Interest in psychedelic-assisted psychotherapy, including treatments involving ketamine, psilocybin, and 3,4-Methylenedioxymethamphetamine (MDMA), continues to attract investors, entrepreneurs, and health care operators. Ketamine clinics in particular have emerged as an accessible entry point because ketamine is already an approved drug that practitioners may prescribe, while other psychedelic substances remain subject to far more restrictive federal and state regimes. For investors, however, these businesses sit at the intersection of health care regulation, controlled substances law, telehealth rules, and employment law, and the value of an investment can depend heavily on whether the practice is built on a compliant foundation. Whether you are investing in an existing practice, opening a new clinic, or operating a multistate platform, the following key legal and practical areas should be evaluated before committing capital.
- Can you own the practice, and how should the deal be structured? Many states restrict corporate entities and non-physician investors from practicing medicine or owning medical practices in order to guard against non-medical professionals exercising control over medical decisions. In these corporate practice of medicine states, investors typically cannot own the clinic directly and instead participate through a management services organization (MSO) that provides non-clinical services (such as real estate, staffing, billing, marketing, and technology) to a physician-owned professional entity. The management agreement, fee structure, and any equity control arrangements must be carefully drafted so that clinical decision-making remains with licensed professionals. It is critically important to review the laws and rules of each state where the clinic will operate, because a structure that is permissible in one state may violate the corporate practice of medicine rules of another and could jeopardize both the investment and the practice's licenses.
- Are patients giving appropriate informed consent? Common forms of ketamine treatment, such as sublingual ketamine or ketamine lozenges, are considered off-label uses. Practitioners should obtain informed consent from patients for such off-label uses prior to treatment. Some states also require that patients consent to receive services through telehealth and have adopted written terms that must be included in telehealth consent forms. Investors should confirm during diligence that the practice uses compliant, state-specific consent forms and documentation, as deficient consent practices can increase malpractice and regulatory exposure.
- Are the practitioners appropriately licensed and registered? Clinics offering virtual care should ensure that their practitioners are authorized to provide telehealth in each state where services are provided by ensuring that each practitioner is licensed in the state where the patient receiving treatment is located. Because ketamine is a federally controlled substance, prescribing and dispensing practitioners and locations must also hold appropriate U.S. Drug Enforcement Administration (DEA) and state-controlled substance registrations, and the practice must comply with storage, recordkeeping, and dispensing requirements. Federal rules governing the remote prescribing of controlled substances via telehealth have been subject to temporary extensions and ongoing rulemaking, so investors in virtual or hybrid models should confirm the current requirements and assess how future changes could affect the business model.
- Are the providers being appropriately supervised? Many ketamine clinics rely on advanced practice providers (APPs), and supervision requirements vary by state. In some states, Advanced Practice Registered Nurses (APRNs) may prescribe controlled substances without supervision, but in other states, supervision may be required. Some states may require a written collaboration agreement between the supervising physician and the APP (e.g., Georgia, New York, and South Carolina), while some may limit the number of prescribing APPs that a physician may supervise at one time (e.g., California, Georgia, and Virginia). These requirements directly affect staffing models, scalability, and operating costs, and should be built into any business plan or financial projections.
- Are providers being classified and compensated properly? Determining the correct classification of therapists and health care professionals in ketamine clinics as either independent contractors or employees is crucial and complex due to varying state and federal laws. For instance, in New Jersey and California, workers are presumed to be employees unless they meet specific criteria. When structuring compensation for providers, as well as management fees paid to an MSO or investor, a state's fee-splitting laws must be reviewed. Arrangements involving referrals or federal health care program patients should also be evaluated under federal and state anti-kickback and self-referral laws.
- How will the practice get paid? Many ketamine clinics operate on a cash-pay basis because off-label ketamine treatment is often not covered by insurance, while certain U.S. Food and Drug Administration (FDA)-approved products may be reimbursable subject to payer requirements. Investors should understand the practice's payer mix, pricing practices, and any membership or package models, and confirm compliance with applicable consumer protection, advertising, and patient billing laws. Marketing claims about the effectiveness of psychedelic treatments should be reviewed carefully to avoid deceptive advertising concerns.
- What is the regulatory outlook for other psychedelics? Unlike ketamine, substances such as psilocybin and MDMA remain Schedule I controlled substances under federal law and are not approved by the FDA for therapeutic use, although some states have created their own regulated psilocybin programs with separate licensing requirements. Investors pursuing a broader psychedelic-assisted psychotherapy platform should distinguish between business lines that are lawful today and those that depend on future federal or state regulatory changes, and should account for that uncertainty in timelines, valuations, and exit strategies.
- Have you conducted thorough due diligence and risk planning? Before investing in or acquiring a clinic, investors should review licenses and registrations, clinical protocols, patient screening and monitoring practices, adverse event history, malpractice coverage, prior regulatory inquiries, and key contracts. Transaction documents should include appropriate representations, warranties, and indemnities addressing regulatory compliance, and the business should maintain adequate professional liability and other insurance coverage tailored to psychedelic-assisted treatment.
Because the legal landscape for ketamine and other psychedelic-assisted therapies is evolving rapidly and varies significantly from state to state, investors should engage experienced health care and corporate counsel early in the process to structure the investment, conduct diligence, and build a compliance program that supports long-term growth.
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To further the discussion about investing in, opening, or operating a ketamine or other psychedelic-assisted psychotherapy practice, feel free to reach out, Lisa Gora.
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