozempic and Wegovy, were no longer in shortage, a move has been challenged by one trade group.⁵ Telehealth companies have argued that they are better able to provide more personalized and precise treatments for individual consumers at significantly lower prices than mass market pharmaceutical companies.⁶

INSURANCE COMPLICATIONS

While rising demand for the weight loss drugs has presented telehealth companies with an opportunity for significant growth, it comes with a variety of risk management challenges. Dozens of product liability lawsuits have arisen over allegations of side effects that include stomach paralysis, bowel obstruction, and malnutrition disorders. Any litigation will very likely name the telehealth company that provided the drug as patients may not even be aware of which company made the compounded version. Some lawsuits have been centralized into multi-district litigation in the Eastern District of Pennsylvania.⁷

Mindful of today’s trend toward ballooning settlements and jury verdicts insurers may seek to exclude multidistrict litigation along with any known side effects. Insurers are also wary about potentially unknown side effects that may emerge later. Compounding represents another concern for insurers, particularly when digital health companies compound the drugs themselves or acquire a compounding pharmacy. Compounded versions may not exactly match the original drug, which could lead to adverse reactions. Standard insurers are generally unwilling to cover non-FDA regulated operations, such as compounding. Most carriers prefer to have a third-party covered by its own insurance, manufacturing the drug to help diffuse the potential product liability losses. Insurers may also exclude coverage for compounding or be prevented from offering coverage due to reinsurance treaty restrictions. Limited markets pose another challenge. Some carriers may be unwilling to participate in shared and layered accounts or are sharply reducing the limits they’ll offer.

DETAILED INFORMATION HELPS

To assuage underwriters’ concerns, digital health companies should be prepared to provide detailed information on their operations and risk management strategies, including contracts with compounding pharmacies and patient outreach programs.

Insurers want to confirm that telehealth companies have strong contract protections whether they’re working with third-party compounders or original drugmakers. Retail agents should engage their wholesale partners in assessing contract insurance clauses to evaluate where they could be strengthened or might require additional negotiation. Corporate counsel may not fully recognize the insurance implication of variations in contract wording for additional insureds, waiver of subrogation, limits of insurance, and other clauses.

Underwriters also seek information on packaging, warning labels, and customer training resources, such as tutorials. These should be clearly written and leave no room for misinterpretation as some patients may not realize that GLP-1 medications require that they measure the doses and fill their own syringes. Digital health companies also need robust product recall strategies and insurance coverage.

BOTTOM LINE

The popularity of GLP-1 weight loss medications has presented digital health companies with a huge opportunity, but compounding adds more complexity to risk management and transfer. Obtaining insurance in a highly fluid insurance marketplace can be challenging. Insureds need to be prepared to provide detailed answers to underwriters’ queries and meet with them in person where appropriate. Brokers with experience in life sciences can assess coverage limits, terms, and exclusions to determine whether they’re adequate. While telehealth platforms face increased challenges in risk transfer, a specialist broker with strong relationships in the excess and surplus lines marketplace can provide crucial assistance in obtaining an optimal insurance program. Reach out to your CRC Group Producer today.

CONTRIBUTORS

• Cristina Varner has more than 25 years of experience in risk management and a deep expertise in Life Sciences andHealthcare. She is an Executive Vice President and Life Sciences & Healthcare Broker with CRC Atlanta.

END NOTES

1. In a win for compounders, FDA will review its decision to put Eli Lilly’s tirzepatide on shortage list, Fierce Pharma, Oct. 14, 2024. https://www.fiercepharma.com/pharma/win-compounders-fda-will-review-its-decision-put-eli-lillys-tirzepatide-its-shortage-list
2. Poll: 1 in 8 adults say they’ve taken a GLP-1 drug, KFF, May 10, 2024. https://www.kff.org/health-costs/press-release/poll-1-in-8-adults-saytheyve-taken-a-glp-1-drug-including-4-in-10-of-those-with-diabetes-and-1-in-4-of-those-with-heart-disease/
3. Weight-loss drug forecasts jump to $150 billion as supply grows, Reuters, May 28, 2024. https://www.reuters.com/business/healthcarepharmaceuticals/weight-loss-drug-forecasts-jump-150-billion-supply-grows-2024-05-28/
4. GLP-1: A medication worth $126 billion in sales by 2029. UBS. https://www.ubs.com/global/en/investment-bank/insights-and-data/2024/glp-1-a-medication.html#:~:text=UBS%20estimates%20global%20GLP%2D1,2029%20sales%20CAGR%20of%2030%25.
5. Drug compounders sue over weight loss drugs’ removal from FDA shortage list, The Hill, Feb. 25, 2025. https://thehill.com/policy/healthcare/5163570-weight-loss-drugs-fda-shortage-list-ozempic-wegovy/
6. Andrew Dudum, co-founder Hims & Hers, X post. Feb. 21, 2025. https://x.com/AndrewDudum/status/1892988156619956450
7. Ozempic lawsuit (2025 update) Forbes, Feb. 6, 2025. https://www.forbes.com/advisor/legal/product-liability/ozempic-lawsuit/
8. Primary care doctors concerned about telehealth GLP-1 boom: survey, Fierce Healthcare, February 13, 2025. https://www.fiercehealthcare.com/providers/primary-care-doctors-concerned-about-patient-risks-telehealth-prescribers-glp-1s-survey#:~:text=As%20demand%20soars%2C%20there’s%20been,such%20as%20semaglutide%20and%20tirzepatide.