Pill mills or the future of medicine? The rise of the telehealth industry

By Nick Bonyhady

It’s not easy for Laney Robson to get her two children, aged 5 and 11, to a doctor. Based just outside the Hunter Valley in NSW, she could brave the “diabolical” wait at the local emergency department or face being told “its weeks and weeks wait before we can take you on” by an unfamiliar GP clinic. So Robson started using InstantScripts, an online business that charges $19 per prescription, for scripts to treat minor ailments like her children’s eye and chest infections.

“Everything else we do in our lives is becoming more and more online, I just don’t see the difference between banking online and this sort of stuff,” Robson says. “Certainly for people in rural areas, we’re very fortunate to be able to access something like this.”

Not your grandmother’s pill bottle: new telehealth companies such as Kin are branding products like contraceptive pills with flair.Credit:AP / Supplied (Kin / Eucalyptus)

Telehealth has been one of the big winners in Australian business from the COVID-19 pandemic. A new wave of startups offering online access to treatments from acne creams to erectile dysfunction medication and weight loss drugs emerged raising well over $100 million collectively from venture capital firms and other investors who see a potential gold rush for startups to capture a slice of the $200 billion this country spends on health each year.

These well-funded startups have been advertising aggressively on late night television, social media and public transport in a bid to ingratiate themselves with customers young and old.

At the forefront of this trend is Eucalyptus, which operates brands such as Pilot, Kin, Juniper and Software that offer men’s health, pregnancy, women’s health and skincare products respectively. There’s also Mosh, a men’s health brand. There are a host of platforms that let you speak to a doctor to get a prescription for all manner of ailments, the largest of which is InstantScripts which Robson was drawn to. And some major players are also getting into the space. The ASX-listed health insurer nib bought a majority stake in Midnight Health, a stable of brands similar to but much smaller than Eucalyptus, last year.

While investors in telehealth startups have high hopes for the industry, and patients are thrilled with the convenience they offer, some health experts and industry groups are deeply concerned. Rather than just changing how healthcare is delivered, they fear that basic tenants of medicine are being disrupted.

Pharmacy Guild president Trent Twomey says there are “cowboys” operating in telehealth and accuses them of “reducing the provision of healthcare to an algorithm” under a doctor’s supervision.

The Royal Australian College of General Practitioners is aggrieved too. The telehealth industry is pursuing “a business opportunity versus a health care opportunity,” says its president, Dr Nicole Higgins.

Trent Twomey, left, the national president of the politically powerful Pharmacy Guild of Australia speaks with the Health Minister last year.Credit:Alex Ellinghausen

Of course, the business and care models of both GPs and pharmacists (which are pushing to do more prescriptions themselves, setting up a separate clash with GPs) are being put under pressure by telehealth companies.

But with Australians’ wellbeing on the line, along with medical professionals’ livelihoods, and a share of the hundreds of billions this country spends on health each year, it will be a long battle.

From marketing to medicine

The idea of telehealth is not new and in theory the level of care and speed is no different to an in-person consultation. But technology and the pandemic have driven it to new levels of speed and popularity.

“McDonald’s is also a very convenient service, but it’s not necessarily one that’s very healthy in the long term”

Figures from the Centre for Online Health at the University of Queensland show that there were 122 million telehealth consultations from the start of the pandemic to the third quarter of 2022. The figure shows how Australians have flocked to telehealth, but would be far higher if it included the new start-ups, who bill customers directly and do not use Medicare.

The biggest player is likely Eucalyptus, which has its roots in marketing rather than medicine. In a 2019 pitch deck designed to secure early investors, the company styled itself after e-commerce companies selling razors and shoes.

“We were just well-placed, luckily, to build infrastructure when the shift to telehealth really happened,” says its chief executive and co-founder, Tim Doyle, a former marketing whiz at online mattress company Koala.

By 2020 the company had shifted to put health at its core, hiring more doctors and giving them final say over all medical calls at the company. And its ambitions are only growing, with a focus on trying to tackle the chronic and wildly expensive problem of obesity.

For companies like Eucalyptus, patient-doctor consultations are necessary but not the moneymaker. By contrast, for InstantScripts and other firms like it such as Qoctor, the reverse is true. They are selling consultations and prescriptions.

While some of the new telehealth companies use video or voice calls for all patients, others rely overwhelmingly on text-based consultations. More than 70 per cent in Eucalyptus’ case.

These begin with a patient selecting the kind of treatment they want. InstantScripts allows the patient to specify down to the exact dosage of, for example, Azotet (a cholesterol medication). Other firms, such as The Hairy Pill, which treats hair loss, do not advertise their medical ingredients because of government restrictions but have slogans such as “One pill. One solution” and before and after photos showing potential results.

