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Offering Psychedelics, Like Ketamine, as an Employee Benefit

BY: Barbara J. Zabawa, JD, MPH • Attorney & President | Center for Health and Wellness Law, LLC

There is growing evidence and interest in psychedelic medication as a way to improve mental well-being. For example, a recent New York Times article highlighted a study that “suggests that, for some patients, the anesthetic ketamine is a promising alternative to electroconvulsive therapy, or ECT.”

Ketamine is only one of many types of psychedelic drugs. Physicians can prescribe Ketamine, which is often administered intravenously, off-label. “Off-label use of drugs is prescribing outside their US Food and Drug Administration (FDA)-approved product label.” See

The FDA has also approved Spravato (esketamine) nasal spray, in conjunction with an oral antidepressant, for the treatment of depression in adults who have tried other antidepressant medications but have not benefited from them (treatment-resistant depression. Spravato is much more expensive than Ketamine, however, because Ketamine can be purchased as a generic drug, whereas Spravato is a patented drug.

Other psychedelic substances that are not FDA-approved (and technically illegal to possess and use as they are Schedule I controlled substances under the federal Controlled Substances Act (CSA)) include MDMA (also called ecstasy or molly), ayahuasca, LSD (acid), psilocybin (the active ingredient in magic mushrooms) and many synthetic chemicals in development. See What’s Next for MDMY in Psychiatry? Nature, Vol. 616 (April 20, 2023). “One analysis has projected that the psychedelics market could be worth more than US$8 billion by 2028.” Id.

Because of this growing evidence and interest, a number of wellness startups are hopping on the psychedelic bandwagon by offering consumers different ways to access the drugs. Some companies are seeking to convince employers, perhaps even through their corporate wellness programs, to offer psychedelics as an employee wellness benefit. What are some legal considerations for employers as they encounter requests to offer psychedelic medicine to treat depression and improve employee mental well-being? This blog will highlight some of those legal issues.

Legal Considerations When Offering Psychedelics as an Employee Wellness Benefit

  • Will psychedelics be the next Ozempic?According to a recent Wall Street Journal article regarding weight loss drugs like Ozempic and Wegovy, employee demand for such drugs is skyrocketing. Costs for the drugs can be as much as $1,350 per month per patient, causing employers to spend millions per month on the drug if offered through its health plan. The FDA approved Ozempic to treat Type 2 diabetes, but it isn’t typically covered by health insurance if there is not an underlying diabetes diagnosis. Indeed, one could argue that failing to cover drugs like Ozempic may discriminate against people with diabetes, which could arguably violate the Americans with Disabilities Act (ADA). Even without a diabetes diagnosis, if an employer perceives obese employees as disabled and then refuses to offer a weight loss drug, obese employees may feel discriminated against. It will be interesting to see if any lawsuits ensue as employers grapple with offering these weight loss drugs.

A similar dynamic may occur with psychedelics. If psychedelics, especially those that are legal, are available but not offered by employers, could employers be accused of discriminating against employees with mental illness? This may be especially pertinent given the recent proposed rules to strengthen parity between mental health services and physical health services. Group health plans that cover weight loss drugs like Ozempic but do not cover psychedelic drugs to treat treatment-resistant depression may need to demonstrate that the method it used to decline prescription drug coverage for a mental health disorder is no more restrictive than the method it uses to cover a drug to treat diabetes and/or obesity. See 88 Fed. Reg. at 51569 (Aug. 3, 2023).
  • How will employers know if the provider is meeting standards? Psychedelic administration should occur alongside guided therapy from highly trained therapists. In the clinical trials for MDMA to treat PTSD, the participant drug is administered by trained therapists who guide the participant’s experience through scripted sessions that also allow for improvisation. See What’s Next for MDMY in Psychiatry?, Nature, Vol. 616 (April 20, 2023). Thus, for psychedelic treatment to be effective, and safe, employers will need to ensure that the individuals who administer the psychedelic drugs are properly trained. Failing to use properly trained practitioners to administer the drug and provide the requisite therapy could increase the chance of inappropriate use, abuse, harm and therefore liability to the employer. Employers will need some way to verify that the individuals administering the psychedelic are properly trained and have adequate liability insurance for themselves. Employers should also ensure that their own liability insurance covers the use and administration of psychedelic treatment to employees.
  • State vs. federal legal compliance. Some state and local governments may allow for psychedelic use for depression before federal law permits it. For example, the State of Oregon has decriminalized medical and effectively, recreational use of psilocybin. Municipalities like Oakland, Santa Cruz, and Arcata California, Ann Arbor, Michigan, and Somerville, Cambridge and Northampton Massachusetts have passed legislation decriminalizing psychedelics. See Legalizing more psychedelic drugs for medical use could follow a similar pattern as legalization of marijuana. Marijuana is still illegal at the federal level, but many states have legalized it. Psychedelic legalization seems to be following a similar path, with state and local government taking action before the federal government. Employers that conduct business in states or localities that permit the use of psychedelics to treat depression may still need to consider federal law, specifically the Controlled Substances Act. Employers will need to weigh the legal risk of violating federal law while trying to help employees who may need mental health treatment with psychedelics.
  • Offering Psychedelics through an EAP or Onsite Clinic May Trigger HIPAA/ACA and HSA Compliance Issues. The recent FDA approval of Spravato requires that people taking the drug be monitored in a doctor’s office for at least two hours, and their experience entered into a registry. See Indeed, according to one study, “training and clinical oversight is necessary to ensure safety and also therapeutic efficacy for this divergent class of treatments.” Thus, offering psychedelics such as ketamine should be more than just listing it on the group health plan’s formulary. Employers that consider offering this treatment for depression and/or PTSD will also need to ensure that proper clinical protocols are followed, including ensuring that a trained clinician oversees the drug’s administration and use. If an employer offers this treatment through an Employee Assistance Program (EAP) or onsite clinic, This more involved treatment would likely be significant benefits in the nature of medical care, thus requiring employers to comply with the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA) market reforms if offered through an EAP, and could jeopardize Health Savings Account (HSA) eligibility for employees.

The legal issues above are just some examples that employers should consider as they are approached by various stakeholders about offering psychedelic treatment for employees suffering from depression or PTSD. This is an evolving area of law, and employers should engage competent legal counsel to help them navigate their way to a benefit plan that makes most sense for them and their employees. Please contact us at if you would like us to help you navigate.

Barbara Zabawa

Barbara J. Zabawa

President of the Center for Health and Wellness Law, LLC

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