Digital health services have exploded since the onset of the COVID-19 pandemic, and behavioral health services have seen large increases in utilization. Prior to the pandemic, telehealth visits for mental health or substance use disorder represented less than 1% of outpatient visits, but by mid-2020 nearly 40% of telehealth outpatient visits were for mental health or substance use.[i] Behavioral health is the highest-funded clinical indication within digital health, and digital behavioral health companies raised $1.7 billion in the first three quarters of 2022.[ii] Investments in behavioral digital health services have the potential to transform the healthcare system in several key areas.
Substance Use Treatment
During the COVID-19 Public Health Emergency (“PHE”), the Drug Enforcement Agency (“DEA”) generally waived the requirement for providers to have an in-person visit with patients at a registered facility to prescribe certain controlled substances. Start-up companies began providing digital health services for substance use treatment, for example, through:
- prescription digital therapeutics (software-based treatments delivered on mobile devices); and
- providing same-day access to medication-assisted treatments such as buprenorphine and naloxone.
Virtual Mental Health Services for Adolescents
Several companies have started targeting virtual mental health services to adolescents, thereby making care less stigmatizing and more convenient for adolescents to access. Venture capital funding for digital mental health services for children and teens was close to $1 billion in 2021, more than double from 2020.[iii] In the 2021-2022 school year, approximately one in five schools offered mental health services via telehealth, with the use of telehealth most common in rural areas, thereby expanding access to mental health care for vulnerable students especially in light of the mental health difficulties exacerbated by gun violence and the COVID-19 pandemic.[iv] Some examples include:
- virtual intensive outpatient programs designed solely for teens and young adults; and
- apps which offer therapy services and are integrated into school-based interventions.
Psychedelics & Digital Health
Companies are investing in offering psychedelic treatment via digital health to treat mental health disorders, such as:
- telehealth platforms for ketamine and psilocybin therapy; and
- EHRs designed for ketamine treatments.
In November 2020, Oregon became the first state to legalize psilocybin-assisted therapy and began accepting applications for licensure on January 2, 2023.[v] In November 2022, Colorado voted to decriminalized psilocybin mushrooms. A continued expansion of the psychedelic market in healthcare is expected in 2023 and the market worth of companies operating in this space is anticipated to be over $8 billion by 2028.[vi]
Companies active in the emerging and expanding area of behavioral health face a complicated regulatory environment. The reimbursement landscape has changed since the start of the pandemic. Medicare has expanded reimbursement for mental health and substance use disorder digital health services by allowing patients to receive certain services at home, some of which have permanently been added to the list of services that may be provided by digital health, and allowing audio-only visits for mental health and substance use services in certain circumstances.[vii] With the onslaught of public and private companies offering virtual services for behavioral health, there are data and privacy concerns particularly with consumers wondering about who owns the data from these virtual visits.
In December 2022, the U.S. Department of Health and Human Services (“HHS”) announced proposed changes to 42 C.F.R. Part 2, which governs the medical records of federally assisted substance use treatment programs. With the rise of digital mental health services and related operational issues, regulatory modernization has also begun to occur.
Companies using digital health to prescribe controlled substances will need to closely monitor the expiration of digital health waivers and the DEA’s actions towards its in-person requirements. Although the PHE has not yet expired, the Department of Justice (“DOJ”) has recently increased its enforcement activity in the telehealth space, especially with regards to behavioral health prescribing methods and habits. While the CY 2023 Consolidated Appropriations Act did not extend the waiver of the Ryan Haight Act’s requirement for an in-person exam for the prescription of controlled substances, there have been talks in Congress to extend this flexibility.[viii] DOJ has relied on public-facing sources to find information on these prescribing habits, and companies prescribing behavioral health therapies should proceed with caution and evaluate their public-facing materials.[ix]