RFK's Pharma "Crackdown" Not Likely to Substantially Affect Hims

Pharma stocks (XPH) dropped earlier today following the publication of a Bloomberg article outlining Trump administration plans to crack down on pharmaceutical ads (RFK Jr. Plans Crackdown on Pharma Ads in Threat to $10 Billion Market).

The story drew attention from some Hims bears, who were quick to point out the company's substantial dependence on pharmaceutical advertising to drive its explosive growth. The news may have helped push the stock down 6 percent in early morning trading before it recovered most of its losses later in the day.

So what's the deal? What is the administration actually planning to do and how much of a threat is it? The short answer, at least with respect to Hims and Hers, is not much.

Greater Disclosure of Drug Side Effects

According to the Bloomberg article, the administration is primarily focused on two policy options, the first of which would require more extensive disclosure of side effects in drug ads. The article cited a possible return to the more extensive disclosure requirements that existed prior to 1997, when pharma ads were far less common than they are today.

Given that Hims does a lot of advertising, it would be natural to assume that it would get swept up in this crackdown. As it turns out, however, certain carve outs in existing law are likely to leave Hims largely unscathed.

The first is the exemption for "help-seeking ads." Under current law, while the FDA extensively regulates drug product ads that name a drug and discuss its benefits, ads that only describe a health condition and do not name a specific drug generally fall under the purview of the Federal Trade Commission (FTC) instead.

Such ads are exempt from the FDA's drug side effect disclosure requirements. The ads are also allowed to name the company and its website.

These ads are a mainstay for telehealth advertisers, including Hims, who often focus their attention on the condition and their related telehealth services in relatively broad terms. Here are some examples among Hims TV ads for hair loss and sexual health. These rules were also central to the Hims Superbowl ad, which drew a lot of attention earlier this year.

A second important exemption is for compounded drugs, which are a core part of the Hims offering and are exempt under the FDA's prescription drug advertising regulations outlined in 21 CFR § 202.1. Such products remain subject to FTC rules against false or deceptive advertising, however.

Unsurprisingly, most Hims ads that are product-specific are focused on their compounded products, often with an accompanying disclaimer such as: "The FDA does not approve or verify compounded drugs for safety, effectiveness, or quality."

Together, these two exemptions will leave most Hims advertising untouched by the administration's brewing side effect disclosure requirements.

Restricting Tax Deductions for Drug Ads

The other primary policy option the administration is considering is restricting the deductibility of direct-to-consumer advertising as a business expense for tax purposes. Such advertising is treated as an ordinary and necessary business expense under the U.S. tax code. Changing this would require an act of Congress.

While related bills have been introduced in both the House and Senate, they are unlikely to move. This is an issue where legislation has been repeatedly reintroduced with no success dating at least back to 2009. Similar restrictions have been introduced with limited but incomplete success on cigarette advertising dating back to the 1970s and (more recently) on advertising for e-cigarettes.

The bills introduced this year did draw some Republican support, notably from Rep. Bill Murphy (R-NC) and Sen. Josh Hawley (R-MO), but they were not included in the "Big Beautiful" tax bill that passed out of the House and is currently being considered by the Senate.

With strong opposition from big pharma and organizations like the Coalition for Healthcare Communication and National Association of Broadcasters, it seems unlikely that Congress will overcome its long history of doing nothing on this issue, at least not this year.

Final verdict? Hims is not likely to suffer much under the proposals being considered by the administration.