Alert November 16, 2022

Five Key Regulatory Considerations for Virtual Ketamine Clinics

The off-label use of ketamine to treat anxiety, depression, and other behavioral health disorders —coupled with the COVID-19 telehealth era—has spurred the opening of virtual ketamine clinics nationwide. Some clinics offer a full suite of health care services, including telehealth visits, prescribing, pharmacy dispensing, and counseling services, while others are focused on more niche areas like group coaching sessions. In the wake of public reports detailing investigations into a number of digital health companies prescribing controlled substances, it is more important than ever to ensure your business model complies with the various regimes regulating the use of ketamine to treat behavioral health issues.

Operating a virtual ketamine clinic triggers a host of applicable statutes and regulations that are layered onto the already complex regulation of the more traditional brick-and-mortar ketamine clinics. Below are the five key regulatory considerations for any company currently considering operating in the virtual ketamine clinic space.

1. Compliance with Federal and State Controlled Substance Prescribing Requirements and Restrictions

The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, amending the Controlled Substances Act, is enforced by the US Drug Enforcement Administration (the “DEA”) and, subject to certain narrow exceptions, requires the following:

  • Practitioners must have an in-person visit with a patient prior to prescribing a controlled substance (note that, for the duration of the COVID-19 Public Health Emergency (the “PHE”), this in-person visit requirement has been waived)
  • The prescription in question must be for a legitimate medical purpose
  • The prescription is given in the usual course of the practitioner’s practice

The DEA's regulations typically require that practitioners register in each state where they prescribe controlled substances; however, this requirement has also been waived during the PHE. Currently, for telehealth practitioners, only one DEA registration is required, even if the practitioner is prescribing controlled substances to patients in different states.

Once the PHE (extended to January 11, 2023) expires, practitioners will no longer be able to prescribe controlled substances via telehealth visits without an initial in-person visit. Additionally, most will need to register with the DEA in each state in which they are prescribing controlled substances to patients.

In addition to compliance with the Controlled Substances Act and the DEA's regulations, practitioners prescribing controlled substances via telehealth are also subject to state law requirements, some of which are also waived during the PHE.

These requirements may include in-person visits for prescribing controlled substances and establishing a bona fide patient-physician relationship, which is a foundational requirement for prescribing any kind of medication to patients. In some states, certain technology specifications are required to establish a patient-physician relationship, such as synchronous audio and video technology. The Center for Connected Health Policy has been tracking state technology requirements for online prescribing, which can be found here. It is important to note that some states may require separate state registrations and in-person visit requirements.

2. State Licensing and Supervision Requirements

When providing telehealth services, practitioners should be licensed in the state where the patient receiving treatment is located. This requirement was temporarily waived by several states during the PHE for licensed out-of-state practitioners to provide health care services across state lines to help meet demand. Most of these waivers have now expired.

Some states have begun to offer telehealth licenses to out-of-states providers who have telehealth services only. Virtual ketamine clinics should ensure that their practitioners are authorized to provide telehealth in the states where they are providing telehealth services. The Federation of State Medical Boards has been tracking out-of-state license waivers for physicians in a 50-state survey, which is available here.

Supervision requirements of advanced practice provider (“APPs”) vary by state. For example, in some states, Advanced Practice Registered Nurses may prescribe controlled substances without supervision, but in other states supervision may be required. These supervision requirements also vary by state. Some states may require a written collaboration agreement between the supervising physician and the APP (e.g., South Carolina, Georgia, and New York), some may limit the number of prescribing APPs that a physician may supervise at one time (e.g., California, Georgia, and Virginia), and one state (Georgia) even limits the distance permitted between the APP and the supervising physician when the physician’s office is out-of-state.

3. Restrictions on the Corporate Practice of Medicine and Other Professions

Most states prohibit the corporate practice of medicine (“CPOM”), a restriction that also applies to other professions like nursing and psychology. In states that prohibit CPOM, a physician may not be employed by a lay entity and may only practice through a professional entity, like a professional corporation or a professional limited liability company. Some states require that the shareholder of the professional entity be licensed in the state where the entity is formed or foreign qualified, while other states merely require that the shareholder be a licensed physician in any state.

In states that prohibit CPOM, a virtual ketamine clinic may want to create a friendly physician (or other professional) model, as appropriate, in order to create opportunities for investment in the business while still complying with CPOM restrictions. Under a friendly physician model, a professional corporation (“PC”) contracts with a management services organization (“MSO”) to provide management services pursuant to a Management Services Agreement (“MSA”). Under this model, the PC pays the MSO for management services while the PC employs or contracts with physicians and maintains control over clinical matters.

In states where this model is utilized, fee splitting, anti-kickback, and other health care regulations may impose limitations on the compensation arrangements between the PC and MSO. Such arrangements should be reviewed by a qualified health care regulatory attorney for compliance.

4. Treatment and Telehealth Consents

Currently, ketamine is only approved by the US Food and Drug Administration (the “FDA”) as 1. an intravenous or intramuscular injection solution for induction and maintenance of general anesthesia and 2. a nasal spray for treatment-resistant depression in adults and depressive symptoms in adults with major depressive disorder and acute suicidal ideation or behavior in conjunction with an oral depressant. The FDA has not approved ketamine beyond these indications. Use of sublingual ketamine or ketamine lozenges are considered off-label uses. Practitioners should obtain informed consent from patients for such off-label treatment prior to treatment.

Some states require that patients consent to receiving telehealth and have prescribed written terms that must be included in telehealth consent forms. This consent should be obtained prior to the patient’s engagement in a telehealth visit with a practitioner.

5. Liability

In addition to obtaining informed consent for treatment with ketamine, it is also important to consider obtaining a release of liability to help ensure that the clinic is not responsible for injury to patients treating themselves with ketamine in their own homes. Ketamine is, after all, a psychedelic. Taking a controlled substance like ketamine has risks. There are limited controls that can be put in place and enforced when a patient is micro-dosing ketamine at home versus in a brick-and-mortar clinic. In the latter scenario, the clinic has more control over maintaining a safe environment for the patient. A release of liability can help protect your company from risks outside of the company’s control.

In conclusion, operating in the virtual ketamine space is rife with regulatory risk, and ensuring that your company complies with the various applicable regulations is imperative to your company’s initial and continued success.