Cerebral CEO Kyle Robertson steps down amid DOJ investigation into prescribing practices

Cerebral Medical Group received a grand jury subpoena from the U.S. Attorney’s Office for the Eastern District of New York earlier this month.

Kyle Robertson, a co-founder of embattled startup Cerebral, has stepped down from the CEO role, effective immediately, the company announced Wednesday.

Dave Mou, M.D., the company’s chief medical officer and president, has been tapped to take over for Robertson as Cerebral’s CEO.

The leadership change comes as the online mental health startup is facing an investigation by the Department of Justice (DOJ) for “possible violations” of the Controlled Substances Act. Cerebral Medical Group received a grand jury subpoena from the U.S. Attorney’s Office for the Eastern District of New York earlier this month.

Insider reported that the subpoena issued by the DOJ demands the company turn over a slew of documents related to the San Francisco-based startup’s prescribing of controlled substances, citing a copy of the document that the media outlet obtained.

The Wall Street Journal reported Tuesday that directors who control the board of Cerebral agreed on a plan to replace Robertson, citing people familiar with the situation.

In a statement provided to Fierce Healthcare, Mou credited Robertson with leading the company through a period of rapid growth during the COVID-19 pandemic.

“We thank Kyle for his service. His vision resulted in what Cerebral is today: a leading provider of urgently needed mental health services to people who were unable or unlikely to obtain treatment,” Mou said. “The timing for his idea was fortuitous. When the pandemic struck, Cerebral became a lifeline for those in need of mental health services.”

He added, “As Cerebral enters its next phase of growth, we look forward to expanding our services, guided as always by evidence-based clinical protocols, to help those who struggle with mental health concerns in silence.”

In a press release, the company also announced Jessica Muse, currently chief operating officer, will assume the role of president. Thomas Insel, former director of the National Institute of Mental Health and clinical advisor for Cerebral, is joining the company’s board.

Earlier this week, Cerebral said it will no longer prescribe most controlled substances to patients, citing the eventual expiration of telehealth waivers that allowed online prescriptions for drugs like Xanax and Adderall.

Insider first reported the news Monday, based on a leaked email from Robertson.

A Cerebral spokesperson confirmed the change to the company’s practices to Fierce Healthcare late Monday.

In an email Mou sent to the company’s prescriber team, which was provided to Fierce Healthcare, Cerebral said it will stop prescribing most controlled substances to new patients starting May 20. The only exception to this will be prescriptions to patients diagnosed with opioid use disorder, which Cerebral will continue to treat.

All existing patients on controlled substances will require a visit prior to Aug. 1 to establish a treatment plan to either transition their controlled substance to a non-controlled substance medication, titrate off of their controlled substance or transfer their care to a local provider by Oct. 15, Mou said in the email.

Mou cited the change was needed to “prepare for the expiration of the waiver to the Ryan Haight Act.”

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In January 2020, the DEA announced it was loosening remote prescribing restrictions of Schedule II through Schedule V controlled substances for the duration of the public health emergency. In effect, this rolled back select provisions of the Ryan Haight Online Pharmacy Consumer Protection Act, originally passed in 2008 to narrow the circumstances outlined in the Controlled Substances Act under which a controlled drug can be prescribed via telehealth.

The Controlled Substances Act regulates the distribution of potentially addictive medicines like Adderall and Xanax.

“The clinical, legal, and operations teams, with the approval of the board of directors, have been preparing for multiple scenarios related to the expiration of waivers enacted during the state of emergency that allowed telehealth practices to grow over the past few years,” Mou wrote in the email. “We have approached the crossroads where changes need to be made in our practice—changes which we do not take lightly, as they may negatively impact our patients who seek us out for exceptional mental health care.”

Cerebral, which has a valuation of $4.8 billion, launched in January 2020 and grew rapidly, propelled by increased demand for behavioral health care services during the pandemic. The startup banked $300 million in a series C round in December, boosting its valuation to $4.8 billion.

In a statement, Cerebral executives said the company provides comprehensive, online mental health services for depression, anxiety, PTSD, attention-deficit/hyperactivity disorder (ADHD), bipolar disorder and a range of other conditions.

Cerebral is among a handful of virtual care startups that prescribe controlled substances without patients seeing a doctor in person.

The well-funded online mental health startup has faced increased scrutiny from the media and former employees about its prescribing practices. Complaints have surfaced that the company has been too quick to prescribe powerful stimulant drugs.

COVID public emergency opened up telehealth prescriptions

Many healthcare organizations are pressing for the DEA to make permanent changes to eliminate the requirement that patients be evaluated in person before being prescribed controlled substances via telemedicine.

The American Psychiatric Association, the American Telemedicine Association (ATA) and 70 other organizations sent a letter to the DEA calling for the agency to permanently waive the telehealth restriction, noting that many patients, particularly new patients, will not have access to care after the public health emergency waiver ends.

“We urge policymakers to consider that, during the pandemic, telemedicine effectively increased access to necessary care for patients in their home or other location, without increased diversion related to the waiver. We welcome the opportunity to discuss a proposed framework to ensure Americans maintain access to clinically appropriate care,” Kyle Zebley, vice president for public policy at the ATA and executive director of ATA Action, said in the letter.

As the virtual care market heats up, there are many companies that now offer telehealth services and the ability to refill prescription medications online. But even with the waiver of telehealth restrictions during the public health emergency, many companies, like Sesame, chose not to prescribe controlled drugs through a telehealth appointment.

“There are many things for which a telemedicine appointment is completely adequate. We happen not to believe that is the case for the prescription of a controlled substance because we just think there’s too much potential risk to the patient,” said David Goldhill, the CEO and co-founder of Sesame, an online marketplace for affordable health services.

“We’ve just never been comfortable in the trade-off between risk and benefit. There are some obvious benefits for patients to have easier accessibility, but there’s a tremendous amount of risk, with inappropriate prescriptions and all the potential impacts on patients or third parties,” Goldhill told Fierce Healthcare.

Many direct-to-consumer healthcare companies got their start by enabling patients to get prescriptions for medications that treat conditions like hair loss and erectile dysfunction, and these are relatively low-risk drugs.

As virtual care adoption surged during the COVID-19 pandemic, some digital health startups focused on a specific vertical, such as mental health conditions, and the business model revolves around a recurring prescription.

Sesame launched in 2019 to connect patients to in-person and virtual care using a direct-pay model. The company also offers prescription medication delivery.

“We have a tremendous amount of telemedicine on the site, including a broad range of mental health services and mental health providers,” Goldhill said.

For patients with ADHD or other conditions that might require a controlled drug for treatment, the company will only prescribe the medication after an in-person visit with a physician, Goldhill said.

As there are significant risks with controlled drugs, including the potential for addiction, inappropriate use and distribution to underage people, Sesame takes the position that it will not prescribe these drugs via telehealth appointments.

“Our business model is not based on getting a patient a specific drug. Our business model is based on providing very high-value care, which sometimes includes prescriptions and sometimes doesn’t,” Goldhill said.

The pandemic has shown that virtual care has an important role to play in healthcare, he noted.

“Telehealth is extraordinarily valuable. But saying something is valuable is not the same thing as saying that it can be substituted, in all cases, for a physical consultation with a physician,” he said.

He added, “Many of us who build direct-to-consumer healthcare sites want to make healthcare more accessible for the patient at a greater value for the patient.”

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