Teladoc's (TDOC) BetterHelp Faces FTC Hurdle, to Pay $7.8M

Teladoc Health, Inc.’s TDOC online mental health therapy business, BetterHelp, recently took a hit from the Federal Trade Commission (“FTC”). The online mental health unit is expected to be barred from sharing client data for advertising purposes with social-media companies.

The trade regulator has reached a settlement with TDOC’s BetterHelp, which requires the latter to pay $7.8 million to users to settle charges. Sharing sensitive health data with third parties for marketing and ad targeting is expected to be no longer included in BetterHelp’s business practices. It has denied any wrongdoing and is expected to continue implementing more comprehensive privacy standards.

The move on BetterHelp marks FTC’s second action against a digital health firm for alleged data sharing. Earlier this year, the FTC proposed to permanently bar GoodRx Holdings, Inc. GDRX from sharing sensitive client data with third parties. It has also imposed a $1.5 million civil penalty on GoodRx, a leading prescription drug discount provider.

The proposed order on BetterHelp is expected to restrict how it can share consumer data and potentially affect its revenue growth. It is to be seen how TDOC utilizes the business to reach its growth targets as it relies significantly on BetterHelp’s performance. The company expects adjusted EBITDA for 2023 to be in the range of $275-$325 million, the mid-point of which suggests 21.7% growth from the 2022 figure of $246.5 million.

The gains recorded from the BetterHelp business in 2022 were major positives for the company, justifying its inorganic growth strategy, which was under tough scrutiny following the $6.6 billion impairment charge incurred on the Livongo acquisition.

Due to regulatory changes and growing competition, the virtual care space is rapidly changing. The space also attracted the retail behemoth, Inc. AMZN, which launched its virtual health product Amazon Clinic last November. The Cigna Group CI, a global health services company, entered the space with the acquisition of MDLive in 2021. The rising competition in the virtual care space is expected to keep pressure on pricing.

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