Cerebral under federal investigation for possible violations of controlled substances law

Mental health startup Cerebral said Saturday it is under 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 on Friday evening, the company said in a statement. The Controlled Substances Act regulates the distribution of potentially addictive medicines like Adderall and Xanax.

"To be clear, at this time, no regulatory or law enforcement authority has accused Cerebral of violating any law," the company said.

The company said it intends to fully cooperate with the investigation, which it already has conveyed to the U.S. attorney’s office.

The U.S. Attorney’s Office for the Eastern District of New York declined to comment.

Insider reported Saturday 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 Grand Jury is conducting an investigation of possible violations of federal criminal laws involving: violations of the Controlled Substances Act," the document states, Insider reported.

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’s services have been especially critical during the last two years of the simultaneous COVID-19 pandemic—which rendered in-person care much more difficult to obtain—and the exploding mental health crisis and associated provider shortage that the United States has faced," executives said.

Controlled substances are medically appropriate for the treatment of many mental and physical health conditions—and are in fact the standard of care for the treatment of several conditions, Cerebral said in a statement. The company maintains that only appropriately licensed and registered clinicians make decisions about whether to prescribe controlled substances to any Cerebral patient.

"Cerebral has dedicated significant time, energy, and resources to ensuring that its policies and procedures regarding the prescription of controlled substances and other medications both are medically appropriate and comply with all applicable state and federal law," the statement also said. "As a responsible company, Cerebral is continuously improving its systems and practices. The foundation of this company is built on evidence-based, ethical, and compliant practices so that our patients can receive the highest quality of care and achieve the best clinical outcomes."

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. 

One former executive at the company filed a labor lawsuit alleging that Cerebral fired him after he complained about the company's prescribing practices. Matthew Truebe, former vice president of product and engineering at Cerebral, claims that the company "egregiously put profits and growth before patient safety," including overprescribing medications for ADHD.

Last week, Insider reported that the Drug Enforcement Agency (DEA) is investigating the company. U.S. DEA agents interviewed former Cerebral employees about issues with clinician licensing and about allegations that some patients had set up multiple accounts to obtain more drugs, Insider reported, citing sources.

According to Insider's most recent story, the grand jury subpoena demands documents such as Cerebral's policies and procedures regarding controlled substances and documents related to Cerebral's relationship with the online pharmacy Truepill.

Earlier this week, Truepill, which is reportedly Cerebral's preferred pharmacy, said it was temporarily halting prescriptions for Adderall and other controlled substances used to treat ADHD.

"Out of an abundance of caution, Truepill is temporarily pausing all fulfillment of schedule 2 substances while we evaluate appropriate next steps," the company said in a statement to Fierce Healthcare.

The government classifies Schedule 2 substances as drugs “with a high potential for abuse, with use potentially leading to severe psychological or physical dependence.” Other Schedule 2 substances include OxyContin and Vicodin.

Cerebral also said this week that it would stop writing prescriptions for Adderall, Ritalin and other controlled substances to new ADHD patients.

Online pharmacies and mental health providers surged in popularity during the pandemic as demand for services grew.

The Wall Street Journal reported in March that some clinicians working at startups like Cerebral and Done Health felt pressured to prescribe stimulants like Adderall to patients even though, in their view, the company’s 30-minute patient evaluations weren’t long enough to properly diagnose ADHD.

Some of the nation’s largest pharmacies have blocked or delayed prescriptions written by clinicians at telehealth startups that sprang up to treat ADHD, the WSJ reported.