Once a patient has selected the kind of treatment they want, a form appears asking questions. Some companies use lengthy forms, asking dozens of questions about a patient, their medical history, and their issues. Other providers probe far less and, if a potential patient wants a particular medication, the answers to questions such as “Are you having trouble achieving an erection?” are obvious.

“The same concerns could be levelled against… in person doctors, [claiming] they’re influenced by drug companies, that they’re trying to do medicine in 10 minute blocks and things like that.”

The new providers get through the results from their patients quickly. Some roster their doctors in five-minute increments. Others expect them to assess six to 10 patients an hour.

If the patient is approved by the doctor, the prescription medications come fast. Eucalyptus’ brands have partner pharmacies that ship pills to patients, while InstantScripts says about 95 per cent of its patients are sent the script electronically and get it from their local chemist.

Higgins, the president of the general practitioner’s association, has a dim view of these companies, though she understands the convenience.

“We also know that McDonald’s is also a very convenient service, but it’s not necessarily one that’s very healthy in the long term,” Higgins says.

She points out that telehealth providers cannot carry out physical checks of a patient and can employ doctors to do prescribing work who are licensed but have not trained specifically as GPs. She says telehealth providers tend not to know patients’ families like GPs do. And Higgins worries about care being “fragmented”, with no GP knowing every medication a patient is taking or following up if medicines are not being used.

The Medical Board of Australia, which oversees doctors, appears to agree. Late last year it handed the GPs a win, condemning the fastest way of getting a prescription online: filling out an online questionnaire that a doctor signs off without ever having spoken to the patient.

“Consultations enable a doctor to ask follow-up questions that help identify the best treatment for a patient,” a board spokeswoman said. “A text-based health questionnaire completed by a patient and read by a doctor at a different time is not a doctor-patient consultation.”

“Prescribing is not a tick and flick exercise – it relies on a doctor’s skill and judgement,” the spokeswoman said. For now, the new rule is a draft only but it could be made permanent later this year.

Back to the future

The risks of telehealth gone wrong have been apparent in Australia for at least a decade, after the Federal Court found a business called Advanced Medical Institute, which was known for its controversial billboards, had engaged in unconscionable conduct. It targeted vulnerable men worried about their sexual capacity with promises of “longer lasting sex” and used high-pressure sales tactics over the phone. There is no suggestion that any company is using those tactics today, but the cautionary tale remains.

Advanced Medical Institute signage was already controversial in 2008 and the company was later hit with a string of lawsuits.Credit:Anthony Johnson

All the telehealth companies that spoke to The Sydney Morning Herald and The Age for this story stressed that their doctors use independent clinical judgement to decide whether to issue a prescription and were under no pressure to issue a script.

They could decide that a patient was not suitable for a text-based consultation and should do a video call or see a different doctor in person if they decided that was necessary, the companies said. Rostering, some said, was a guideline and doctors could spend as long as needed. The most addictive or risky medications are not available through the telehealth platforms, and Eucalyptus, for example, said about half its customers for some treatment lines do not end up with a prescription.

InstantScripts, which only allows repeat scripts through its text-based prescriptions, said it has rules designed to limit the number of more sensitive medicines a customer can request and checks for red flags to prevent abuse. Others, such as the Hairy Pill, that deal with a narrower range of medications that use similar active ingredients to alternatives that can be bought over the counter, say they start patients with conservative doses and adjust medication to minimise or eliminate side effects.

“We understand that you can have treatment without side effects,” says Hairy Pill co-founder Jonathan Stiebel. “So that’s what we always fight for.”

Mosh co-founder David Narunsky said it safely treats conditions such as erectile dysfunction that are associated with stigma, which men might be afraid to discuss, with a combination of medication and allied health. And the company pushed back on the Medical Board’s proposed guidelines.

“The changes to the telehealth guidelines aren’t in line with international practices and may result in the unintended consequence of restricting patient choice and access to healthcare across Australia,” the spokesman said.

In an interview with this masthead, InstantScripts pointed to the people who are too busy, live too remotely or just cannot find a GP appointment that the firm has helped.

Company statistics show a 38 per cent increase in telehealth consultations between Christmas and New Year, when many GP surgeries are closed, going from an average of 853 to 1177. It dovetails with the general GP shortage, with the Australian Medical Association forecasting last year that Australia would face a shortage of 10,600 GPs by 2031.

“We find that instance groups usage is directly correlated to communities where doctor shortages are the most acute,” the company’s chief operating officer Richard Skimin says.

It continues to promote itself as providing prescriptions in a “snap” and proudly has “instant” in its name. That does not lead to over-prescribing, the company argues.

“The number one complaint we get from patients is that they had an expectation around a particular medication and InstantScripts wasn’t prepared to issue it,” Skimin says.

