Not So Magical: Insuring Psychedelic Treatment Risk

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The allure of psychedelics is rising among users and investors, with the promise of relief for those with untreatable depression, addiction, PTSD, eating disorders, and more. About 50 of these companies are now publicly traded, offering drug development, retreats and training programs.

In Canada, ketamine has been approved for medical use, leading to publicly-accessible clinics. In the United States, ketamine is sometimes prescribed “off-label,” increasing legal risks for clinics and practitioners. Currently, ketamine is the only psychedelic approved in the Canada and United States.

With this promise as a backdrop, an increasing number of U.S. and Canadian companies are setting up operations in areas with more lenient regulations, like Mexico and parts of Europe, to bypass U.S. Food and Drug Administration restrictions.

However magical the journey into psychedelics may seem, it is full of legal and financial perils. Here’s why: Operating abroad doesn’t eliminate risks for businesses domiciled and advertising their services in the U.S.

6 evidence-based practices to becoming insurable

Entering the medical psychedelics field carries both significant promise and risk. Ensuring your practice is insurable means adhering to several critical requirements first:

1. Work with your broker first

Before even obtaining licenses, engage with an insurance broker. Adequate insurance is essential to attract the right investors and medical professionals to your board. Directors and officers (D&O) coverage, along with a comprehensive risk management analysis strategy, are crucial. No reputable doctors will want to join your board without both.

Action points:

Contact a broker early in your planning process to ensure all insurance needs are covered.
Develop a robust D&O strategy to protect executives and attract high-caliber professionals.
Ensure all risk management protocols are in place before seeking funding.

2. Obtain proper licensing

The foundation of any medical practice is proper licensure. This means that staff involved in administering treatments must be clinically licensed according to the regulations of the specific state or country where the practice operates. Psychedelic medicine involves complex therapies that require precise qualifications. A major risk occurs when parent companies use local practitioners to administer medication who may not meet the necessary licensure standards of their home country. This can jeopardize the entire operation.

Key questions:

Who is prescribing, administering and monitoring the medication, and are they legally authorized to do so? More specifically:
Are all practitioners licensed to perform the treatments in the specific jurisdiction?
Is the licensure of the parent company at risk due to using unlicensed providers?

3. Create and enforce protocols

Robust protocols are essential to ensure the safety of patients. These protocols should cover all aspects of patient care, from the administration of drugs to handling of potential adverse events and ensuring informed consent.

Key questions:

What protocols are in place to prevent abuse, such as multiple therapists in the room or video recording sessions?
What is the plan for managing adverse events or medical emergencies?
What are your policies regarding the psychological and physical risks of the treatment?
How long must a patient stay under supervision after treatment?

4. Procure informed consent

Patients must be fully informed about the risks and benefits of psychedelic treatments. Informed consent documents should be written at an accessible level, typically around an eighth grade reading level, and in the patient’s native language if necessary. This document is crucial in protecting both the patient and the practice.

Action points:

Clearly outline the risks and benefits of the treatment.
Ensure the document is easy to understand or provide an interpreter if needed.
Require patient signatures to acknowledge they have been informed.

5. Implement practitioner training

Training is paramount, but the lack of a standardized federal protocol means it varies widely. Each practitioner must have documented training specific to the psychedelics being used, adhering to evidence-based protocols, which can differ by state or province.

Training requirements:

Ensure practitioners are trained according to the specific psychedelic therapies they will administer.
Document all training and ensure it meets local regulatory standards.

6. Standardization of products

Consistency and reliability of the psychedelic compounds used are crucial. Like cannabis, psychedelic compounds can vary, and synthetic lab-produced substances are generally preferred for their reproducibility and safety.

Standardization steps:

Source products from approved, standardized suppliers.
Ensure all compounds are tested and reliable before use in treatments.

Protect your practice

For companies in medical psychedelics, insurance is often an afterthought — but it’s crucial. Without strict adherence to licensing, protocols, informed consent, practitioner training, product standardization and early engagement with an insurance broker, securing coverage is nearly impossible. In this burgeoning field, thorough preparation and adherence to evidence-based practices are essential to protect your practice and ensure success.