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2. Minor Surgery. As mentioned above, pellets are not simply an injection but rather a minor surgery. A local anasthetic is applied, a small incision made and then a special "hollowed out needle" is used to insert the pellets. Minor bleeding and bruising are relatively common.
3. Expense. My understanding is that currently most insurance carriers do not cover pellets for standard hypogonadal (clinically low testosterone) treatment and these pellets, though the size of a grain of rice, are not cheap: about $25-40 apiece with 6-10 pellets being the most common dosage. Reimbursement for the office visit may or may not be possible as well.
NOTE: Of course, testosterone pellets have all of the common side effects that other HRT options have, including decreased fertility, acne, (possibly) apnea, etc. For more information, see my links on The Safety of HRT and Testosterone Therapy Side Effects.
The good news: the technology for pellets has greatly improved and most of the side effects listed in #1 have been greatly reduced with the new Testopel pellets. For example, one recent study showed extrusion and infection rates of only 0.3%, an admirable improvement to say the least.  Although the study was sponsored by the manufacturer, I think everyone agrees that these pellets are a significant advance over the prior, being smaller and with more tight quality control for contaminants leading to infection.
NEWS FLASH: Golfer Doug Barron used Testopel for his hypogonadism only to find that the PGA lebelled him as "doping", i.e. accused him of cheating. However, Doug Barron sued and was eventually granted a PGA Therapeutic Use Exclusion.  Doug has almost $3 million in earnings making him one of the top hypogonadal athletes that we know about.
This now makes pellets a very convenient option for those who feel they can afford it: nice, steady blood levels of testosterone for months at a time with little additional time commitment. In addition, there is no worries about accidently getting some of the product on the wife and kids, a potential issue with Testim and Androgel, who now have a black box FDA warning requirement. Talk to your doctor if interested of course.
1) Urology Times, Apr 15 2009, 37(5):S8(8), "Long acting testosterone therapy"
2) Clin Endocrinol (Oxf), 1999 Oct, 51(4):469-71, "Extrusion of testosterone pellets: a randomized controlled clinical study"
3) The Journal of Sexual Medicine, Nov 2009, 6(11):3177-3192, "Subcutaneous Testosterone Pellet Implant (Testopel®) Therapy for Men with Testosterone Deficiency Syndrome: A Single-Site Retrospective Safety Analysis"
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