Thirty-five per cent of people seeking a script are rejected from the text-based form and directed toward a live telehealth consultation, his colleague and medical director Dr Andrew Thompson, says. The company did not provide statistics on how many people do not receive a prescription after having a live consultation.

But doctors at InstantScripts, which has more than 100 on contract and are billed out for consultations starting from $49, do have an incentive to work quickly. “It’s like a general practice,” Skimin says. “Doctors are paid by consultation.”

He says the business will never pressure its doctors to speed up, saying it would instead just hire more staff if customer demand required it. “We would never ask our doctors to work faster.”

Thompson gives another example of restraint. “We encourage our doctors to follow all the guidelines and best practice to give the safest treatment for a patient and sometimes that will not involve medication,” says Thompson.

And for continuity of care, InstantScripts has a form that allows it to inform patients’ regular GPs of any new medications.

The University of Queensland’s Liam Caffery, an associate professor in telehealth, doesn’t see the industry as a panacea but regards its issues as similar to those confronting other doctors.

“The same concerns could be levelled against… in person doctors, [claiming] they’re influenced by drug companies, that they’re trying to do medicine in 10 minute blocks and things like that,” Caffery says.

Eucalyptus counts about 65 employed and contracted doctors, its chief executive Doyle says. He rejects the healthcare-by-algorithm criticism, saying that the company’s forms are tools to collect information on patients in a more structured and comprehensive way than many GPs do, but that Eucalyptus’ doctors make unfettered medical decisions.

"I think blanket rejection of technological innovations is a bit naive and actually, quite frankly, counterproductive for patients," says Doyle.

Eucalyptus chief executive Tim Doyle sat for this photo for the AFR Magazine last year to illustrate the start-up crash. His business sees obesity treatments as the path to avoiding a repeat.Credit:Nic Walker

Aside from the medical battles to come, companies like Eucalyptus – which is not yet profitable – need to prove they can make money.

In the US, a similar healthcare company, Hims and Hers Health, has been a mediocre performer on the stock market. It went public at around $US10 in 2019, shot up to $US24 in February 2021 and has mostly traded below its listing price since then.

One industry concern about businesses selling pills online through slick websites is that they will become locked in a race to the bottom on price because the medicines they sell, such as generic brand Viagra, are cheap to make and widely available. Margins, one executive says, are “skinny”.

Eucalyptus’ answer to that is ambitious. It wants to address obesity, a multibillion dollar challenge to the Australian health system by selling a package of licensed treatments. They begin with a drug called Saxenda, which can cost up to $395 a month, plus extra for diet shakes and real-time sessions with a coach. Newer generations of medicine are likely coming soon and trial results have been impressive.

But studies show that patients get plateauing results from the existing drugs after about nine months, Doyle says. He hopes to keep them as customers for longer because Eucalyptus is trying to go further and help people develop healthy habits of the kind that usually cost thousands to cultivate from personal trainers, life coaches and dieticians.

“The opportunity to provide behavioral change and service through technology is pretty central to the future of that treatment,” Doyle says. “Because even if you do lose the weight from using the drug you’re likely to put it [back] on unless you do the behavioral change.”

It is no small ask, but if Eucalyptus is to succeed in its goal of becoming a "generational" company, it will have to.

The other end game for a telehealth company is a sale, and no buyer is seen as more likely than a health insurer. The giant nib Group bought a majority stake in a company called Midnight Health for a total of $16 million last year.

It unlocks access to a predominantly younger base of customers, which health insurers prize because they balance out older and sicker members. It could make its members healthier, should Midnight encourage people to get timelier treatments, lowering nib's costs, and it could be a good business in itself.

Midnight Health co-founder Nic Blair wants the industry to move from putting marketing money behind generic drugs to creating health platforms.

Midnight’s co-founder Nic Blair says the telehealth offered today is far from where he’d like it to end up.

“I think if you look at the digital healthcare landscape now, it’s mostly businesses that have kind of popped up to do a pretty similar thing: pick four or five conditions, and spend a lot of your time and money on marketing those and driving customer acquisition and growth and revenue growth, all the rest of it, across a small set of conditions.

“But that doesn’t actually solve the bigger problem that exists within healthcare…”

He hopes that Midnight will eventually be able to offer a health super app that connects patients’ medicine data, biometric information, test results and more to help their doctors manage or prevent chronic health problems. It is a vision no less ambitious than Eucalyptus’.

But relative to InstantScripts, which has reportedly examined a sale for around $200 million, or the $100 million plus that Eucalyptus has raised, or nib’s $3.7 billion market capitalisation, the $16 million that the insurer has put on Midnight is a small bet.

“Time will tell whether or not we got [Midnight Health] cheap,” says Mike Fitzgibbon, nib’s chief executive. “Measuring the success of Midnight Health will be as much about NIB’s total membership, rather than the top line per se of Midnight Health, even though obviously we hope those things run in parallel.“

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