FTC Puts Digital Health’s Growth Playbook on Trial

Digital health borrowed its growth playbook from consumer technology, landing patients fast and keeping them subscribed.

In a legal complaint against Hims & Hers filed Wednesday (July 29), the Federal Trade Commission directly challenged that model.

The FTC, joined by Utah and Los Angeles County on behalf of California, alleged that Hims shared sensitive information about consumers’ medical interests with advertising platforms while promoting its services as private and discreet, according to a Wednesday press release. Regulators also accused the telehealth company of charging many customers for prescription treatments before they had an opportunity to consult with a provider, enrolling them in recurring plans and making those subscriptions difficult to cancel.

The lawsuit treats privacy, clinical intake, payments, advertising and retention not as separate compliance domains, but as one connected consumer journey. Hims shares fell around 12% on news of the lawsuit, reflecting concern not only about potential penalties but also about whether regulatory intervention could constrain a model built on efficient acquisition and recurring revenue.

Reached for comment, Hims pointed PYMNTS to its own Wednesday press release in which the company denied the allegations and said it will defend itself “vigorously.”

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Healthcare’s Growth Funnel Becomes the Compliance Perimeter

According to the FTC complaint, Hims asked consumers to complete online intake forms and provide payment information while representing that they would be able to connect with a medical provider to determine the right treatment. Regulators alleged that most consumers instead were charged and enrolled in recurring prescription plans shortly after submitting the form, without first receiving the consultation they expected or reviewing the treatment selected.

Many digital health platforms use social advertising to acquire customers, streamlined questionnaires to reduce friction, saved payment credentials to accelerate conversion and subscriptions to improve retention. Data flows among websites, analytics systems, customer service platforms, pharmacies, providers and advertising networks. Each layer can appear operationally distinct. To the consumer, however, it is one healthcare experience.

The FTC’s case effectively collapses those layers into a single regulatory perimeter. Hims said in its press release that information patients share with healthcare providers is used only to provide care and that its privacy policy allows customers to make choices about how their data is used. The company said in the release that the FTC disregarded evidence supplied during a nearly three-year investigation and is attempting to stretch the law beyond established telehealth practices.

The FTC’s theory is broader. Regulators alleged that Hims shared lists of certain customers and transmitted website “events” through third-party tracking technologies to Meta, Snap and other companies. Those events can reveal actions taken on pages associated with conditions such as weight loss, sexual health or hair loss, even when the information is not a physician’s note or prescription record.

That makes health privacy an API and systems-design problem. A company may have strong controls around its clinical database while still exposing sensitive inferences through pixels, software development kits, customer-list matching or analytics integrations operating elsewhere in the stack.

“There are existing bodies of law that, while not passed or promulgated for the reason of AI, are still applicable to AI solutions,” Alaap Shah, member of the firm at Epstein Becker Green, told Competition Policy International, a PYMNTS company, in an interview this month, adding that the question for healthcare firms is not simply whether an AI-specific law applies but whether the system creates risks covered by older legal obligations.

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Subscription Economics Face a Healthcare Viability Test

Regulators, as the FTC complaint underscored, are now examining the entire patient journey in much the same way financial regulators examine a customer’s path from solicitation and onboarding through payment, servicing and account closure. The FTC’s billing and cancellation claims are equally consequential because subscriptions have become central to digital health’s economics.

Recurring plans can improve medication adherence, smooth revenue and lower the cost of repeatedly reacquiring patients. They can also blur the boundary between ongoing care and automated commerce. The FTC alleged that Hims did not clearly disclose when prescriptions would be refilled and designed cancellation pathways that required customers to navigate multiple steps before seeing an option labeled “cancel.”

The underlying tension is that subscription design optimizes continuity by default, while healthcare traditionally requires continuing attention to consent, appropriateness and patient choice. Digital health companies must reconcile those objectives rather than assuming that consumer software retention tactics transfer cleanly into medical commerce.

The PYMNTS Intelligence report “Generations Under Pressure: How Younger Consumers Are Coping With Higher Living Costs” found that medical costs are landing like a second monthly rent payment for many households, recurring often enough to reshape budgets and weaken consumers’ confidence in their ability to stay ahead. Consumer concern about health insurance pressure rose from 60% to 63% between October and January, while concern among baby boomers and seniors about medical bills and copays increased from 53% to 55%.

Prescription costs were a challenge cited by 46% of Generation Z in January, a 12 percentage-point increase from October. Mental health costs produced a similar jump, rising 11 points to 44%, while dental and vision pressure climbed 7 points to 48%.