By Vincent Joralemon

As therapies using drugs like MDMA, psilocybin, and LSD advance through the FDA research and approval pipeline, patients should be prepared for steep price tags attached to these procedures. For example, experts estimate MDMA-assisted therapy for PTSD will cost upwards of $12,000 per patient.

These high costs highlight the need for comprehensive insurance coverage because many of those experiencing symptoms of conditions like PTSD also frequently lack the resources to pay for such treatments. Looking at how the current system works, including presently available psychedelic therapies, can help to inform coverage policies moving forward.

Spravato: How Psychedelic Therapy is Being Covered

There is already one psychedelic therapy available (assuming you, like me, consider ketamine a psychedelic)—Janssen’s Spravato, an intranasal esketamine (S-ketamine) spray that is approved for treatment-resistant depression. Spravato requires biweekly infusions that taper off after several weeks; the total annual cost can be anywhere from $18,000 to $45,000.

Billing medical insurance for Spravato involves codes for both drug delivery and supervision because treatment requires administration of the drug (using the intranasal spray) and a monitoring period of at least 2 hours at a certified treatment center. As such, depending on coverage, Spravato can fall under either (or both) medical or pharmacy benefits.

Spravato is covered by Medicare Part B, which pays 80% of expenses. This includes the price of the medication (which is around $590 per session) and the cost of the doctor’s visit associated with the administration of Spravato.

Spravato also runs the Spravato WithMe initiative, which requires patients to pay only $10 per treatment (with a $8,150 maximum benefit per calendar year). The easiest way to qualify for this program is for patients to have insurance that covers Spravato. Luckily, many insurers do—Cigna, Aetna, Blue Cross Blue Shield, United Healthcare, Medicaid, and Medicare all provide coverage.

Johnson & Johnson, Janssen’s parent company, also runs a Patient Assistance Foundation (JJPAF), a separate nonprofit that gives eligible individuals free prescription medicines donated by J&J companies. Although “anti-kickback” rules prohibit drugmakers from subsidizing co-payments for patients enrolled in Medicare, they can donate to such organizations if they are independent—which ostensibly JJPAF is.

How Psychedelic Therapy Coverage May Play Out

Coding

In June 2023, the AMA released three Current Procedural Terminology (CPT) codes covering in-person monitoring and intervention during “psychedelic medication therapy.” Although these codes are temporary, they offer a peek at how clinicians might bill insurance companies for psychedelic therapy. BrainFutures, a nonprofit dedicated to brain-based interventions, put out a phenomenal guide to these medical codes—which I recommend you review if you are interested in determining how insurers may reimburse psychedelic therapies. 

A key takeaway from the BrainFutures report is that substantial negotiation for coverage using these codes will need to take place among patients, providers, and insurers. There isn’t yet an industry “standard” for insurance coverage; until one emerges, experts recommend providers code services to whatever payers agree to pay for.

Prioritizing “On-Label” Prescriptions

Right now, few insurers cover off-label ketamine therapy (i.e., using generic ketamine, which is only approved as an anesthetic). This is typical—without a seal of approval from FDA, insurers are reluctant to pay for off-label treatments. And, while many private payers cover Spravato, they do so strictly under its two FDA-approved indications.

The takeaway here is that, although off-label uses for psychedelic therapies may become more common, those will likely not be covered by insurance. For example, if FDA approves MDMA later this year, it will do so for PTSD only; most insurance will not cover any use outside of that indication (e.g., for depression).

Coverage Through Ancillary Benefits

Already, some private payers are covering psychedelic therapy. For example, Enthea, a third-party administrator of health insurance plans, offers psychedelic therapy as an “ancillary benefit” similar to dental and vision; charging patients extra for coverage of these therapies. As of early 2024, Enthea’s ancillary coverage only provides benefits for ketamine therapy.

Enthea ran a pilot program with the soap company (and Burning Man “magic foam” sponsor) Dr. Bronners, offering ketamine therapy to employees. According to Enthea’s founder, this program garnered substantial interest from several companies. Enthea provides third-party administration of psychedelic therapy—which means they streamline the reimbursement process for providers, employers, and insurers. The upshot here is that, even if insurance coverage through traditional channels is difficult, businesses may still leverage such plans for what is becoming an attractive employee benefit.

The “Assisted Therapy” Modifier

The next psychedelic treatment to be FDA-approved will could be Lykos’ MDMA-assisted therapy for PTSD. Lykos’ MDMA is not just a pharmaceutical—it is a package deal, where patients receive several rounds (42 hours) of therapy to prepare and “integrate” their experience on MDMA.

In the past, insurers have covered drugs and therapy, but Lykos’ procedure will be for “therapy while on a drug.” According to industry insiders, there aren’t any current “drug-therapy combinations” that can serve as an easy comparison for coverage. The FDA does not regulate therapy, which is a state-level issue regulated by state medical boards. This means that Lykos has had to work hard to convince insurers they should cover the treatment.

Experts project the price of Lykos’ MDMA-assisted therapy to exceed $11,000 for the course of treatment. Although this may be highly cost-effective (considering the cost of untreated PTSD), insurers may balk at the price tag. Because of this, Lykos, and its patent nonprofit, MAPS, have been working with payers to get them on board with providing coverage, emphasizing that despite high upfront costs, the treatment could create substantial savings in the long run. Whether these efforts work—and the extent to which insurers will cover the MDMA-assisted therapy, is yet to be determined.

Takeaways and Recommendations

J&J’s Spravato has been a triumphant psychedelic therapy, entering near-blockbuster status in 2023. This is attributable to wide insurance coverage of the drug, a streamlined copayment system, and financial assistance by the J&J nonprofit foundation for poor or uninsured patients. Future psychedelic therapy businesses would be wise to learn from J&J’s model here.

Although Spravato treatment does not explicitly include both a “therapy” and “drug” element, it involves a dual-payment reimbursement for both the “drug” (the esketamine nasal spray) and the associated “monitoring.” Streamlining future psychedelic therapy reimbursements with something like the Spravato WithMe Program or through third-party administrators (like Enthea) will also substantially reduce payment friction for patients and providers.

Companies like Lykos and Compass Pathways, both of which have psychedelic therapies approaching approval, should also continue to engage with insurers to convince them of the clinical and economic benefits of these therapies. Psychedelic-assisted therapies require substantial upfront costs; although there are ways to minimize those expenses (e.g., with group therapy sessions), they will still be a hard pill to swallow for price-conscious payers. Yet, these psychedelic therapies may carry immense clinical promise for a host of difficult-to-treat conditions. Getting insurers to see that potential will go a long way.

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